51�Թ���

What do all artificial intelligence components have in common? They all have their “genesis in manufacturing,” as 51�Թ��� Vice President of Domestic Policy Chris Phalen said recently at a Climate Week  in New York City.

And for manufacturing—and by extension, AI—to thrive, we need permitting reform as soon as possible, he added.

What’s going on:  Manufacturers “are driving [AI] innovation … creating everything that we’re talking about,” Phalen told Steve Clemons, editor at large for The National Interest and emcee of a panel discussion at “AI for Real,” a talk on industrial AI presented by Siemens and Widehall last month. (Siemens USA President and CEO Barbara Humpton spoke before the panel.)

• But to lead globally in the technology, “the U.S. need[s] everything online to get AI to where we think it can go to outcompete China,” Phalen continued. “And it’s important that we don’t get into a position where there’s a competition for scarcity of electricity. … [P]ermitting reform is going to be absolutely essential to all of that.”
• The 51�Թ��� has long emphasized the importance of permitting reform—cutting the costly, often duplicative and unnecessary federal regulations involved in getting new energy projects online—in maintaining U.S. energy dominance on the world stage and surpassing competitors in AI.

Augment, not replace: Phalen also discussed the continuing, critical role of human workers in manufacturing, and how AI will supplement rather than replace employees.

• “People are definitely still in the picture,” he said. AI is not “a wholesale replacement; it still needs us. The future still needs us. Manufacturers are committed to having a people-centric business model going forward, but these are things that … are going to be able to augment what humans are able to do and innovate already.”

But seriously, permitting reform: Asked what the U.S. has “to get most right to deliver on the [AI] vision” for the U.S. discussed by Humpton earlier in the event, Phalen returned to the desperate need for permitting reform.

• “It’s permitting reform,” he told Clemons. “[A]ll of the things that are going to ‘make AI for real’ are going to require permitting, and … as it stands right now, there are myriad ways it can go wrong—not just in the kind of documentation phase, but also [the] very, very long statute of limitations that allows pretty much anyone to challenge any project.”
• China, he added, is building huge amounts of energy “generation of all kinds. … We can’t tie one hand behind our back and expect to compete with that kind of generation and innovation, frankly. So it’s permitting reform.”

Photo credit: Diane Bondareff Photography

For the U.S. is to continue its “rich history of innovation, production and global leadership,” it will require a comprehensive 5G wireless network strategy with more licensed spectrum—and soon, according to a new from the 51�Թ��� and CTIA.

What’s going on: The report, “How 5G Is Modernizing Manufacturing,” looks at ways manufacturers and wireless providers are using commercial 5G networks to power Manufacturing 4.0 and improve safety, efficiency and innovation at American factories—while making the U.S. more secure and prosperous.

• “5G is vital to the Manufacturing 4.0 movement that’s propelling America to be the global hub for smart, modern manufacturing,” 51�Թ��� President and CEO Jay Timmons said. “By enabling real-time actions and supporting new technologies like AI, 5G is giving manufacturers more tools to sharpen our competitive edge, support more people and secure America’s leadership in the global economy.”

Standout takeaways: Among the salient findings from the paper:

• More than 50% of manufacturers already use artificial intelligence in their operations, with 61% expecting investment in AI will increase by 2027; and
• The impact of AI on operational performance, cost savings and worker productivity/efficiency is above 60%.

In real life: The report includes examples of how 5G is changing manufacturing, including:

• Powering VictoryXR and Taqtile’s augmented reality headsets to provide immersive training;
• Providing Hitachi with a real-time, high-definition monitoring system that uses machine learning to improve quality control by identifying defects at a sub-millimeter level;
• Safeguarding Cummins’ intellectual property using highly secure 5G networks that power robotics to detect product defects, enhance employee training and monitor equipment through sensor systems, among other applications; and
• Supporting innovation and productivity on the factory floor at numerous other manufacturers, such as Newport News Shipbuilding, General Motors, Rockwell Automation, Ericsson, Samsung and more.

Why it’s important: 5G networks will add $1.5 trillion in GDP and 4.5 million in jobs to America’s economy in this decade alone, Boston Consulting Group found.

