Yet another “this must be some weird dream” moment happened today:
During a hearing in the U.S. Senate, the chiefs of General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLC were responding to a question from Banking Committee Chairman Christopher Dodd, D-Conn. Dodd asked whether they would be willing to work within a structure similar to that established for the federal bailout of the former Chrysler Corp. in 1979-1980.
GM’s Rick Wagoner, Ford’s Alan Mulally an Chrsyler’s Robert Nardelli said they would.
While there’s been a lot of Sturm und Drang over whether the auto companies deserve a bailout, both from the rump remains of the allegedly free market Republican Party and from consumers frustrated by decades of shoddy products and environmental destruction, it’s kind of hard to see how it is in the national interest to allow that sector to go belly up. I think we really would be talking about the Second Great Depression at that point. And while I freely admit to engaging in hyperbole at times, in this case I don’t think that’s an exaggeration.
Arguments that we might need the assembly plants for national defense strike me as a bit naive. We’re not in wars that require tens of thousands of tanks, we’re in wars that require smart intelligence, smart diplomacy and a nimble military. The argument over the fate of Detroit is an economic one more than a military one, although of course nothing happens in isolation. If we hollow out what’s left of our manufacturing capacity, what exactly is it that we do as an economy? There is unrealized potential in green power, and high-tech is often beneficial, but are we really going to be able to continue buying cheap plastic shit forever on credit from overseas?
Anyhow, supposedly one in ten American jobs are directly or indirectly related to the automotive industry. If those go away in short order, we’re left with having tried to bail out the financial sector to little effect, which raises questions about exactly whose money we are going to manage. Even the Saudis and the Chinese have their limits.
Could we have a deflationary spiral from hell? Don’t know, but if Congress can bail out AIG and the rest of the financial sector to the tune of (potentially) trillions of dollars, they might want to think long and hard about doing nothing to help the auto industry. There’s plenty of blame to go around here, but in the end fixing the underlying economy (which was wrecked in the first place by the financial industry) has to be the top priority.
I don’t like it anymore than the next person, but there it is. Bail out the automakers, Congress, and let’s get on with the next thing. Maybe we’ll get lucky and a small South American military junta will foolishly invade an obscure island or something.