With the approach of Spring comes one of the most important events on the NASF calendar, the 2011 Washington Forum and its increasingly important program on the latest status of regulatory and health issues which so heavily impact the industry. Once again, the attendees - more than 100 participants and over 25 speakers - were given straight talk and found that the elections of 2010 had spawned a new climate in Washington, more receptive to promoting industry. Nonetheless, there remained many regulatory obstacles looming on the horizon, many of which had a global reach.

There was a change of scenery at the Washington Forum this year, as the conference was relocated to a new venue, the Ritz-Carlton Hotel in Pentagon City, virtually the width of I-395 away from the pentagon itself. The new facility was quite amenable to our needs, and attendees spoke of it quite favorably.

As in the past, the three-day Forum consisted of two days of talks by people in the know on governmental and regulatory issues faced by the surface finishing industry, followed by a third day in which attendees had the opportunity to journey to Capitol Hill and convey their concerns on issues directly impacting their businesses to members of Congress and staff.

Much of the discussion on the first day was centered in giving the audience information and guidance toward successful discussion during the Capitol Hill briefings on the last day of the Washington Forum.

The proceedings began with welcomes from NASF Executive Vice-President Christian Richter and the Washington Forum Co-Chairs, NASF President Tony Revier and Joelie Zak. In his remarks, Mr. Revier stressed the importance of the NASF to the surface finishing industry. He focused on the need for Congressional visit participants to get out the word about the industry and what it really is about. Indeed, some folks have been “caught” referring to it as the “surface RE-finishing” industry in recent years. Ms. Zak made it a point to thank the organizers and staff for their hard work in making the program a success.

In his opening remarks, Mr. Richter gave an update on NASF efforts. He reported that moves were afoot to increase our collaborative efforts with other groups, including the Nickel Institute and the Canadian Association of Metal Finishers. As for the Washington Forum, he noted that participants were arriving in Washington during a time of critical issues on the federal debt and budget. The status quo would no longer be possible and the Capitol Hill meetings later in the week would be taking place in that context. He stressed to those taking part in the meetings that the theme of the Forum was manufacturing competitiveness, and added that American manufacturing had a $200B value-added impact on the economy.

Challenges to Nickel

Reflecting the importance of the partnership between the NASF and the Nickel Institute, on April 11, the Nickel Institute offered a one-day seminar on the effects of European REACH regulations on nickel in particular. It was thus appropriate for Dr. Kevin Bradley, Nickel Institute President, to begin the Washington Forum program, summing up the content of the REACH Seminar, outlining the critical importance of nickel to the world and elaborating on the joint efforts with NASF.

He noted that the European Union was issuing a stream of regulations with good intent, but with unintended consequences. Like it or not, these regulations were sure to impact the U.S. Everyone wants “stuff,” as Dr. Bradley noted, stuff without any hazard, impact, etc. Unfortunately, there is a serious lack of understanding and awareness of how things are manufactured, and thus the call for a coordinated response between NASF, the Nickel Institute and other stakeholders.

Dr. Bradley stressed that nickel is particularly important in this mix because of its critical use in commerce. Although there is at present no nickel mining in the U.S., the nation is a significant producer of stainless steel and superalloys. On the mining front however, he added that by 2013, the first U.S. nickel mining in decades would be operating by the Anglo-Australian company Rio Tinto in the Upper Peninsula of Michigan. Although there is a global shift of nickel plating to Asia (74%) and more specifically to China (52%), nickel plating is still increasing in America. Applications include automotive-decorative plating, electroforming for CD and DVD molds, and electroless Ni-P for hard disc drives, among many others. In terms of end use, 65% of usage in the U.S. involves transportation and engineering.

The challenges of increasing regulation have brought the Nickel Institute and the NASF together. Dr. Bradley supported this effort, and stressed the need for strengthening advocacy and expanding outreach. He noted the importance of communicating “good science” to those promulgating regulations.

