H 32°, L 7° | Tomorrow: 
H 17°, L 4°You’d be hard-pressed to find many similarities between the cities of Detroit and Madison, but there is a shared and systemic failure represented in the two cities. Detroit, the veritable capital of American automotive power, is now presiding over the collapse of American auto manufacturing capability. Madison, the liberal capital of Wisconsin, has for its part created a fiscal legacy that, while not wholly responsible for Wisconsin’s current budget deficit, has made it much worse.
Detroit’s, and more specifically, Ford, GM and Chrysler’s problems are even worse than Wisconsin’s as private industries can fail — states cannot. The Big Three automakers are teetering on the brink of bankruptcy and clamoring for billions in federal aid just in order to meet day-to-day needs like payroll. While they don’t deserve it, a bailout of American automakers could be one of the greatest legacies of the incoming Obama administration — provided they attach the right kind of strings.
And those strings must be more than taxpayer equity and increased fuel efficiency standards. They must include an agreement by the Big Three automakers to become a part of the largest federal program since Social Security. This program will completely shift the American automobile fleet from a dependence on carbon-based fossil fuels to hybrid and plug-in capable vehicles.
Chrysler, GM and Ford have obstinately followed a path that is tailor-made for irrelevancy and insolvency. Eschewing the Japanese trend of smaller, fuel-efficient cars, they have pursued a bigger-is-better method of producing a product line that features massive, inefficient gas-guzzling SUVs and trucks. Instead of noting the consumer preference for lighter, more efficient vehicles and investing in more efficient engines, they’ve spent millions lobbying Congress in an attempt to fight fuel economy bills and maintain their sub-standard status quo.
Ford, Chrysler and GM are years behind firms like Honda in manufacturing capability. According to a report by The Wall Street Journal, assembly lines in Honda plants can be adapted quickly and affordably to produce different models depending on market demand. It takes Ford 13 months and $75 million to do the same at one of their plants. For Honda, it takes five minutes at no cost.
The market teaches valuable lessons, and the lesson being taught here is American automakers are not worth their salt, and they certainly aren’t worth a bailout. But their workers are, as well as the industry and workers who provide critical components to make their vehicles. It may not be the right thing to do from a free market standpoint, but it’s not as if we have a choice. It’s time to bail out American automakers.
The Big Three are asking for roughly $25 billion in loans to stave off bankruptcy. Give it to them. But any automaker accepting this taxpayer-funded bailout must opt in to a federal program that invests billions into shifting the American automotive fleet from an obsolete system that makes America’s transport infrastructure dependent on fossil fuels to one that boasts hybrid and plug-in vehicles.
This program would provide billions in overhauling American automakers plant by plant. A new cabinet-level position would oversee this program, and who better to fill that post than Al Gore? Word is that he has been resistant to joining the Obama administration, but with the promise of billions of dollars and a federal program unparalleled in scope, I can’t imagine Gore would say no.
President-elect Obama should open this program up to involvement from global institutions like the United Nations Environmental Program, which just weeks ago called for a “global green New Deal.” A commitment to international involvement would put America at the forefront of the next great global industry, just as it was at the forefront of the last great industries: manufacturing, transportation, energy, communication and information.
And if Detroit balks at the decades-long commitment it must make in shifting its operations into the 21st century, spend the billions elsewhere. Let them fail if they refuse. They deserve it.
The notion of so massive a public involvement in private industry will surely give pause to anyone trained in free market thinking. But the current economic status quo demands innovative and bold actions. Millions of jobs will be protected and created from such an effort. And President-elect Obama will create a framework upon which our economy can experience unparalleled and sustainable growth, our national security will be better assured, and our environment can be protected. That’s quite a legacy.
Gerald Cox ([email protected]) is a senior majoring in economics.
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Well, Gerald, it all comes down to one simple thing, taxes. The 16th Amendment made it all possible. Need money to bail out the rich guys? Fleece the taxpayers.