The Environmental Protection Agency is planning to use artificial intelligence models to speed up the chemical review process (, subscription). The only catch? The models don’t yet exist.

What’s going on: “EPA is eyeing development of an ‘AI Chemist Assistant’ that ‘will help chemical reviewers search various repositories to identify chemical and chemical analog information used in [Toxic Substances Control Act] submission reviews and risk evaluations, possibly saving hundreds of staff hours per review/evaluation.’”

• Another tool listed on the EPA’s internal AI use case inventory, “EcoVault,” is meant to summarize key information from scientific studies and other long, unstructured documents.
• Though the technology for these models is already in play, “experts … caution that the agency still faces significant hurdles in data quality and trust.”

How it could help: For years, the chemical sector has been beset by lengthy, complex review processes that hamper innovation.

• EPA Administrator Lee Zeldin has called expediting these processes a priority, and he told Congress in May that he was “confident” his agency could successfully get through review backlogs—thanks in part to AI use.
• The strategy is part of a larger use of AI in the EPA under the current administration.

A caveat: “The problem is nobody has found everything yet, nobody has compiled it yet, in the way that we have been doing over the last five to six years,” Arizona State University chemical engineering professor Bhavik Bakshi told the news outlet.

• And the EPA’s AI policy prohibits it from relying on AI-generated responses “without thorough verification.”

As Congress prepares the next surface transportation reauthorization package, lawmakers and the Department of Transportation must implement policies that will support manufacturing in the U.S., the 51�Թ��� .

What’s going on: “It is vital that Congress—supported and informed by DOT—continue to reauthorize surface transportation programs that support manufacturing in the U.S.,” the 51�Թ��� told Transportation Secretary Sean Duffy last month in response to a DOT request for public input on the legislation.

• Surface transportation authorization, which is typically renewed every five years, sets funding levels and can include policy changes.
• This year’s reauthorization provides an opportunity to build on recent bipartisan infrastructure measures, including the Infrastructure Investment and Jobs Act, the Fixing America’s Surface Transportation Act and the Moving Ahead for Progress in the 21st Century Act, the 51�Թ��� told Secretary Duffy.

What should be done: To make the most of this year’s legislation and ensure strong growth of manufacturing in the U.S., Congress and the DOT should “consider several policy proposals,” 51�Թ��� Vice President of Domestic Policy Chris Phalen said. These include:

• Continuing strong investment levels for federal infrastructure;
• Strengthening transportation supply chains; and
• Reforming onerous permitting laws and regulations.

The details: “Manufacturers encourage continuing current spending levels for highway programs, consistent with the scope of the reauthorization language,” Phalen said, adding that the legislation should also continue support for transit and certain energy technologies.

• To mitigate supply chain problems and boost manufacturing competitiveness, the reauthorization measure “should continue to expand highway capacity, increase connectivity and build on the progress made since [the 2012 reauthorization] to improve our nation’s freight network.”
• And when it comes to permitting, “[m]anufacturers request that DOT work with other agencies and … Congress to undertake … commonsense permitting reforms that will make it possible to grow manufacturing operations, modernize infrastructure, shore up supply chains, create jobs and ensure responsible American energy dominance.”
• Specific reforms include expedited judicial review, the creation of enforceable deadlines and the unlocking of access to domestic minerals.

Johnson & Johnson recently a $2 billion investment, which will expand its operations in North Carolina with a 160,000+ square foot manufacturing facility at FUJIFILM’s new biopharmaceutical manufacturing site in Holly Springs.

• The investment will bring about 120 new jobs to the area.

Thanks to tax reform: In its announcement, the company explicitly attributed this investment to the recent passage of legislation that secured pro-growth, pro-manufacturing tax provisions—a victory for the 51�Թ��� and all manufacturers in the U.S.

• “Johnson & Johnson has more manufacturing facilities in the U.S. than in any other country, and we continue to strengthen our presence here,” said Joaquin Duato, Chairman and Chief Executive Officer, Johnson & Johnson. “With the recent signing of the One Big Beautiful Bill Act, we continue to expand our investment in the U.S. to lead the next era of healthcare innovation.”