Later in the program, on the second day of presentations, Washington Forum regular Dr. Hudson Bates, Executive Director of the Nickel Institute, talked about the future of risk assessment for nickel in North America. He reviewed the ramifications of the REACH risk assessment regulations to date. In sum, there has been a negative effect on the plating industry in Europe.

Like Cr(VI), the proposed nickel amounts are down to levels associated with the natural background. REACH evaluation of Derived No Effect Levels (DNELs) are at odds with their definition. DNELs are considered to be levels below which there is no risk. Unfortunately, DNELs are being interpreted by the regulations as thresholds, an incorrect interpretation. The assessment seems not to be based on risk, but rather a black-and-white interpretation of whether or not a given substance is a carcinogen or mutagen - and that’s it.

Dr. Bates noted that of 300 nickel compounds registered under the REACH protocol, only 31 have been approved. The situation is so dire that the continuity of critical substances supply beyond the November 30, 2011 is at risk. This will only accelerate the loss of the surface technology sector in Europe.

Unfortunately, REACH-like legislation now active in China and Taiwan and under consideration in many other countries (e.g., TSCA reform in the U.S.). The EPA/ECHA (European Chemicals Agency) data sharing agreement of December 2010 guarantees REACH data and risk assessments will be seen by regulators in the U.S. Dr. Bates feels that it is only a matter of time before REACH concepts are enacted in North America.

Dr. Bates portrayed the air limits as similarly unrealistic. The European Scientific Committee on Occupational Exposure Limits (SCOEL) has set the single, inhalable nickel OEL at 0.01 mg/m³. As seen in the accompanying chart, such a level puts most of the common nickel manufacturing technologies out of business. Beyond that, there is a possibility that the OEL values could be extended as a reference to the rest of the world.

He went on to discuss the various ambient (as opposed to occupational) air levels being promulgated by various states. He noted the Texas levels were well considered, documented and vetted through a panel of independent experts. On the other hand, California levels have built in safety factors the may be based on serious mathematical errors. In any case, it is apparent that ambient air levels for nickel are going to be based in the low nano-range (ng/m³).

Manufacturing competitiveness

It is no secret that there has been a devastating decline in manufacturing in the U.S. over the last several decades. Pat Cleary, Senior Vice-President of Fleishman-Hillard, was on hand to outline the challenges facing U.S. competitiveness in manufacturing in the future. He stressed the need for the audience to communicate these challenges to Capitol Hill later in the week.

American manufacturing amounted to 11% of the gross domestic product in 2009, and, if standing alone, was still the world’s 8^th largest economy. It produces 2/3 of all U.S. exports, 3/5 of industrial R&D and 90% of all patents. U.S. manufacturing employs 11.7 million, and the nation still leads the world in manufacturing (24%, versus 12% in China … for now). Nonetheless, it is a shadow of its former self, and faces many challenges.

Mr. Cleary noted that the United States is at a 32% cost disadvantage versus our “trading partners” in manufactured goods. Not including workplace regulations, non-wage costs have severely handicapped U.S. manufacturing. America has the highest pollution abatement costs, the second highest corporate tax rate and the highest tort costs in the world. And, “We did it to ourselves,” notes Mr. Cleary. He stressed that American prosperity is steadfastly linked to relieving such burdens. This was food for thought for everyone in the room.

Industry collaboration

In addition to the Nickel Institute collaboration, the NASF has been uniting efforts with several other organizations to increase effectiveness in dealing with the regulatory challenges facing the surface finishing industry. A panel representing three of these organizations was on hand to report on these efforts and advise the audience on issues for discussion on Capitol Hill - Ann Wilson, of the Motor Equipment Manufacturers Association for the automotive industry, Omar Nashashibi of the Franklin Partnership, for the tooling and machining segment and Jennifer Baker Reid of the Laurin Baker Group for the fasteners and forging industries.

