Well, here we go again. Mama, round up the kids and get them off the streets. The lame ducks are heading back to Washington — and they have fire in their bellies and money (ours, apparently) in their pockets. If there was ever a time when we need some thoughtful reflection, careful consideration and truthful communications this will be the week. Don’t expect any of that this week as members of Congress reassemble in a lame-duck session to try to bail out the American auto industry.
It would also be helpful if we had some trust in the elected officials and the corporate management and union leadership that they could get this right. And for that matter — get anything right.
As Arianna Huffington wrote in an article last week “While Paulson Waffles, the White House Dawdles, and Congress Dithers, the Economy Continues to Burn“:
So, $290 billion into his bailout plan, Hank Paulson is calling for a do-over. Now there is a confidence booster.
Wow. A do-over on a big chunk of the first $700 billion. And the certainty this week of more waffling, dawdling and dithering. All those thoughts were colliding in my mind this morning while running in the snow.
What to do? What to do? Well, I guess we’ll have to go ahead and bailout the Big Three auto makers. Doesn’t look like we have much choice — and the stakes are huge for us living here in Ohio. This is from the Akron Beacon Journal editorial yesterday, “Rescue Detroit“:
Ohio employs more than 250,000 in car plants, supplier industries and dealerships, with more than 70,000 jobs in the northeastern corner of the state. Ohio ranks third in auto manufacturing employment, behind Michigan and Alabama.
Ohio is already in deep economic doo-doo. And if a significant number of those 250,000 jobs evaporate our economy will rival that of a third-world nation, at best.
So the Detroit auto makers are dinosaurs. But they are our dinosaurs. And there is no point fretting over the facts that the industry has been crippled by inept, unimaginative management, billions upon billions in legacy pension and health-car costs — and the Great Recession of 2008 sparked by greed on Wall Street that was so widespread that it even shocked the “Maestro.” We feel his pain. And I’ll guess we’ll pass the big philosophical debates of socialism and free-market capitalism off to the professors in the macro economy classes. Dinosaurs go there to die too. I digress.
Plenty of informative articles about why to support a bailout (no it’s not a rescue plan) or not.
Here’s one, “The Detroit Bailout: Unsafe at any Cost,” from The Heritage Foundation, a conservative think tank in Washington.
The Detroit-based automakers–General Motors, Ford, and Chrysler–argue that they need more money from U.S. taxpayers. That approach, however, is more likely to extend the status quo rather than lead to reform. A far better approach is to restructure the old-fashioned way, through a formal bankruptcy process if necessary. Bankruptcy–and the prospect of it–would provide both the incentive and means for making the hard and painful choices that Detroit needs to make. Lawmakers should turn down pleas for subsidies that would detour that process.
Here’s an article from Robert J. Samuelson in The Washington Post this morning, “How to Bail Out GM“:
In a booming economy, a GM bankruptcy might be tolerable and useful. It would remind everyone of the social costs of mediocre management and overpriced unionized labor. But far from booming, the economy is declining at an apparently accelerating rate. By one survey, confidence among small businesses is at a 28-year low; in October, retail sales dropped a stunning 2.8 percent.
No one knows what further havoc a GM bankruptcy might inflict. The Center for Automotive Research (CAR) estimates an initial job loss of 2.5 million. The logic: If any of the “Big Three” went bankrupt, many suppliers would also fail; because car companies share suppliers, all U.S.-based manufacturers would suffer parts shortages. American production would virtually stop until new supplier arrangements emerged. “It takes 6,000 to 14,000 parts to make a vehicle,” says Sean McAlinden, CAR’s chief economist. “If you don’t have one, you can’t make it.”
So it will be lame ducks and dinosaurs this week in Washington. And I guess the pressure is on for the turkeys to get something done before they had home for Thanksgiving. Good luck. Let’s hope they can figure out something that won’t require an immediate do-over. Or a repeat of the A.I.G. debacle where it seems like our money is falling into a bottomless well. Just like my retirement savings account. I digress again.
And amid the bluster in DC this week, don’t forget that this isn’t a new problem. Wonder if things would have worked out better if Roger Smith would have taken the time to visit with Michael Moore two decades ago. Remember?