Let's Not Cut Off Our Face To Spite Our Face

Anyone who is policy maker opposed to preventing the liquidation of the U.S. auto industry is quite simply out of their minds. I can understand why parts of the general public might be skeptical, but those who are supposed to be informed about political economy should know better. I'm relieved that we appear close to an agreement, but I've been outraged that there was every any doubt. For me, those who opposed any assistance on principle (as opposed to objecting to specific types of support) should no longer be taken seriously on matters of significant import on economic matters. They've demonstrated either gross negligence and irresponsibility. Predictably most of them have been Republicans.

Why am I being so belligerent on this issue? Well, because I can't think of a rational case that can be made against helping the auto industry survive, while I can think of a whole host of reasons to do it. The economy appears in free-fall (which is one of the causes of Detroit's problems), and the collapse of the auto industry would lead to millions - yes, millions - of additional job losses. The ripple effects would be truly horrifying, and could very well send us into a Depression (that's with a "D", not an "R"). The auto industry is one of the linchpins of the struggling U.S. manufacturing sector - a sector that desperately needs encouragement. Sacrificing it in the name of economic ideology would gravely undermine our industrial and (ultimately) strategic position. The only word I can think of describing the idea that we should let the Big 3 go under is "insane."

So what are the arguments opposed to the bailout. The first is that the auto industry made its mess and has to bear the consequences - that it's not the government's job to bail out the industry. Sorry, but the "moral hazard" argument went out the window when we started rescuing the financial sector. Second, it could be claimed that the auto industry has been in long-term decline for decades, and we should just let it go - more funds would be throwing money away. I can think of several responses to this. Many of Detroit's problems are not of its own making. Health care costs and perverse economic incentives (both partly due to government policies) have facilitated its current woes. In addition, the decline of something does not mean that it cannot revive, or that it has disappeared. Just because something isn't as good as it used to be doesn't mandate that you throw it out. I'm not getting a new battery for my Mac just because it doesn't hold energy as well, because I can still get some good use for it. Finally, this crisis can be viewed as opportunity. Detroit has come so close to death that now, with proper encouragement from those rescuing it, it can make the fundamental reforms necessary to regain its long-term viability.

If you can think of another good reason to abandon the U.S. auto sector, I'd love to hear it. In the mean time, putting together some sort of package just seems like a no-brainer. I'm glad that the Democrats in Congress appear to be coming around.