Ms. Wilson stressed that the current state of affairs (national debt and the federal budget) should not set the agenda during the Capitol Hill meetings. The meetings are brief, and should focus on industry issues. Attendees were advised to control the agenda during these meetings. In her view, R&D funding was extremely important, as it is the basis of a successful future. Her other concerns were advanced energy‐efficient technology, the Commercial Motor Vehicle Advanced Safety Technology Tax Act, the National Vehicle Safety Inspection Program, reauthorization of the Transportation Bill for Manufacturing, as well as remanufacturing and intellectual property issues. Given the number of new governors and state legislators elected in 2010, she noted that governmental outreach is critical at the state level as well.

Mr. Nashashibi gave further advice on dealing with Congressmen and staff members, stressing that basically, “they really have no idea of what we do.” The problem is further compounded by the influx of over 100 new members of Congress this year.

Ms. Reid sounded an optimistic note as she described the new influx of representatives as having “a little bit of a new feeling in Washington.” While there seemed to be an increased willingness to listen, the regulatory agenda still had a life of its own.

Health care reform

Last year, at the 2010 Washington Forum, the newly passed Health Care Bill and its effects on industry was the subject of considerable discussion and concern. This year, Susan Eckerly and Amanda Austin, of the National Federation of Independent Business, returned to review health care developments since the last Washington Forum. The good news was that the onerous 1099 IRS reporting requirement had been repealed and was waiting to be signed into law. Indeed, during Capitol Hill meetings with NFIB members, representatives and staff admitted that they were hearing about the 1099 issue for the first time (despite the fact that many had voted for the bill in toto).

Nonetheless, Ms. Eckerly and Austin reported that the health care legislation imposes many other burdens on small businesses. These include frozen plans or cancelled existing plans, premium increases, restrictions on over-the-counter purchases and health care tax credit issues. They noted that 2014 would herald the most significant impacts in the law. Noting that the ongoing court actions would likely go to the Supreme Court, they anticipated a decision by the end of the Court’s term in June 2012.

Day Two of the Forum concentrated on technical and regulatory matters, punctuated by a most informative and entertaining luncheon program, featuring Charlie Cook, the well-known political analyst and commentator (See sidebar).

Aerospace / Defense and Finishing

One of the more important segments in the surface finishing industry is that of aerospace and defense, always well represented at the Washington Forum. This year, Paul Yaroschak and Dr. Keith Legg were on hand to discuss the latest developments in this area.

Paul Yaroschak, the Deputy Direct of the Office of Emerging Contaminants within the U.S. Department of Defense (DoD) outlined the chemical and material risk management initiatives currently being undertaken by the DoD. In discussing the operating environment and trends within the DoD, he noted the Precautionary Principle, i.e., we must understand health and environmental effects before using chemicals. He stressed the importance of science in the risk assessment process. Still, international, federal and state toxic substances laws, such as EU REACH, California’s Green Chemistry Law and pending revision of the Toxic Substances Control Act, were well in view.

He discussed a new initiative still in the idea stage - a Sustainable Chemicals and Materials Consortium, consisting of a coordinated, voluntary effort between the DoD and industry, in which sustainable chemicals and materials would be identified, tested and evaluated. With such an effort, Mr. Yaroschak projected that the information shared and lessons learned would identify and break barriers to implementation of technologies.

Finally, Mr. Yaroschak discussed a paradigm shift in the approach to the minimization of hexavalent chromium. In the past, the policy was to consider the use of Cr(VI) as the “default,” while promoting the use of substitutes. Now, the approach has been reversed, with the substitutes considered to be the default with the use of Cr(VI) allowed only when no substitute can meet performance requirements. Further, under a new Defense Federal Acquisition Regulation, for new systems, executive level approval is required for deliverables with Cr(VI) certifying that there is no acceptable substitute. With these new arrangements, the bias is toward changing to substitutes (or perhaps developing them as well). The policy applies mainly to paints and primers. It does not apply to Cr(VI) produced as a by-product of manufacturing and will not affect chromium plating, anodizing, washing or conversion coatings.