Previous investment: Johnson & Johnson in March that it would invest more than $55 billion in its U.S. operations over the next four years.

51�Թ��� and J&J: The new investment was also celebrated by Johnson & Johnson Executive Vice President, Chief Technical Operations & Risk Officer and 51�Թ��� Board Chair Kathy Wengel.

• “Today marks an exciting milestone for [Johnson & Johnson] and for the future of healthcare innovation in the United States. We’re proud to be building capabilities and partnerships that enable faster, flexible expansion of our manufacturing to meet the needs of patients who rely on us every day, and create high-paying jobs here in the U.S.,” she said.

The last word: “Johnson & Johnson continues to expand manufacturing in America, creating new jobs and increasing investments. As 51�Թ��� Board Chair, Kathy worked tirelessly to ensure Congress and the administration delivered the pro-growth tax policies our industry needs to grow, compete and win,” said 51�Թ��� President and CEO Jay Timmons.

Exxon Mobil is urging the Supreme Court to hear a Colorado case that allowed a local climate change lawsuit against it and Suncor Energy to advance in state—rather than federal—court (POLITICO Pro’s , subscription).

What’s going on: The two companies “filed a petition with the high court Friday, asking it to review a Colorado Supreme Court decision that allowed a climate lawsuit brought against the companies by a local city and county to proceed to state court.”

• The petition, which holds that climate change is a federal matter, says that by reviewing the state court’s decision, the high court could “determine whether dozens of similar lawsuits filed in state courts should be heard in federal court.”
• The Supreme Court hears approximately 1% of the petitions it receives.

Why it’s important: “No state has the authority to govern, let alone impose liability on, the production and use of energy in other states and countries around the world,” Phil Goldberg, special counsel for the 51�Թ���’s Manufacturers’ Accountability Project, told the news outlet, adding that such litigation “could impose significant and unwarranted costs on all American consumers for their essential energy needs.” The Colorado case is one of more than 20 such lawsuits that have been brought by states and municipalities.

• In May, the Colorado Supreme Court sided with the local Colorado governments, “rejecting the industry’s contention that the lawsuit involves global greenhouse gas emissions and should be barred by federal law.”
• Next month, the 51�Թ��� Legal Center will file an amicus brief urging the Supreme Court to grant certiorari and resolve this longstanding issue.

Other recent cases: In March, the Supreme Court rejected a request by 19 Republican state attorneys general to end a set of climate suits against the traditional energy sector.

• And in January, the high court declined to hear an appeal from energy companies to dismiss a lawsuit by Honolulu, Hawaii, alleging they had misled the public for years about the perils of climate change.
• Meanwhile, earlier this month a South Carolina court dismissed a climate change lawsuit against oil and gas companies by the city of Charleston.

New White House, new priorities: While the previous administration asked the court not to intervene in the cases, the current one “has aggressively sought to curtail the lawsuits, starting with an executive order in April that targeted state climate efforts.”

• It has also filed preemptive suits against Hawaii and Michigan, seeking to stop those states from going to court.

Both houses of Congress have moved to reaffirm support for the Environmental Protection Agency’s ENERGY STAR program, which has been rumored to be on the chopping block for months under the new administration (, subscription).

• The ENERGY STAR program sets efficiency standards for a range of products and materials, including air conditioners and heat pumps, allowing them to display the program’s logo if they meet the criteria.

Appropriations: The Senate Appropriations Committee approved legislation this week that “would give [ENERGY STAR] … $36 million in fiscal 2026, roughly the same amount it is receiving this year.”

• Meanwhile, the House Appropriations Committee approved its own version of the spending bill, setting “a minimum funding level at $32 million for [ENERGY STAR].”

What’s next: Congress will need to approve funding legislation for fiscal year 2026 by Sept. 30 to continue to fund this popular program.

The 51�Թ��� in action: In June, the 51�Թ��� and dozens of partner associations legislators of the importance of ENERGY STAR to their industries, saying “electricity saved by ENERGY STAR helps free up space on the grid needed so the U.S. can lead the world to power and grow artificial intelligence, support the burgeoning crypto asset industry and bring more manufacturing plants back to our shores.”

