The Auto Bailout

I have stayed silent on the auto bailout for some time. However, the discussion has gotten so out of control that I have to respond to some of the nonsense. Today’s Detroit Free Press is filled with hate and vitriol for those who dare question the validity of a bailout to the automotive companies.

Normally I find Mitch Album to be quite thoughtful. I enjoy his column, his radio show, his books, etc. However, today’s column is so devoid of economic analysis (“people will lose their jobs” is not a complete analysis) that I simply cannot comprehend how it passes as a sufficient argument in favor of the bailouts. (A brief note: I have chosen Mitch’s column not because it is the most vitriolic, it is in fact perhaps the least so, but because it highlights the main themes.) Here are some excerpts (with my comments below):

Do you want to watch us drown? Is that it? Do want to see the last gurgle of economic air spit from our lips? If so, senators, know this: You’ll go down with us. America isn’t America without an auto industry.

America is not without an auto industry and would not be without an auto industry even if the firms filed bankruptcy.

Kill the car, kill the country. History will show that when America was on its knees, a handful of lawmakers tried to cut off its feet. And blame the workers. How suddenly did the workers — a small percentage of a car’s cost — become justification for crushing an industry?

This is hyperbole like I have never seen. I am tempted to point out that “a small percentage of a car’s cost” is $20 per hour more expensive than the competitors (not including the retiree benefits). Nonetheless the central point is correct. However, the UAW has said that even if they work for free, that would not be enough to solve the problems of the Big 3. If that is true, it is perhaps the most credible criticism of the bailout yet.

In a world where banks hemorrhaged trillions in a high-priced gamble called credit derivative swaps that YOU failed to regulate, how on earth do WE need to be punished? In a bailout era where you shoveled billions, with no demands, to banks and financial firms, why do WE need to be schooled on how to run a business?

Who is more dysfunctional in business than YOU? Who blows more money? Who wastes more trillions on favors, payback and pork?

At least in the auto industry, if folks don’t like what you make, they don’t have to buy it. In government, even your worst mistakes, we have to live with.

I am in full agreement with regards to failures of government. Nevertheless, as my mother would say, “two wrongs don’t make a right.” The fact that the government has wasted countless tax dollars on worthless pork barrel spending and the financial market bailouts does not mean that we should simply throw caution to the wind and hand out money like candy on Halloween.

Further, it is time to stop propagating the myth that the reason that the Big 3 are going bankrupt is because of the credit crisis. In fact, those who favor the auto bailout should be thankful for the financial crisis because under any other circumstances, they would not likely have received ANY help.

By the way, there are a great number of us who opposed the financial bailouts (myself included). It’s time to drop the moral equivalence argument.

Kill the car, kill the country. Sen. Richard Shelby, Sen. Bob Corker, Sen. Mitch McConnell, your names will not be forgotten. It’s amazing how you pretend to speak for America when you are only watching out for your political party, which would love to cripple unions, and your states, which house foreign auto plants.

Corker, you’ve got Nissan there and Volkswagen coming. Shelby, you’ve got Hyundai, Honda, Mercedes-Benz and — like McConnell — Toyota. Oh, don’t kid yourself. They didn’t come because you earned their business, a subject on which you enjoy lecturing the Detroit Three. No, they came because you threw billions in state tax breaks to lure them.

Why are the jobs created by foreign manufacturers in the United States somehow deemed less significant than those created by the Big 3? How are these senators any different than Debbie Stabenow and Carl Levin speaking up for the auto companies in their state?

Also, Mitch is correct to point out that these men convinced these manufacturers to come to their states by throwing money at them. Michigan, of course, could have done the same thing had they allowed the state to be a “right to work” state. Doing so would have allowed the government of the state of Michigan to “throw money” at the foreign manufacturers, who in turn could have employed all the auto workers who have been laid off over the past several years.

You’re so fond of the foreign model, why don’t you do what Japanese ministers do when they screw up the country’s finances?

They cut their salaries.

Or they resign in shame.

I actually like this idea!

No matter what the president does, history will not forget this: At our nation’s most uncertain hour, you senators stood ready to plunge hundreds of thousands of American families into oblivion. Leave them unemployed, with no health care, on public assistance. And you were willing to put our nation’s security at risk — by squashing the manufacturing base we must have in times of war.

“Our nation’s most uncertain hour”?! Seriously? Bigger than World War II? Pearl Harbor? September 11? The Civil War? The American Revolution? The hyperbole is off the charts.

Also, how many people would lose their jobs? Perhaps someone can give me an estimate as I do not think it would be nearly as many as those who assume that bankruptcy means liquidation.

I am not opposed to a debate about the automotive bailouts. I know many people who work in the industry and would likely be devastated by a bankruptcy. However, as harsh as it may sound, we shouldn’t base our decisions on emotions, but rather considering the costs and benefits of the bailout. Contrary to what many in Detroit and Michigan would have you believe, the idea that we should bailout the automakers is not a foregone conclusion that a couple senators fail to understand. Nearly two-thirds of the American people are opposed to the bailout.

I look forward to the hate mail.

One response to “The Auto Bailout

  1. Hi Josh,

    Someone at The Corner (Jim Manzi?) roughed out that if 3 million jobs were lost, which seems to be a standard apocalyptic figure, and the economy has 150 million jobs, then unemployment would rise by 2 percent. Difficult and painful, but not the end of the world.

    Keep up the great econoblogging work!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s