…but transportation related. Jonathon Golob at the Stranger has a post about GM nearing bankruptcy and advocates for a government bailout. The bailout of the big three automakers is which is virtually certain, so I won’t bother arguing whether GM deserves a bailout. I have some issues with his arguments, you can see them below the fold.

GM and the auto industry are among the few things that have worked in the US private sector, from a social and economic point of view. You know the deal. Work hard, turn in your hours, and you’ll be rewarded with the American dream: home, retirement, some vacations, and so on. Be part of the great, producing company, and all of this is yours.

Among the few things? I can hardly believe anyone would think that; the entire country is built on the private sector. Golob even notes Boeing’s downturn in the late 1960’s and early 1970’s. Why did Boeing have a bubble? The public sector. What saved Seattle? Private entrepreneurs like those who started WAMU, Pemco, and not least Microsoft.

With the possible exceptions of defense and farming, I cannot think of a single industry that has been more subsidized than the auto industry. How many miles of roads were built by the government? We’ve even fought wars to protect our oil supply, to keep cars running. It’s not a coincidence that the auto-maker’s most profitable time was when the government was building roads. To paint automakers as a benevolent private company that established the American dream without government help is incredible.  

Golob also makes the argument that if the ne’er-do-well AIG, who apparently went bankrupt on their own perverted designs, deserves a bailout, then GM certainly does:

Early on in this crisis, we decided that AIG—an insurance company that made horrifyingly bad decisions—was worthy of rescue. We’re now up to $150 billion in a growing pit of despair attempting to save a company that did little to create or maintain a middle class. On the other hand, the same sum invested in American industry as loans would have a clear, immediate and profound effect on the economy—putting money into the pockets of line workers, new products on the global market that are competitive and even potentially make our society more energy efficient.

I don’t want to get into the argument over whether the credit bubble was caused by government policy, though I believe it was. But whether or not AIG made bad decisions, their bailout was not a reward, but rather a move to keep the economy running. AIG owes literally hundreds of billions of dollars to hundreds of companies. If AIG had gone bankrupt, many of those other companies would have as well, and who knows how many dominoes would have been knocked down in that tumble.

Companies go out of business all the time. The reason no bailout was offered when Enron went under, or when Linen’s-n-Things went under or any other company that went under recently is because our government, for good reason, didn’t think that protecting Enron or Linen’s-n-Things was necessary for our economy to function. Banks and giant insurance companies on the other hand play crucial roles in keeping our modern economy working, and whether they deserve bailouts or not, we don’t always have a choice.

This opinion coming from a Stranger contributor is surprising. This is the same newspaper that didn’t want the 2007 Prop. 1 because it had new roads. Not because Olympia should pay for the roads, but because there were new lanes of highway roads and that would produce CO2. Now it’s authors want to save GM, who has spent the last 15 years selling Hummers and Suburbans because it represents some unionized, working class private sector utopia? Because those greedy bankers with their bad decisions got a bailout?

You’ve got to be kidding me.

Right now, GM cannot profitably make cars, trucks or buses. A large part of the reason is that GM has massive liabilities to its employees and former employees in its pension program and health care costs, which would be the first thing to go if the company declared bankruptcy. If the government wants to earnestly protect workers and allow manufacturing in the United States to be competitive it needs to stop requiring business to pay huge health care costs. But we’re not solving that in the next few months, so GM will almost certainly receive a bailout, deserving or not.

Now back to transit…

3 Replies to “Automakers: Not-Transit Related”

  1. It’s nice to know the I and my children and my children’s children will be financing UAW pensions.

    You also make a slight misstatement of fact–the government doesn’t ‘require’ businesses to pay health care costs at all, the Unions ‘bargian’ that in to their contracts.

    Odd little fun fact: Health care as employment benefit is directly related to a government-mandated pay rate freeze during WWII, so in order to keep/attract new hires, health insurance was added as a carrot.

  2. Best bet for the auto industry is similar to what I would dictate for the financial industry. You want a bailout? Fine, treat the companies as bankrupt in all but name (there are some political and psychological reasons having either the automakers or financial companies be in actual Ch. 11 would be bad). Wipe out the shareholders, fire the executive management, offload the pension and retiree health care obligations, require the companies to sell non-core businesses, require higher fuel economy and environmental standards as a condition of bailout, and leave equity and control of the board in employee hands on the other side.

Comments are closed.