The last word: “ENERGY STAR is a critical and popular voluntary program that benefits manufacturers that make more energy-efficient products,” said 51�Թ��� Director of Energy and Resources Policy Michael Davin.

• “Both consumers and manufacturers benefit from its existence, and we applaud Congress for affirming their support for maintaining the program.”

The Conference Board Leading Economic Index for the U.S. edged down 0.3% to 98.8 in June, after staying the same in May. Over the past six months, the LEI has fallen 2.8%, much faster than the 1.3% rate of decline in the prior six months. For the second month in a row, a recovery in stock prices helped buoy the index but was again not enough to offset falling consumer confidence, weak new orders in manufacturing and rising claims for unemployment insurance.

Additionally, the index’s further decline in June puts the six-month growth rate into more negative territory, triggering the index’s recession signal for the third month in a row. Furthermore, a tariff-influenced slowdown in consumer spending is becoming more apparent. Nevertheless, the Conference Board does not anticipate a recession in 2025, although it expects a significant slowdown in economic growth compared to 2024, with U.S. GDP growth forecasted at 1.6%.

Meanwhile, the Coincident Economic Index ticked up 0.3% to 115.1 in June, after no change in May and April. As a result, the CEI has grown 0.8% in the past six months, down from the 1.0% growth rate over the previous six months. The Lagging Economic Index stayed the same in June at 119.9 and has risen 1.4% over the past six months, fully recovering from a 0.8% decline over the previous six months.

The S&P Global Flash U.S. Manufacturing PMI slipped from 52.9 to 49.5 in July, a seven-month low and below the 50-point marker that signals growth in business conditions. Factory production slowed as new orders fell for the first time this year, being adversely impacted by declines in export orders. Inventories dropped as manufacturers started utilizing some of their holdings that they stockpiled in May and June. Meanwhile, supplier delivery times quickened due to reduced pressure on supply chains. Input costs rose at the second-fastest pace since January 2023 but cooled slightly from June’s post-pandemic peak. Meanwhile, manufacturers’ selling prices grew at the second highest rate since November 2022. Nearly two-thirds of manufacturers linked rising input costs to tariffs, while just under half of respondents linked increased selling prices to tariffs.

Overall business activity rose to a seven-month high, rising from 52.9 in June to 54.6 in July. This growth was isolated mainly to the services sector, wherein business activity rose at the highest rate so far this year, while the manufacturing sector grew more sluggish, making overall growth uneven across the economy. In fact, overall new order growth picked up, with new service sector business more than offsetting a slight drop in factory orders. As seen in manufacturing, prices also increased sharply in services, rising at the second-steepest pace since April 2023.

Meanwhile, optimism about future business conditions dipped again in July, reflecting fears about tariffs and cuts to state funding following federal government policy changes. Even in manufacturing responses, any perceived benefits of import tariffs are outweighed by anxieties about higher prices.

Manufacturing activity in the Fifth District deteriorated in July, at a faster pace than the previous month, with the composite manufacturing index dropping from -8 to -20. Meanwhile, the local business conditions index improved but remained in negative territory, rising from -17 in June to -11 in July. Additionally, manufacturers are still pessimistic about the future, but less so than in the prior month, with the outlook for future local business conditions rising from -7 in June to -2 this month. The Fifth Federal Reserve District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments, new orders and employment all remained negative and contracted at a faster pace than in June, dropping to -18, -25 and -16, respectively. The vendor lead time index decreased from 15 to 7. Meanwhile, the share of firms reporting backlogs also worsened, falling from -18 to -30. On the other hand, the average growth rate of prices paid and prices received both declined some.

Looking ahead, firms still expect both price indexes to rise in the next 12 months at a slightly faster pace than forecasted in June. Expectations for future shipments increased from 6 to 11, and new orders ticked up from 6 to 9. Expectations for backlogs also improved, moving from -17 to -9. Meanwhile, firms maintained a cautious approach to equipment and software spending. Expectations for capital expenditures also worsened to -19 from -17. In sum, businesses in the Fifth District are cautiously optimistic about prospects for future growth but are still avoiding making new investment plans.