Dr. Keith Legg, President of Rowan Technology, gave an enthusiastic presentation specific to DoD developments in the surface finishing industry. In his view, the big issues are current chromates, cadmium and REACH.

Of particular interest is a low hydrogen-embrittlement zinc-nickel deposit usable as a substitute for cadmium. Compared to a typical automotive zinc-nickel containing 10% Ni, the new coating contains 14% Ni. The process eliminates brighteners and levelers to assure that all hydrogen bakes out. Consequently, the finish appearance is quite dull. Nonetheless, it is less porous than low hydrogen-embrittlement cadmium. Significantly, it has been approved by Hill AFB for a USAF landing gear application.

It could serve as a drop-in replacement for most cadmium plating applications, although it may take a few years until it is widely accepted. There are a few “flies in the ointment,” as Dr. Legg noted. There is contradictory data on embrittlement in sea water. Further, the process involves an alloy electrodeposit, which entails much closer process control. Indeed, in the case of irregularly-shaped parts (i.e., most of them), performance depends on the galvanic polarization curve and part geometry. Hill AFB uses computational software to design anodes,

electrolyte flow, etc. Fortunately, such software is getting very good at predicting performance distribution.

Dr. Legg also had some words to say about REACH. He noted that the regulation is already affecting the supply chain in subtle and unexpected ways. Because of the rigorous registration and approval procedure, suppliers have been withdrawing formulation components from new processes. In essence, items even proposed as Substances of Very High Concern (SVHC) are removed from the market to avoid expensive bureaucratic hassles, and possibly beneficial new technology is lost from commerce. As Dr. Legg summed things up, “The coating world is getting more complicated.”

Canadian developments in sustainability and regulation

Sustainability and regulatory issues in Canada are at the forefront of doing business in that country, just as they are in the United States. Mike Kuntz, President of Kuntz Electroplating and Mike Dutton, Director of Environmental Health and Science at Vale Inco (Canada) were on hand to discuss these issues.

Mr. Kuntz describe the history of Kuntz Electroplating (KEI), one of North America’s largest independent Tier 1 / Tier 2 full service finishing facilities for functional/cosmetic aluminum, steel and zinc components in the automotive, motorcycle, appliance and specialty industries. Certified for ISO 9001-2008 and ISO 14001, the company has 450,000 ft² of production space, 450 employees and operates three shifts, five days per week.

He went on to explain the concept of corporate sustainability, “a business approach that creates long-term consumer and employee value by not only creating a ‘green’ strategy aimed towards the natural environment, but taking into consideration every dimension of how a business operates in the social, cultural, and economic environment.” The approach can reduce a company’s manufacturing footprint, and by these good works, a company can attract new business development and save money.

Mr. Kuntz summed up by saying, “The market has changed, turning the traditional business model on its head. Whether due to increasing knowledge of the economic costs of environmental degradation, rising oil and food costs, or simple greenwashing, businesses around the world are reacting to customers and shareholders who are becoming more informed and more vocal in insisting upon corporate sustainability. No longer can corporations justify a wasteful business model with a temporarily strong bottom line. Facing shareholder and market demands, and sometimes legal and compliance standards, full environmental, social and fiscal accountability has become the yardstick, not the exception, in business today.” Food for thought.

Mr. Dutton discussed the impact of sulfur dioxide (SO₂) sustainability issues on nickel smelting in Canada. The primary cause of acid rain, SO₂ has been gradually and consistently reduced from 2200 ktonnes/year (2340 ktons/year) in 1970 to 100 ktonnes/year (110 ktons/year) in 2010. By closing certain smelters and undertaking other actions, Mr. Dutton anticipates that Vale Inco SO₂ emission will be down to 10 ktonnes/year (11 ktons/year) by 2015. Efforts such as these have put Vale Inco in the forefront of corporate sustainability.

Chromium risk and regulation

On hand to discuss the EPA’s pending risk, air and drinking water decisions were Deborah Proctor, Principal Health Scientist at ToxStrategies, and Ann Mason, Senior Director, Chemical Products and Technology Division of the American Chemistry Council.

