The Worst Argument for Bailing Out the Auto Industry

I was thinking of this as I watched a few interviews today. I’m still less than at full speed after being sick in bed early in the week, and I’m spending more time on the couch working on my laptop and less at the desk in my office.

My first inclination was to cite the argument that we already gave $700 billion to the financial industry, so we should obviously be willing to give $25 or $34 or $xx billion to the auto industry. That suggests that if I stupidly spend a large amount of money on some techie toy I thereby license myself to spend additional money on any other toy I may desire. Why not? I’ve already established the principle, no?

Of course, since I do think the financial system bailout was a bad idea, and has also failed to bail out the financial system, I obviously would find the argument that we ought to do more of the same unconvincing.

The auto company executives shouldn’t be too surprised they’re getting more scrutiny either, since many congressmen are quite annoyed at the apparent lack of effect of the original bailout and the fact that they really don’t know just how the money is being used.

But I actually heard what I think is the worst argument from the mayor of Lansing who was interviewed on MSNBC. He refined the “we already bailed out the financial industry” argument so as to make it much worse when he said that since we had bailed out the financial industry we should be willing to bail out the auto companies where, after all, “real” people make “real” products. (Note that this summary is from memory just after watching the interview.)

When certain Republicans talked about “real” people during the campaign and suggested that those of us on the other side were less patriotic, less American, or didn’t have values, I found it annoying. I also think it’s counterproductive in politics when you suggest people you ought to try to persuade that they are morally defective. (The left prefers to accuse its enemies of being mentally defective instead.)

But in this case problems come from two directions. First, some of us “unreal” people out here are customers who buy those cars. And I would note that unlike a certain congressman who was advocating the bail-out this week, but was found to be driving a Honda himself, I do own an American car. And no, I don’t have a couple of foreign cars as well–I only own the one American product.

But further, this entire distinction between the “real” people who produce “real” products is invalid in an economic sense. Without those “unreal” people on wall street, the auto manufacturers would be unable to gather the capital necessary to invest in those factories and create those jobs. We have this bizarre vocabulary that suggests that the “everyday workers” who man the assembly lines “make cars” but somehow the white collar folks do not.

But the brains the design the cars, the managers who organize the rather complex manufacturing process, the financiers who pull together the money, and those who distribute them all have a major part to play. The assembly line workers would be unable to build any cars without all those people. That’s not intended as a put-down. They also have their part in the process, and an honorable one it is. But that’s no excuse to pretend that they’re the whole operation.

The best argument may be the economic risk of letting the industry fail with the resulting dislocation. The problem with this argument is that, if the industry is not doing well now, and if we don’t have an actual plan that is likely to make it better later, all we’ll be doing is delaying the day of reckoning. And sort of like an earthquake fault, the more pressure we allow to build, the worse the crash is once it comes.

The arguments used to pretend that the U. S. auto industry is really much better than their sales and balance sheets indicate don’t give me any sort of feeling of assurance that the current team is going to fix things. When they are told that they’re failing they point to ratings in automotive magazines and good reviews. But good reviews don’t pay the bills. “Unreal” people like me, who don’t work assembly lines but nonetheless need transportation, pay those bills when we choose an American car.

Of course there is an alternative. Get those magazines and those reviewers to bail out the industry. Apparently they believe the manufacturers are doing well. On the other hand, I’m betting they got their test and/or review cars free.