Wednesday, December 10, 2008

The Auto Bailout

I haven't written at all on the auto bailout because I just don't have much to say. It's a horrible, horrible idea, made all the worse by the potential creation of a car Tsar (Yes, I prefer the T-spelling). At least the proponents of the financial bailout could make the argument that a potential credit crunch could potentially stifle the entire economy, but here, other than helping people who might lose their jobs, there doesn't appear to be any real rationale for federal intervention.

Even if you're a big government liberal, you've got to be a bit troubled here, both with the proposed powers that would be granted to the government and with the valuing of certain people's livelihoods above others. As a libertarian, I have a big problem with the government offering a helping hand to provide well-paying jobs to those who wouldn't have such jobs in a free market, while at the same time not offering to the same sort of assistance to those who are actually living in poverty.

It's interesting because Obama won the election by focusing on the middle class, while rarely, if ever, discussing the poor. The middle class lifestyle has become what the nation feels entitled too and not one that individuals can achieve through hard work. Just look at all the proposed policies we've seen of late- people shouldn't have to lose their homes, people shouldn't have to lose their jobs. We've moved well past the notion of a social safety net to a vision of a society where there should never be any losers. It's practically a political movement, only one who's ideas were never throughly articulated and that's probably because when you actually put it down on paper it sounds so distasteful.

Even as a libertarian, I recognize that there's something to be said about the idea of a social safety net and a rich society ensuring the poor a decent standard of living. But how do you justify poverty when rich Wall Street types and even well paid autoworkers have their lifestyles supported through tax dollars. If anyone, liberal, conservative, or libertarian can think of a world where this is just, I'd love to hear about it.


Anonymous rose said...

Leave it to Bob Lutz, GM's voluble vice chairman, to puncture the unreality of the auto bailout he himself has been championing. In an email to Ward's Auto World, he notes an obvious flaw in Congress's rescue plan now taking shape: The fuel-efficient "green" cars GM, Ford and Chrysler profess to be thrilled to be developing at Congress's behest will be unsellable unless gas prices are much higher than today's.

"Very few people will want to change what has been their 'nationality-given' right to drive big and bigger if the price of gas is $1.50 or $2.00 or even $2.50," Mr. Lutz explained. "Those prices will put the CAFE-mandated manufacturers at war with their customers -- and no one will win in that battle."

Translation: To become "viable," as Congress chooses crazily to understand the term, the Big Three are setting out to squander billions on products that will have to be dumped on consumers at a loss.

None of this was mentioned at four days of congressional bailout hearings, because Detroit knows better than to suggest Congress has a role in the industry's problem. Yet its own recently updated Corporate Average Fuel Economy regime, or CAFE, makes a mockery of the idea that government money will render the companies profitable, even as the same bailout bill demands that the Big Three drop their legal challenge to a California mileage mandate even more unsustainable than the federal government's.

Forget Chrysler, which has needed a bailout from Washington or Stuttgart in three of the last four recessions. The tragedy of GM and Ford is that, inside each, are perfectly viable businesses, albeit that have been slowly murdered over 30 years by CAFE. Both have decent global operations. At home, both have successful, profitable businesses selling pickups, SUVs and other larger vehicles to willing consumers, despite having to pay high UAW wages.

All this is dragged down by federal fuel-economy mandates that require them to lose tens of billions making small cars Americans don't want in high-cost UAW factories. Understand something: Ford and GM in Europe successfully sell cars that are small but not cheap. Europeans are willing to pay top dollar for a refined small car that gets excellent mileage, because they face gasoline prices as high as $9. Americans are not Europeans. In the U.S., except during bouts of high gas prices or in the grip of a Prius fad, the small cars that American consumers buy aren't bought for high mileage, but for low sticker prices. And the Big Three, with their high labor costs, cannot deliver as much value in a cheap car as the transplants can.

Under a law of politics, such truths were unmentionable in last week's televised circus because legislators are unwilling to do anything about them. They won't repeal CAFE because they fear the greens. They won't repeal CAFE's "two fleets" rule (which effectively requires the Big Three to make small cars in domestic factories) because they fear the UAW. They won't hike gas prices because they fear voters.

And make no mistake: An even more massive auto wreck lies ahead when a soon-to-be taxpayer-financed and taxpayer-owned auto industry confronts a California rulemaking that, in a silly gesture against global warming, would render most of its auto designs, profit centers and tooling unsalvageable.

We hate to admit it, but the only good idea from the bailout debate is the proposal for a new "auto czar." Along with disposing of Chrysler and downsizing Ford and GM, his job should be to confront Congress with its own policy cowardice and failure. If saving gasoline and Detroit are both worthy goals, let's ditch CAFE and institute a gasoline tax to make consumers value the cars government is forcing auto makers to build. If Congress doesn't have the tummy for that, at least ditch the "two fleets" rule so Detroit can import small cars to meet the mandate.

Alas, Barack Obama's vaunted "change" apparently doesn't include spending the political capital to make Congress acknowledge the failure of CAFE. If he can't do better than throw taxpayer money at a dismal policy disaster like our fuel-economy regulations (and so far he seems to be joining Congress in pretending it's all Detroit's fault), we might as well give up on his presidency along with any hope of progress on the nation's other unresolved dilemmas.

His campaign never really answered the question of whether he was Chance the Gardener or Abraham Lincoln. We might as well find out now.

4:34 PM  
Anonymous rose said...

It is a good day for the republicans.

"Senate Republican leader Mitch McConnell of Kentucky joined other GOP lawmakers in announcing his opposition to a White House-backed bill that was approved by the House on Wednesday. He called for an alternative that would reduce the wages and benefits of the Big Three automakers to bring them in line with those paid by Japanese carmakers Nissan, Toyota and Honda."

Good shit. What the fuck is GW Bush doing in agreeing to the previous bailout draft that did nothing to fix the core problem, the UAW contracts.

First positive development I've seen out of congress in a long time.

They need to come out and say we're not going to bail out overpaid workers with their underpaid neighbors cash. Explain yourself McConnell. This is a simple issue and people will get it if you explain it forcefully.

4:09 PM  

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