Ah yes, the very idea that was the brainchild of many a liberal back in the day was systematically turned in its head and used against them. “Soak the rich!” they said. Little did they know that the income tax liability threshold, the point at which you earn enough to owe, came crashing down through one income bracket after another.
Today, the income tax is a much more useful tool in controlling the masses than the vote is for the masses to control the government. No matter who you voted for, McCain or Obama, Baldwin or Theron, they all change their tune once they’re in office. Don’t like the war in Iraq? Why are you paying for it? Don’t like the financial bailout they voted to pass a month and a half ago? Why are you paying for it? Get the idea?
Look, it’s your money ‘til you spend it. You can keep on paying your federal taxes so a bunch of a-hole politicians can buy themselves handjobs, or you can draw the line. You’ll starve, they won’t. You’ll go without health care, they won’t. Your kids will go to mediocre schools, theirs won’t.
Now that you know just what chumps honest, hard-working taxpayers are, let me share a nice little idea on you: a federal tax revolt. Next filing season, everybody who owes federal taxes should pay it over to their home state instead of the IRS. We’ll have plenty of $$$ to keep our own wheels turning while the jackasses in Washington DC sit there with stupid looks on their faces. They know damn well they can’t do anything. And the state governments will have no choice but to go along with it because it’s the last $$$ they’ll ever get if they don’t.
And imagine what the rest of the world will be thinking…”Damn, those Americans finally remembered that they still live in a democracy and turned it all around!” And that’s exactly why we Americans used to have the world’s respect. We were bad-asses then and we’d be bad-asses now if we would only remind our own leadership of the one fundamental aspect of our democracy-that they work for us, not us for them.
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Wisconsin’s budget deficit hasn’t been created by a democrat-republican thing, it’s been created by the same “thing” that is busting the budgets of most states and the federal government.
People have to spend money on houses and goods for Wisconsin to raise appropriate funds. Also, unemployment shifts government spending towards deficits too.
Even oil-rich Alaska is facing a shortfall. Governor Palin’s budget depends on $70 barrels of oil, and now we’re under $60.
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Bailing out Car manufacturer’s is dumb. Its even dumber to say lets do it so that we can force the auto industry to go green. This article is anti-capitalism. The fact is there is a growing demand for green cars that the market will step up to satisfy. Besides that gas prices are still dropping and it would be insane to spend 25 billion dollars on 3 companies to force our country to go green. I thought this was America, guy?
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GM Ford and Chrysler aren’t failing because of the kind of cars and trucks they make. They are failing because they have 3 times as many retirees as current workers. 3 times! All with huge pensions and health benefits. This is why they can’t make any money, and a bailout will only be temporary and not fix the problem.
Let them fail. The jobs lost will quickly be recreated as foreign competition steps in. Even the NYTimes admits it, though you have to get to the last paragraphs to find it http://www.nytimes.com/2008/11/17/business/economy/17impact.html?hp
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I agree that all land transport should be powered by electricity but where is the electricity going to come from? How will it be generated? How will it be transported?
The NIMBYs don’t want any power plants or transmission lines anywhere. There are Luddites who still refuse to accept nuclear power. Everybody seems to want wind power but nobody wants to see any windmills (even Saint Kennedy and his family).
The Big Three are now against the wall because they gave in to the UAW demands. The UAW must accept that auto workers are overpaid if not under-worked.
“Almost everyone I know makes less than an autoworker, and has a whole lot less job security.”
http://meganmcardle.theatlantic.com/archives/2008/11/righttowork.php
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The country would be better off in the long run if we let the Big Three fail, and in the process break the UAW labor monopoly, and then let Toyota, Honda and Volkswagen take over the U.S. auto industry, and restore realistic, competitive, market wages to the industry.
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OK, so what happens after the government “invests” billions of dollars to force Detroit to make hybrid and electric cars and they don’t sell? These companies already offer those types of cars, as do other auto makers, but they aren’t selling more than standard cars with combustion engines. “Green” cars also cost more, so will the government subsidize cars for the people who can no longer afford them? Does Cox really want the people who bring you the DMV, US Postal Service and the US tax code deciding what cars we drive?