Ms. Proctor discussed where regulatory Cr(VI) risk assessments were headed. The EPA’s current draft concludes that Cr(VI) acts by a mutagenic mechanism, with linear extrapolation from extremely high doses in rodents to extremely low doses in humans. Such a long extrapolation is deemed to be very questionable and not good science. Indeed, health-based criteria for drinking water work out to around 40 ppt (0.04 ppb), a value below the naturally-occurring background value. Even more puzzling, the California Cr(VI) Public Health Goal is around 20 ppt in drinking water. Ms. Proctor noted that these levels are impractical and not achievable.

Her discussion then touched on the validity of these rodent studies. For example, there are differences in response to Cr(VI) doses between rats and mice, let alone between either of the two and humans, but the reasons are far from clear. The most relevant question is “Are findings relevant to humans who are exposed at levels at least 1,000-times lower than those in the rodent tests?” She then outlined the details of a research project sponsored by the American Chemistry Council to answer such questions and put some realism into the discussion. Timing is critically important, as the results must be input to the EPA before new rules are promulgated. The study is scheduled to be completed in June 2011, while the EPA assessment process is scheduled to be done in September 2011. Preliminary conclusions suggest that there are no effects on humans at the lowest doses (see graph). Most important, this work puts real science into the argument.

However, there seems to be another proverbial fly in the ointment. In Ann Mason’s presentation, she noted that the Cr(VI) naturally present in source waters around the U.S. used for drinking average about 1 ppb. She expressed concern that the EPA is accelerating the oral Cr(VI) risk assessment. The peer review process is already proceeding without the data from the study outlined by Ms. Proctor, and the results of that study are imminent. Nonetheless, she notes that the EPA is unwilling to adjust their accelerated schedule. She stressed that the risk assessment should be based on the best available science and there is no need to rush the risk assessment earlier than the established September 2011 date. She stated that the EPA is not meeting the highest possible standards for scientific quality and integrity.

Regarding the inhalation risk assessment for Cr(VI), Ms. Proctor noted that EPA re-assessment is also ongoing, with completion scheduled for September 2012. The tightening of these values seems to be always under consideration. The outline chart shows that challenges remain both in drinking water and in inhalation standards.

Chemical/metals policy - the emerging agenda

Lynn Bergeson, Principal at Bergeson and Campbell, gave her assessment of the emerging legislative agent regarding U.S. and global chemical metals policy. She discussed a number of legislative initiatives, and noted that the climate is not quite as severe for industry in the current 112^th Congress.

One of the main concerns was reform of the Toxic Substances Control Act (TSCA) of 1976. Reform of the 35-year old legislation was a target of the 111^th Congress, with far-reaching changes proposed in both houses of Congress. The mid-term elections of 2010 changed the landscape and reform is now unlikely for 2011-2012, unless there is a strong push by industry.

Ms. Bergeson noted that the key legislative focus is on regulation. The EPA Inventory Update Rule (IUR) requires manufacturers of reportable chemicals listed on the TSCA Inventory to report production, process and use information. Proposed changes to the IUR expand the information to be reported. She noted that the final revisions are not yet clear.

Also under consideration is the EPA Chemical Management Program for “chemicals of concern.” Under this REACH-like program, eight action plans on specific “chemicals of concern” have been released to date, including hundreds of perfluorinated chemicals. There are serious questions as to why these chemicals were chosen, as selecting them immediately infers presumptive risks, whether real or imagined. Unfortunately, as Ms. Bergeson noted, once the process begins, lists beget lists … and the process never ends.

Other regulatory concerns mentioned by Ms. Bergeson included specifying toxicology tests. It seems that agencies are determined to use unreliable animal data and questionable extrapolations to humans. She also warned of developing programs in many states which deal with “chemicals of concern,” including the California Safe Consumer Product Alternatives Program and other efforts in Minnesota, Maine and Washington State, among others.

