In the February 5 issue of Business Week, the widely-read Outlook Column’s subtitle is: “Business is Focused on Cost Control, Not Prices.” Welcome to the world of manufacturing!

If you have read this blog before, you know that we have been emphasizing the dilemma that U.S. manufacturers find themselves in. Manufacturers face rising costs for health care, taxes, natural gas, etc. But they have no pricing power, so the prices they can charge generally remain flat. In the past decade, manufacturing prices have increased by 4 percent while the overall CPI has increased by close to 60 percent. Wow, how do you manage in that environment?

Here’s what BW says and they are right on,

The overarching change, however, is the way globalization and technology have altered corporate pricing behavior in the face of rising costs. The resulting intensification of competitive forces limits the ability of companies to simply mark up based on cost increases. It has made cost control, rather than pricing power, the driving force behind corporate profit margins and earnings growth…..

Author James Cooper goes on to look at several components of cost pressures: health care, performance-based pay and technology. It’s definitely worth reading and, if you want to hear a short interview with Cooper about the cost pressures, click here.

The Manufacturing Institute, NAM and the Manufacturers Alliance/MAPI published The Escalating Cost Crisis last year, showing that structural costs in the US add 31.7 percent to the costs of manufacturing, when compared with similar costs in nine major trading partners. This is must-read for anyone interested in manufacturing. To read that report, click here.

Those wacky non-scientists from the Union of Concerned Scientists are at it again, spinning their yarns. The press gives them a total pass and the name implies that they are scientists, which they’re not. Like they say, anybody can get a business card. We gotta come up with a counter group of non-scientists, call ourselves, “Climate Scientists for the Truth” or something. Oh, gotta add, “Concerned.” No, better yet, “Really Concerned.” Yeah, that’ll work.

Any-hoo, they’re quoted — without skepticism — in this article which fosters the canard that somehow scientists are cowed into not talking about climate change. Given what you read in the papers, do you believe anybody’s being muzzled? Crikey, it’s a parade! Well the Union of not really Scientists have outdone themselves this time. Their study of 1600 scientists yielded 279 responses. (Check our math, but this is about 12%, right?). Of that 12%, fewer than half said — get this — that they “perceived or personally experienced changes or edits to their research that changed the meaning of scientific findings.”

The mind wanders: First, we’re down to 6% of those surveyed, a pretty small group. Second, these are folks who even perceived it, didn’t have to actually be true. Know how many people perceive that there are aliens living in their stomachs? About 6%. Finally, is it possible that any of this less than 6% — the actual, not the perceived — might have warranted a change in their findings?

It’s amazing how the press can just report this with all due hysteria. However this debate unfolds, as we’ve said repeatedly, it ought to be with facts and not hysteria. If 6% is the best these non-scientists can do, they darned well oughta be concerned.

Big day for trade yesterday, from the Ways & Means Committee hearing to the President’s trip to Caterpillar (forgive us if our pride is showing….)

Just to follow up, here’s a link to Ways & Means ranking minority member Jim McCrery’s (R-LA) opening statement. You’ll see he hits all the right points: More trade agreements, more enforcement, job training for anyone displaced (doesn’t matter whether it’s by trade or not — anyone who’s displaced should get training), and encouraging savings and investment. We happen to agree on all fronts.

Also, the President gave a strong message out in Peoria about the importance of trade and free trade agreements. Here’s a link to NAM President John Engler’s statement, applauding the fact that on this, the Prez was dead-on right.

Here’s an item off of the AP wire: Speaker Nancy Pelosi is apparently reaching out to bloggers and is thinking of starting her own blog. Just what we need, more bloggers.

Our friend John Aravosis of AmericaBlog.com is quoted in the article as saying of the politicians warming to blogs, “They’ve gone from an initial writing blogs off, then moving to skepticism, then moving to, ‘OK, maybe we can find a way of working with these guys.’” Aravosis adds, “It’s a power base and it’s influential and it’s an opportunity. And you know what? It exists.” However, he rightly cautions, “It should only scare you if you’re on their bad side.” Inside joke to Aravosis: Just ask Deborah Howell….

So we welcome Speaker Pelosi to the blogosphere. For some reason we were not invited on her initial call with bloggers. As we’ve said in this space many times, we are bi-partisan, would welcome — and accept — the invitation.

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Newt Gingrich’s riff on environmentalist opposition to desalination (a high moment for attendees at last weekend’s National Review Institute summit) prompted us to catch up on our reading on the topic. And what do you know? Good things are going on.

MADRID, Jan 29 (Reuters) – Spanish construction-to-services group Acciona (ANA.MC: Quote, Profile , Research) said on Monday it has been selected by Poseidon Resources Corp to design, build and put into operation a de-salination plant in Carlsbad, California.

The plant, which will be the biggest in the United States, will involve an investment of $300 million and will produce 204,000 cubic metres of high quality potable water per day.

The project will provide enough desalinated water for 300,000 residents of San Diego County a year. We know very little about the venture — described at the Poseidon Resources website here — but are inclined toward any effort that uses the most advanced technology to address a pressing human need while easing pressure on other water sources, i.e., the environment.

The Encina Power Plant that will power the plant uses petroleum, but as the desalination process is energy-intensive, nuclear power is seen as a promising part of this trend, especially in the developing world. Which leads us to some other good news, although not salt-related:

SPRING CITY (AP) — The Tennessee Valley Authority will submit applications to build two new nuclear reactors under the government’s streamlined licensing process and restart its oldest reactor after a 22-year shutdown at Browns Ferry, TVA officials told The Chattanooga Times Free Press.