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Wow. usually I hate your articles but this one is ok. Until the end… where you say that if they don’t cooperate to let them fail they deserve it. Well this is the problem isn’t it. They kind of have us where they want us. We can let them fail because then your dad and my brother and our friend are out of jobs. It’s not just the car, it’s the rubbers, and plastics and metals that go in to them. The electronic components. The satellite radios. There is so much at stake. We can’t let them get away with failure and we can’t allow them to manipulate the govt. If obama can nail this then it will be one if his greatest successes - you are correct.
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quick note: Your picture on the website should be updated to the one in the paper.
Other than that, have a good day Mr. Cox.
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Gerald has yet to disappoint me, and disappointing me is pretty easy to do.
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Why are the automakers taking a beating in this and banks are not? Everyone saying “Let them fail”, “Let Toyota, Honda, VW take over the US”. Are you kidding me?! The governement just set aside 700 Billion to GIVE to banks and what are they doing with it? Buying other freakin banks. Where’s that money going? Not to the consumers that need it. Is this credit crisis going to end? THat’s what’s hurting the domestic car companies right now. And while you’re at it, fix the foreclosure problem and these stupid adjustable ARMs that people were duped into.
A few years ago, the volume in US for selling cars was around 18 million. At the beginning of this year, it was at a projected 15 million units and will more realistically be closer to 10-11. That’s a huge drop in volume that’s hurting all of the automakers, even the mighty Toyota.
Part of the problem is definitely the big 3’s fault. They took really good care of their workers, with pay, benefits and safe working conditions, with millions of retired people getting a pension and health care benefits from the big 3. Guess what, take all that away and they become the government’s problem. That’s going to raise your taxes. Put 250,000 direct autoworkers out of work and another 2.5 million people that secondarily work for the autoworkers and give all of them unemployment. Who pays for that? You do. When their houses are foreclosed and banks are even in worse shape, who pays for that? You do. The LOAN the big 3 are asking for to help get through this crisis is a drop in the bucket compared to what will take place if they go under, even if the loan would be 100 Billion dollars.
And foreign companies aren’t going to swoop in overnight to set up factories all over to take their place, even though we make it easy for them to do so by giving them free land and tax breaks (see Alabama). How come other countries take care of their own but we don’t? South Korea exported 700,000 vehicles to the US last year vs 5,000 they imported from the US. Why? Because their country makes sure it isn’t economically viable for us to send cars there. GM has great sales in China. Why? Chevy is seen as a world icon and trustworthy brand. But to do business in China, you have to have plants in china. You don’t import. But here in the US, hell, bring your cars here. Bring everything here. I guess we don’t want manufacturing here anymore. And, if you bring your factory here, we’ll practically pay you to put it up and create a few thousand $15/hour jobs with crap benefits.
What burns me the most is if you are jealous that an autoworker makes more money than you, fine, I get it. I’m jealouse that movie stars and professional athletes make more than me. But the fact you’d rather send more your money to some other country like Korea or Japan, where it’s not being reinvested here as much as the big 3 do, that’s stupid. It hurts everyone, not just those evil domestic autoworkers.
And one last thing, the big 3 should have done a better job making smaller, more fuel efficient cars but to be fair, the market demanded big SUVs and Trucks. They couldn’t make enough of them. Up until gas hit $4 and everyone freaked out, those items were bread and butter for the big 3. Toyota jumped on that bandwagon with the Tundra and Sequoia, Honda made the big old Ridgeline, there’s the Nissan Titan. They obviously wanted a piece of that pie too. And the Silverado even beats the Tundra in gas mileage. Toyota made the Prius and got a lot of “feel good” publicity for them, but they didn’t sell that many. 15,551 in 2001. 107,897 in 2005. But when gas jumped, all of a sudden people wanted them and Toyota finally had a winner.