Manufacturing priorities in Congress

Following on from chemical/metals policy, Dana Woods, Co-Chair, Government Relations and Public Policy for Kelley Drye and Warren, LLP, outlined the Congressional climate for manufacturing. She described the current state of affairs in the 112^th Congress as having returned to divided government (Republican House, Democratic Senate) and a looming Presidential election year. The President faces a less-friendly Congress and a frustrated electorate.

Driving the agenda is the budget. Ms. Wood noted that, while the economy remains a top priority, the public is increasingly concerned about the federal deficit. The climate is evident in the news every day.

The Republican majority in the House has been particularly aggressive in its oversight of the Obama Administration, particularly by the House Committee on Oversight and Government Reform, chaired by Darrell Issa (R-CA), who spoke at the 2010 Washington Forum. Earlier this year, Mr. Issa solicited responses from over 150 trade associations and businesses on regulations that have harmed job-growth. In their responses, many emphasized environmental regulations. In addition, hearings by the Energy and Commerce Committee, the Ways and Means Committee and the Financial Services Committee have looked into hindrances to manufacturing.

The goals of these efforts are to weed out outdated regulations, including those which have not or have never been authorized, duplicate regulations, and examine the cumulative impacts of multiple regulations, as well as the effects on indirectly impacted businesses. While this is all well and good, Ms. Wood noted that the chances of major reform are still slim, although “mild” changes are possible.

She noted that the EPA has become the poster child of the regulatory reform campaign and the House Energy and Commerce Committee is implementing an aggressive agenda. In response, the EPA is delaying some proposals, including the ozone standard and greenhouse gas reporting. TSCA reform and enforcement of the Clean Water Act remain priorities of the Obama administration, support from Congress is unlikely.

Looking ahead to 2012, Ms. Woods describe the future as filled with many questions that cannot be answered at this juncture. There are concerns about the deficit and long-term debt, the effect of rising oil prices and energy legislation, when the politics of the 2012 election will take over and - above everything else, the effects of Congressional redistricting.

OSHA and U.S. Labor Policy

A discussion on OSHA and labor policy was given by Baruch Fellner, Partner at Gibson Dunn, and Mark Freedman, Executive Director of Labor Policy for the U.S. Chamber of Commerce. Mr. Fellner began by describing the current group at OSHA as “zealous,” indeed “the most zealous in history.” Nonetheless, Mr. Fellner believes that a sense of reality may be coming to temper this zealousness. He cited several examples where OSHA pulled back from the original intent of an action when reality intruded.

In the matter of recordkeeping, a Congressman believed in “a vast conspiracy” in industry not to report injuries. In reality, it turned out that, given the number of compliance inspectors and the labor intensive work (i.e., voluminous paperwork) involved, each plant can only be inspected on average about once a century. Many dollars were spent to find this recordkeeping conspiracy, but none was ever found. It was a waste of time and money for politics.

On workplace noise standards, OSHA could write citations for failure to protect against levels great than 90 decibels, a rather low floor. Industry comment was vociferous, and OSHA backed down in the face of reality.

Mr. Freedman noted that the noise issue was clearly poorly thought out, and it was apparent that someone higher up in the Department of Labor ordered OSHA to back off. Part of this is due to the change of climate in the House of Representatives, which is more proactive in overseeing such matters.

Mr. Freedman expressed concern at the introduction of an Injury and Illness Prevention Program (I₂P₂). In truth, Mr. Freedman reported that injury and illness rates are at the lowest levels recorded. It has not yet been formally proposed that every employer must have such a plan in place, but the concept is rather burdensome, whereby “all employers must find and fix every hazard in their workplace.” He warns that it is coming, but also notes that OSHA is having problems getting such a broad catchall regulation in force.

