President Joe Biden has blocked Japanese steel giant Nippon Steel’s acquisition of U.S. Steel, citing national-security risks. The trouble is, these risks were fabricated to benefit Cleveland-Cliffs, an American steelmaker that bid unsuccessfully to acquire the once-great, now-flailing, U.S. Steel. Biden’s theories rested on the dubious assumption that Nippon would spend $15 billion to acquire U.S. Steel (plus billions more on facility improvements) only to shutter its new properties and switch to importing steel from its plants located in foreign countries, thereby shrinking America’s domestic capacity for steel production. Doing so would prove to be a senseless act of economic self-harm. Neither the numbers nor the logic add up — which is, of course, why Nippon intends nothing of the kind.
Cleveland-Cliffs and its friends in Big Labor (the United Steelworkers), cajoled the Biden administration to halt the deal. The intimate political relationship between the President and the companies that lobbied him reveals produced an equally crony and stomach-turning outcome — all to the detriment of the shareholders and employees of U.S. Steel. This was the type of intimacy between regulators and lobbyist that produce what George Will might call “the carnal noises of consenting adults committing acts of government in private.” It pays to be good at business — but often, it pays still better to be in bed with the president.
The feeble — albeit politically resonant — mewling of those opposing the deal on national-security grounds deserves close scrutiny and a thorough debunking. One might be forgiven for wondering what links Cleveland-Cliff’s business frustrations to national security. Since 1984, Nippon has invested heavily in American steel, now holding stakes in 11 plants; these plants have done well under Nippon’s management. Japan is, moreover, a trusted nation and an indispensable partner in America’s campaign to muffle China’s noisy rise — a trusted nation to which the Biden administration just greenlit the sale of $3.6 billion worth of missiles.
Meanwhile, at home, U.S. Steel has atrophied. No more is it a behemoth or national champion; it fell from the S&P 500 in 2014, and it employs fewer workers than either Petco or Dave & Busters (as of last year). Shorn of its iconic name, its fate seems of little concern to anyone besides those — like Cleveland-Cliffs — who might feel the competitive squeeze of a revitalized U.S. Steel under dynamic new management.
Neither Biden’s national security adviser Jake Sullivan nor Secretary of State Antony Blinken found a security threatlurking in the deal. The reviewing entity, an interagency panel known as the Committee on Foreign Investment in the United States (CFIUS), failed to reach consensus, although reporting indicates that opposition sprang more from economic than geopolitical factors. To the contrary, many believed that the deal would deepen America’s friendship with Japan and that an energetic U.S. Steel could counter China’s state-subsidized and expansionist steel sector.
Nonetheless, Biden blocked the deal. Perhaps little more could be expected of a president who declared in March 2024, before CFIUS had begun its review, that “it is vital for [U.S. Steel] to remain an American steel company that is domestically owned and operated.” Accordingly, the two wronged steel companies have sued the Biden administration. “[R]ather than engaging in a good-faith, politically neutral review and investigation of the Transaction for national security concerns, CFIUS engaged in a process that was designed to reach a predetermined result,” the product of “President Biden’s undue influence to advance his political agenda,” they will allege, (via Business Wire).
The purported reasons for squashing the deal being dispensed with, observers must conclude that Biden (who acted with President-elect Donald Trump’s enthusiastic backing) used national-security means to secure crony protectionist ends. He rewarded the interest groups that form the foundation of his political support — no matter the economic fallout of such an intervention. All too often, as George Will wrote, “the real scandal in American government is not the way a few politicians break laws, but the way most politicians make laws.”
Biden’s hijacking of what ought to be an economically disinterested national-security body cuts to the center of the American compact. Under a just government, all citizens receive equal protection under the laws. Nothing of the kind was afforded to the shareholders and employees of U.S. Steel. A republic, as John Adams wrote, is “a government of laws, and not of men.” Well, the man who now sits behind the Resolute Desk has warped the laws for his own ends. If nature gives to each person the right to pursue happiness, the state may not infringe on liberty absent a compelling public interest. In this case, the liberty of U.S. Steel became the casualty of a protectionist campaign promise; there was no compelling interest in sight.
Joe Biden leaves the White House with the economic agenda he had upon entering it, predicated on control and cronyism, protectionism and central planning, mendacity and an unsullied disregard for the dictates of sound policymaking.
