Why we need to forgive Detroit-and reform it
Talk of a fresh auto-industry bailout caught fire last week when the Barack Obama raised the issue with sitting-President George Bush. The President-elect’s plea came on the heels of dire predictions that without federal money the Big Three (General Motors, Ford, and Chrysler) will descend quickly into bankruptcy, with GM coming first in early 2009.Don’t expect any plans for a bailout until January though-Republicans are stalling any potential bill (or even talk of one), assuring that Congress go on winter break without any action. But rescue opponents are shouting down a well: A bailout bill is almost certain to pass when Congress reconvenes; for Democrats, it’s political suicide to let Detroit sink. After bending his ear to Detroit’s unions and winning their endorsements, signing such an act will allow Obama to make good on campaign promises to support autoworkers.But shouldn’t we just let Detroit burn? Normally, yes. Bankruptcy would force Detroit to get leaner and smarter, and if there ever was an industry that deserved a good spanking, it’s the automakers. At every turn, the Big Three’s lobbying punched massive loopholes into environmental regulations, guarding them from the market forces that buoyed smarter competitors, such as Toyota. Our tottering economy, however, is going to force us to set principle aside, for now. Moreover, if Washington approaches the bailout aggressively, we don’t have to pout and hold our noses at the prospect (as Thomas Friedman, among others, already has).The most astute recognize the truth, hidden in plain sight: This is a massive opportunity to green the industry–an unparalleled chance to rewrite a toxic, 30-year-old relationship. Barack Obama has promised a new, green economy. It should begin in Detroit-the same place that created so many of our current problems.A bailout would make the auto industry accountable to the government-and by proxy the taxpayers. On condition of granting economic relief, we should demand concessions; most important would be an overhaul of the cars Detroit offers (as suggested by Friedman and others). This could be structured in numerous ways: For instance, the government could set a mandate for the automakers to meet yearly targets for the percentage of total hybrid and electric cars they manufacture. Further, as researchers at the Center for American Progress argue, there could be incentives for such innovation. Detroit’s technology investments could be traded for relief from the spiraling health-care costs that have put the industry at a baleful competitive disadvantage.Sure, bankruptcy for Detroit would finally subject it to competition from foreign companies. In exchange for wiping away many debt and pension obligations, the bankruptcy court would demand a plan for getting back to solvency and fixing the problems that caused the downward spiral in the first place. Presumably that would finally produce greener, more competitive cars. But bankruptcy is still a worse option than a bailout, precisely because its the environment-rather than Detroit-that should be our chief concern. The court has a narrower mandate than the government: Its chief concern is the long-term viability of the company. By contrast, the government can yolk a restructuring to a smart environmental plan.Of course, the most powerful argument for the bailout is that our fragile economy can’t bear any more shocks right now. It’s been estimated that if the automakers are allowed to go bankrupt 40,000 jobs will be lost directly. Millions will suffer indirectly-from parts suppliers to restaurant waitresses. We already have a moniker for those sorts of economic conditions: a depression.A bailout will preserve jobs; but, it must also right a backwards industry. In the blitz to stave off disaster, Democrats may well forget about all the environmental imperatives that a rescue package should address. To do so is to ignore the root of the problem: automakers that can’t sell cars in a less carbon-soaked age. Without the sorts of environmental provisions outlined above, a bailout will be nothing more than a band-aid stuck on a gaping wound.(Photo from Flickr user clarkbw)