Tax policy

Monica McGuire, Senior Policy Director for Taxation at the National Association of Manufacturers, reported on the legislative outlook for tax policy. She began by noting a more favorable view of manufacturing with the makeup of the 112^th Congress. She noted that there was considerable uncertainty about tax policy, given issues such as raising the debt ceiling, and whether the divided government could reach a compromise on the budget. This uncertainty derives from factors including the unemployment rate, the state of the economy, tax expenditures, the Tea Party and Senate election prospects in 2012. Possible options that could come out of this situation could be lower corporate tax rates, a broadening of the tax base, incentives for R&D spending by renewing the R&D tax credit (expiring at the end of 2011) and perhaps even an add-on valued added tax (VAT), mentioned as a trial balloon.

Energy policy

Closing out the speaker program was Washington Forum regular Paul Cicio, President of the Industrial Energy Consumers of America, with his update on issues affecting energy usage and prices. His outlook was decidedly pessimistic, seeing “more threats than opportunities” in the energy field. He laid much of the blame on the EPA, which he described as “out of control.” Mr. Cicio cited several consequences that resulted from EPA actions, including higher regulatory costs, higher electricity costs, higher natural gas costs and higher energy demand.

He went on to describe the decline in American manufacturing since 2000, noting that 33%, or 5.7 million manufacturing jobs were lost between 2000 and 2008. Real industrial output growth has slowed 88% since 2000. Imports have exceeded exports by 55% in the 2000-2010 period. The last decade has seen persistently low investment (in the U.S., not overseas) in manufacturing capability.

Mr. Cicio went on to describe EPA rules on the electrical generation industry, and described them as “designed to stop coal.” In his view, they have forced the early retirement of a number of existing plants, made new coal-fired plants too expensive, and impacted their reliability. Under EPA regulations, Mr. Cicio predicts the loss of 19% of current fossil-fuel plants by 2018. The summer-surplus capacity (air-conditioning, etc.) will be threatened. He sees coal as “under siege,” with restrictions on fly ash, ozone, particulate matter, mercury and hazardous air pollutants, mountaintop (strip) mining as well as mining water and safety issues.

He suggested that if the EPA is successful in ending the use of coal, nuclear power is taken out because of the situation following the Japanese earthquake, and Congress eliminates renewal subsidies, there will only be one fuel left - natural gas. In his view, the price of natural gas would increase further, and electricity costs would follow.

Capitol Hill Meetings

Once again, the last day was reserved for Capitol Hill meetings, where participants had the opportunity to meet with Congressional representatives and staff. They were well prepared and armed with the input from two days of valuable discussion. Before heading out to their meetings, participants were given tips on how to handle the meeting.

And so those involved headed for Capitol Hill, ready to advise their representatives on the critical need to revive American manufacturing and to educate them on what the surface finishing industry was all about. With all of the new faces on Capitol Hill, there was additional incentive to get the word out that America has a stake in the future of manufacturing, and in particular the surface finishing industry.

Sidebar: Political Pundit Charlie Cook Delivers a Superb Luncheon Speech

The luncheon provided on the second day of the Washington Forum was memorable for the food, but the main attraction was the luncheon speaker, Mr. Charlie Cook, Editor and Publisher of The Cook Political Report, Columnist for the National Journal and Political Analyst for NBC News. Well known for his knowledge of Washington as well as his wit, his speech was much anticipated by the audience, and he did not disappoint.

After a few opening remarks, Mr. Cook reviewed the election results of 2010 and the events leading up to it. It was a drastic loss for the Democrats, but not just in Washington. They lost 690 state legislative seats, resulting in the fewest Democrats in state capitols since 1948, and the most Republicans since 1928.

On a national level, he termed the election as a “parliamentary election,” by party rather than individual. There had now been three “wave” elections in a row, characterized by wide swings against the party in power. This contrasts with 40 years of Democratic House control to 1994 and 12 years of Republican control to 2006. There has been much more volatility.

