The President on the Auto Industry

With jobs in the news President Obama has been eager to talk about the new found success of the American auto industry. He visited Ohio to highlight the fact that the American auto industry is back to being profitable after the financial crisis nearly wiped out the Big Three. I am quite sure that he will be reminding some of the folks in Ohio and Michigan that the Republicans were firmly opposed to assisting the U.S. auto industry. No question that the President’s actions saved about a million American jobs and spared us the ignominy of not having a domestic auto industry, but the Republicans still remain opposed to the actions taken by President Obama (and President Bush) I have to say that the criticism has been somewhat muted, with Mitt Romney claiming he was against the help before he was for it. (Or was it the other way around?) A potent issue in the industrial midwest, where the President will need help in 2012. I think the words from Republican Pat Buchanan on the American auto industry highlight the critical importance to the United States of a viable auto sector.

When workers, execs, engineers, dealers, salesmen and suppliers are all factored in, the Big Three employ 3 million people who contribute $21 billion a year to Social Security and Medicare, and $25 billion in federal income taxes. Add in all the businesses that depend on the auto industry, and we are talking about one-tenth of the U.S. labor force.

As columnist Tom Piatak of Chronicles and Takimag.com writes, 850,000 retirees, and their families, depend for pensions and health care on the Big Three. If they go under, the burden falls on us.

And to let the auto industry die is to write America out of much of the economic future of the planet.

So the President, in my opinion, has a good political story to tell on the Big Three automakers. But the job numbers released yesterday were not good news politically, with job growth below expectations, and unemployment still over 9%. The fact that two million jobs have been created in the last fifteen months (as opposed to the massive monthly job losses occurring when he took office) will not be enough to help the President politically. The Republicans teed off on him on that front yesterday, and will likely continue that drumbeat while the unemployment rate stays above 8%. Aside from some talk about “restoring confidence” and tax cutting for upper earners and corporations I have not heard anything from Republicans that leads me to believe they have a cogent plan for job creation. The “confidence fairy” talked about by Paul Krugman will not be creating demand anytime soon.

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5 Responses to The President on the Auto Industry

  1. Jules Gordon says:

    Your Honor,

    In the former America everyone is to be treated equally. Not in Obama’s America. If Ford was able to weather the financial storm why couldn’t Chrysler and GM?

    It’s because Obama’s union buddies had to be saved. Chrysler has gone through this same thing years ago. Yes they paid it back, but that misses the point.

    How many small business people had to shut down due to the financial problems we have gone through? Why weren’t they “saved” by a bail out?

    Better the automobile companies such as GM and Chrysler be forced into bankruptcy (of their own making)? It is not certain that they would go out of business. Maybe reorganization is what is needed.

    I roils me that I have to save those union thugs that have contributed to this particular problem.

    Jules

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  2. Bill Manzi says:

    Jules,

    GM and Chrysler were unable to make it because they made terrible decisions, and quite frankly had lousy union contracts. Of the sins of both I must agree with you that they are guilty as charged. I had my own doubts, but they were based on throwing good money after bad. If there were no reforms of the union contracts, (which there were) and no fundamental shakeup of management then I would agree that it would not have been a wise investment of taxpayer dollars. But the process, started under President Bush, recognized the need for reform but also recognized the critical need to save millions of American jobs. Jules, even for those who abhor unions I just do not believe that flushing a couple of million jobs down the drain so we could all stand on principle would have been the right thing to do for the country. Even President Bush blanched at that potential, and he was right to have acted.

    Bill

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  3. Jules Gordon says:

    Wow, so it was Bushes fault (Joke here).

    Actually, your honor, you speak of outcomes based on the rashness of cost/benifit analysis.

    I talk of a free America based on the principle of capitalism and small government. I guess in a country where the powerful can get a bailout after making bad decisions (rewarding incompetence) and half the country pays no taxes and are on the doll, those ideas do not hold sway.

    And whose to say that the same idiots won’t carry these companies to the precipice. After all there was no consequence for the last muck up.

    Jules

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  4. Bill Manzi says:

    Jules,

    The financial program (TARP) bailed out Wall Street. Despite the moral hazard the government acted because failure to do so, in the estimation of most, would have sank the economy and caused the financial system in the U.S. to collapse. George W. Bush did not want to do that, he HAD to do it. Now we can blame Bush for not following small government, free market principles, or we can recognize that he had no choice. The debate is fine as an academic exercise but frankly doesn’t work when decisions need to be made immediately. The same thing for the automakers. I do not doubt the management stupidity, nor do I doubt the overreach of the unions. But you just cannot flush millions of jobs down the toilet regardless of your governing principles. The federal government bailed out New York City and Chrysler in the past, and they may be faced with tough choices again in the future. Lets hope that when they make the decisions that they are not boxed into dogma over people.

    Bill

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  5. Jules Gordon says:

    Your Honor,

    II read the same speech in my copy of “1984”.

    A freedom lost is not found again.

    Jules

    Like

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