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Wake Up America

Will you pardon an occasional rant? Isn’t that partly what blogs are good for? My subject today is the failure of Congress and the Bush administration to bail out the American auto industry. If today’s news stories are accurate, any bailout will have to await the new Congress and administration in January, and by then the price tag will have climbed much higher, making the public more resistant to helping, and one or two of the firms might have gone under.

Why is that a problem? Can’t Japanese, South Korean, and German firms (with the Chinese also readying an industry) supply cars to American consumers? First, of course, it’s a matter of several million jobs ranging from auto workers to suppliers to the myriad of small businesses that cater to these workers and businesses disappearing in the midst of global recession that is verging on a depression. Secondly--and little remarked--it’s the loss not merely of assembly line jobs, but also the ability to conceive, design and engineer large durable goods. 

Let’s assume that after the recession eventually lifts, Toyota, Nissan, Hyundai, Honda, BMW and other plants expand their manufacturing in the U.S. So there will be factory floor jobs and also jobs in showrooms and repair shops. But there won’t be as many--these firms will increasingly get their parts from abroad and merely assemble their products in the U.S., and wages will also decline relatively as the threat of the United Auto Workers recedes. But also the administration and the advanced engineering and design of these products will be housed abroad. Some of the brawn will be left; but the brains will be gone.

You can contrast the fate of autos and trucks with that of the American computer industry in the ‘80s.There was much concern then that the American semiconductor industry was losing its ability to manufacture computer chips. The Reagan administration entered the fray by putting a surcharge on Japanese imports and by subsidizing semiconductor research. The upshot was that the U.S. did lose out to Asia on low-cost semiconductors, but it retained its lead in the most advanced computer technology. If it didn’t build all the pieces, it designed them, including the software that ran them, and it administered the companies from the U.S. and paid taxes to the U.S. and state governments without using various kinds of transfer payments to disguise their profits.

That’s not going to happen with automobiles and trucks. With them, it is not going to be possible to abandon manufacturing while retaining the ability to engineer and administer. The industry will disappear the way the American television industry disappeared. American workers and engineers will lose their ability to compete in a major durable goods industry--and that’s not a good thing.

Other countries seem to understand this. French President Nicholas Sarkozy announced a $33 billion bailout package yesterday. France is not in as bad shape as the United States, but Sarkozy is worried about the French auto industry and is promising to protect it in exchange for a commitment from it to produce cars in France rather than to outsource the production of them.

What is obvious to France’s president seems entirely out of the question in today’s Washington. News reports are dominated by quotes from two Republican Senators, Richard Shelby and Robert “Bob” Corker who come from states with large Japanese automaking plants and who, surprise or surprises, oppose a bailout of American firms. And the network news echoes propaganda about overpaid American autoworkers. CBS’s Katie Couric (whom I had to started to watch after the Sarah Palin interview, but am now thinking better of it) has been trumpeting the $70 vs. $24 an hour canard that our Jonathan Cohn has so artfully exposed.

I would like to see Couric and other networks consider two relevant questions about the auto industry.  First,  haven’t Japanese and South Korean auto companies benefited from enormous government help themselves--and subsidies were the least of it. For decades, Japan--and currently South Korea--kept out American car companies. And the United States turned a blind eye, respecting the desires of these countries to have their own industries. Why should we begrudge our own companies a modicum of what we have tolerated from Japanese and South Korean companies?

Second, are these foreign auto companies engaged currently in lobbying people like Corker and Shelby to shut down their American competitors?  Maybe not, but for those who think I’m just hyperventilating, look at what happened to the American television industry in the ‘70s and early ‘80s.  It’s in chapter six of Pat Choate’s Agents of Influence. I think a little research on this order might counteract some of the idiotic reporting--especially by the television networks--on these matters.

Meanwhile, where is the president-elect on these matters? Does he have people working on this issue? Is he going to appoint Labor and Transportation Secretaries who understand the urgency of these matters? As Barney Frank has said of Obama, “At a time of great crisis with mortgage foreclosures and autos, he says we only have one president at a time. I'm afraid that overstates the number of presidents we have. He's got to remedy that situation.”

--John B. Judis