The three “wave” elections have been determined by fine point swings, all determined by independents. Those independent voters have been the driving force behind what has occurred. After September 2009, after cap-and-trade proposals, after stimulus packages and after health care, there was a major shift against the government doing more among independents. Mr. Cook noted, “Conservatives have passion. Liberals have passion. Independents have lives.” On independents, he added, “They don’t say what they like, but they are very articulate about what they are against.” The Tea Party consisted of energized conservatives, but the independents had more influence.

Mr. Cook talked about the changes in climate resulting from the 2010 election. Obama had a life-changing experience on November 2, 2010. He had been advised to “dial it back,” but didn’t. It was a different world on November 3, more like what faced Bill Clinton in 1994. Now Obama is well aware of the influence of independent voters.

Impressed with new Speaker John Boehner, Mr. Cook described him as “one of the most normal, well-adjusted people to reach the Speakership.” He noted that Mr. Boehner may be a good thing in these times. In contrast to the Tea Party, independents are for compromise, and so far Boehner has listened.

Discussing raising the debt ceiling, Mr. Cook called it a “big problem.” He said that people think that raising the debt ceiling is a green light to spend more money, but that is not technically correct. In truth, our credit rating would crash, devastating the economy and the dollar. Sensible things, like cutting spending and raising taxes are needed, but it is critical that the debt ceiling not be frozen, in his view. He stressed the need for compromise.

As for the 2012 Congressional elections, he predicted that the Republicans would keep the House and gain the Senate. He noted that it was historically unprecedented that the opposite could really happen. Only if the Republicans nominate a “really toxic” candidate for President, could they lose Congress. With redistricting, the Republicans are in the strongest position in history, controlling 202 Congressional districts to the Democrats 47. In the Senate, the Democrats have 23 seats at risk versus 10 for the Republicans. In 2014, the respective figures are 20 Democrats and 14 Republicans at risk. On the other hand, the Democrat’s chance comes in 2016, six years after the 2010 Republican gains.

The 2012 Presidential election may be a different matter, according to Mr. Cook. Presidents are resilient. In 100 years, only one elected President has not been re-elected (Carter). Yet not all is cut and dried. Obama’s re-election depends on who the Republicans nominate and the state of the economy in late 2012, particularly the unemployment rate. Given the current unemployment rate of 10.1%, Mr. Cook predicted that if it remains high, 8.7% or above, “Obama is toast.” If it is down to 8%, Obama could make it. The Blue Chip Economic Indicators suggest a rate of 7.9% for election 2012. Still, Mr. Cook cautioned that inflation could choke things off, if the price of oil remains high. He feels that it won’t be a 49-state landslide, but Obama’s re-election is probable.

As for the Republican nomination, Mr. Cook feels that when it comes down to it, the Republicans are unlikely to nominate someone who is “toxic” or unqualified. Still, of the candidates in play today, there is not a charismatic one in the group. He doesn’t think Sarah Palin will run, but she will lose if she does (independents, again). As for Donald Trump, he considers his actions “just a publicity stunt.” He notes that Newt Gingrich is “a very smart guy,” but he carries too much baggage. On Huckabee, Cook notes that he never got support beyond the “social, cultural and religious types.” As for Mitt Romney, he has a lot of strengths, but Mr. Cook questions whether he can add support to win. Referring to Romney’s explanations of the difference in his Massachusetts health care program versus Obama’s, Mr. Cook noted that “If you’re explaining, you’re losing.” There was also the matter of Romney’s flip-flops in 2008. He expects no majority for Michelle Bachmann, and feels it is unlikely that Mitch Daniels or Haley Barbour would run. That leaves Tim Pawlenty, a dark horse with no major liabilities - “not exciting, but fine.” Mr. Cook is betting on Pawlenty getting into the finals against Romney. Then, if the economy is bad, either of the two could win; if not, Obama will be re-elected.

Clearly, the audience was pleased with Mr. Cook’s speech. The Q&A session that followed could probably have gone on for the rest of the afternoon, with no one disappointed. Nonetheless, the time eventually came when Mr. Cook had to take his leave, and the audience traded Mr. Cook’s presentation for more interesting and important presentations in the Washington Forum program.