Sunday, November 16, 2008

Republican Views on Auto Bailout Show A Stunning Lack of Vision

Republican Party lawmakers who are scratching their collective heads and wondering why they are now the party of the margins need look no further than the American automobile bailout for the answer as to why they are no longer trusted with the nation’s governance.

Despite the national economic meltdown, caused in large part by a free-market run aground upon the shores of unfettered greed, Republicans in Congress have suddenly found their conservative voices and refuse to vote affirmative on a proposal to float the "Big Three" auto-makers (GM, Ford, and Chrysler) low interest loans to help them make it to next spring intact. Despite the abject failure of the free market to self-correct time and again in American history without government guidance; i.e. oversight, Republicans continue to claim that “it” knows best. I loudly and strongly disagree.

Don’t get me wrong, I am a proponent of the free-market, a well-regulated free-market that is. An unfettered, unwatched, and unregulated free-market is not in the best interest of any human society, because not all citizens benefit, and human greed eventually proves corrupting and disastrous. I contend that a little socialism mixed with capitalism is the way to go.

And to that end I support floating a loan to the Big Three, because their demise would swell the ranks of the unemployed by some 3 millions according to most estimates. And it would weaken national defense and place an undue and unnecessary burden on an already sinking economy. Not to mention that a failed U.S. auto industry would severely hamper our ability to wean ourselves from foreign sources of energy. Yes, Toyota, and Honda build hybrid vehicles, but they are not American companies and therefore not vested in seeing that America become energy independent.

And yes, the Big Three (and the congressional delegation from Michigan) are partly to blame for placing the nails in their own covens and nailing them shut. Their foolish short-sided thinking the slavish devotion to quarterly profits blinded them to the inroads the completion was making into hybrid technology, so now they are playing catch-up. And instead of supporting the Corporate Average Fuel Economy (CAFÉ) standards, they were a bulwark against them year after year, after year, to the determent of themselves, the American consumer, and the nation.

But, the current morass the Big Three find themselves in is not entirely of their own making. They are playing on an uneven field. Toyota, Honda, BMW, Daimler-Benz, and Hyundai do not have the active employee/ retiree health care and pension obligations that American car makers do, nor are their factories unionized. Health and traditional pension benefits place and enormous financial burden on American automakers, obligations the aforementioned foreign concerns do not share. True, GM did reach an agreement with the UAW late last year to move 340,000 retiree (or surviving spouses) health care cost off its books and onto the unions’ shoulders, but it cost them a staggering $30 billion to do so.

What is needed to prop up the Big Three for the short term is imaginative thinking. The government needs to lead in the fight to wean America from the teat of foreign oil. Instead of loans the government could and should invest directly in the Big Three in the form of stock. Government intervention in the auto industry is not unprecedented; it has taken action in the past; in the 1980’s the government floated Chrysler low interest loans and bought the company’s K-cars in order to help it stave off bankruptcy. It worked. Chrysler came back from the brink, the government made back it money, Americans kept their jobs, and Chrysler went on to start a new car segment. In short everybody won.

The infusion of cash into the Big Three would not only help keep the companies afloat, but also give them the capitol need to invest in hybrid technology. That would be step one.

Step two: replace the entire fleet of government owned vehicles with hybrids made by the Big Three. The U.S. government owns and operates some 642,233 vehicles according to GovCentral. In order to show the American people that it is serious about moving the country in the direction of energy independence, the U.S. government should take the lead in purchasing and operating hybrid vehicles of all types; e.g. plug-ins, hydrogen, and Compressed Natural Gas (CNG), wherever feasible. In addition, the federal government should encourage state governments to follow its lead, and dramatically increase the tax incentives for private citizens to switch hybrids built by American car companies.

Step three: support and partially subsidize the building of an energy infrastructure that will support hybrid vehicles. This means an Energy Department led initiative to see the placement of at least one pump at every major gas in the nation devoted to hydrogen and CNG.

Would this cost a lot of money? Yes, in the short term it would, but short-term thinking is what got us (the U.S.) into this economic and energy mess to begin with. Its way past time to start thinking about long-term energy solutions for the nation. In the long term, this is a win/win proposition, because the United States has some of the largest know natural gas reserves in the world. And hydrogen is the most abundant naturally occurring substance in the universe; we don’t have to pay for it, just extract it, and man has been doing that for more than a century. Lets us not forget that water is two parts hydrogen!

Would we still need oil? Of course, but as we replace oil and gasoline with other forms of energy we would gradually import less and less and in time rely solely on domestic stock.

The United States is facing an economic earthquake on par with the Great Depression. The time for Pollyanna economic models that have heretofore proven largely unequal to the task of "forming a more perfect Union" should be set aside in haste to make room for other models that work in favor of all Americans. Letting the Big Three fail, thereby throwing millions more Americans out of work (remember 1.2 million Americans were let go in 2008 alone, and Citigroup just announced a layoff of 10,000 more) and all that entails to cling to a failed economic model that seeks to enrich to the few at the expense of the many is the kind of foolish, conservative, rose colored thinking that our nation can no longer afford.


media boy said...

In the case of the auto-makers' bailout, it's a relief to have a national issue that is so straightforward: American cars tend to suck therefore people are not buying them. If GM and Ford don't want to go out of business, they should start making decent cars. To bail them out would be to reward their terrible manufacturing standards.

V. Edward Martin said...

“American cars suck.” That is a misnomer long dispelled by the high quality now put into American cars. We all have a stake in the long-term viability of the Big Three. Did not thing I stated in my article make sense to you?

Anonymous said...

Great blog Vincent.
Media boy, not so much.
Actually, even saying that "American cars tend to suck" makes you a fool in my book.
My husband works for one of the Big 3, we drive GMC's and we are supporters of buying products made in the USA. (well as much as you can anyway)
You cannot put my Yukon next to a Nissan/Toyota. Not now, not ever in this girls opinion.
Even "if" we started making substandard products, and they were made here... I'd still buy them.
It's that important.
My husband goes to work everyday and looks for ways to save his company money. And there are more just like him. That want to see the automotive industry SUCCEED.
I wonder what type of vehicle media boy drives, a Kia?

Kelly A (your facebook pal)

V. Edward Martin said...

Kelly, I agree with 100 percent; buy American and American work. I proudly drive a 2005 Ford Freestyle and I have never had a problem with the vehicle. And I plan to buy another American made vehicle at the end of next year, a Cadillac and I picked it over several foreign models. American must realize that we all have a stake in the success or failure of our home-grown industries. It’s time we put country first again and started asking what we can do for her and not what she can do for us, for we are her.

Anonymous said...

Thoughts on the crippling health care obligations you mention in paragraph 6? Have the Big Three ever supported health care reform that would put them on a level playing field? Employers complain about th unfairness of shouldering health care costs, but won't get behind any kind of meaningful non-employer based health care system that would level the playing field.