The nuclear renaissance grows.

Although it’s chilly elsewhere in the Mid-Atlantic today. Anyway, just to note two hearings today on climate change. They provide excellent evidence of the maxim that elections have consequences.

Senator Barbara Boxer, D-CA, chairs the committee.

It is serendipitous that on the day the House Ways & Means Committee holds a hearing on trade and globalization, the President will be in Peoria, Illinois at NAM member — and exporter extraordinaire — Caterpillar.

We’ve said in this space before that there are a handful of US manufacturing names that rise to icon status, whose names, brands and logos are synonymous with durability and quality the world over. Caterpillar is one of those companies. For anyone who has stood on the floor of that plant in Peoria (as we have), the manufacturing vibe is damned near overwhelming. All around you are giant yellow parts of machines eventually being made into giant yellow machines, some as tall as a house. The President will see it all today.

But more important to the trade discussion is where those big machines go. Over half of all Caterpillar products are exported. In 2006, they exported over $10.5 billion worth of big yellow stuff to some 200 countries. Cat’s exports to China alone have increased 40%. The net effect of that is an additional 5,000 new production jobs in Peoria and elsewhere.

Hopefully the President will touch on the benefits of free trade agreements (FTA’s) that open markets to US-made goods. Cat’s exports to Australia have risen 26% since the Australia FTA was signed. CAFTA lifted tariffs on Cat-made goods in Costa Rica alone by 14%. When you’re talking about equipment that weighs many tons and are quite expensive, that 14% tariff is a whopper. Since the Chilean FTA, Chile has become Cat’s fifth largest market. You may recall Cat CEO Jim Owens spoke to National Manufacturing Week about trade last year in a speech that was very well-received. Here’s a link to that great speech, making the point that many small and medium manufacturers benefit with the boost in Cat’s exports.

Here’s a fact sheet on FTA’s in general and Here’s a fact sheet on trade. Let’s hope when the folks gather down at the Ways & Means Committee today they actually take a moment to ponder the facts. The facts are that trade is good for US manufacturers and our workers. Just ask the folks in Peoria.

UPDATE (By Carter Wood, 9:12 a.m.): The Washington Post leads its business section this morning with a timely, telling story, headlined, “U.S. Exporters Feel Favorable Trade Winds.” The lede:

EDEN PRAIRIE, Minn. — Inside the factory, engineers tinkered with machines that test how well tires hug slick roads while others trained customers on running additional gear.

Only a few years ago, MTS Systems sold its testing equipment mainly to American automakers. No longer. The tire-testing machine was bound for South Korea. A road simulator was headed to a Formula One auto-racing team in Europe. The customers were visiting from Shanghai.

Today is Milton Friedman Day and the bloggers here are pleased to tip our hats to one of the great economists of our time. The world lost of one its greatest minds and advocates of personal freedom when he passed away last November, at a spry 94 years of age. PBS is broadcasting a special program on Mr. Friedman this evening; check local listings for the time in your community. Few practitioners of the “dismal science” have ever been as highly esteemed as Milton Friedman. Former Fed chief Alan Greenspan said:

There are very few people over the generations who have ideas that are sufficiently original to materially alter the direction of civilization. Milton is one of those very few people.

And the current Fed Chairman, Ben Bernanke, said this of Friedman:

The direct and indirect influences of his thinking on contemporary monetary economics would be difficult to overstate.

Friedman would probably be somewhat chagrined that a day had been named in his honor, because he eschewed personal notoriety in favor of attention to his ideas. Those ideas have been very powerful, shaped at the University of Chicago in part by his long partnership with his wife, Rose. His contributions –once considered radical and now seen as mainstream–fall in to two main categories of economic policy and social responsibility.

His economic and monetary policy theories, as discussed in his book, The Monetary History of the United States, showed that the Great Depression was more of result of poor Federal Reserve policy than it was a failing of capitalism. His work in the 1960s came along at time when traditional Keynesian policies were starting to be questioned and he showed how monetary policy was more important to the economy than fiscal policies.

He felt people should take responsibility to make their own choices and advocated those views forcefully in Capitalism and Freedom in 1962 and Free to Choose, coauthored with his wife Rose in 1980. His ideas helped shape the notion that the United States would be best served by a volunteer army, instead of a draft, and that public schools would improve if there was competition among them. Some of the leaders of Eastern Block countries found his perspective refreshing and they served to help shape the societies they established after the fall of the Iron Curtain.

If you are a teacher, student or just interested in Mr. Friedman, click here for a short classroom guide to his life and ideas. And for his obituary from the New York Times, click here.

OK, here we go for the fastest three minutes in Washington, your weekly roundup:

That oughta do it for this week.

A postcript from last weekend’s National Review Institute summit, comments just so entertaining we had to pass it on. Former House Speaker Newt Gingrich gave the morning speech Saturday, one of his typical “big, challenging ideas” kind of addresses that most candidates avoid — not unreasonably — as too politically risky. (Video here.)

In the RLSRCMIWGLQ&A session that followed, a gentleman made a long, impassioned plea for desalination (about 45 minutes into the video). Gingrich expressed interest, noting that he is working on a book, “Contract with the Earth,” about technological, free-market solutions to environmental problems. He then cautioned the questioner.

I do want to warn you that if the Left wins, and you come up with a virtually free water desalinization, you will not be able to use it.

Because first of all, it will mean you are taking water out of the ocean.

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