01:21 pm
The Big Three Bailout: The View from Michigan
Undip reader Ross writes from Michigan in response to my post late last week on the Big Three bailout. It’s worth quoting in its entirety:
This is something Kate and I have been discussing, as have many Michiganders, for quite some time–what appears to be the final gust of an ‘economic Katrina’ that is set to demolish southeast Michigan as we know it.
We have multiple family members who have worked for GM, a couple of whom are drawing on pensions at present, but we are also environmental advocates by vocation, so we have been frustrated at the big 3’s downright obstinacy with respect to mileage standards, and all the attendant petroleum/national security/climate change ramifications.
Leaving that aside, however, as you describe above, is the all-to-real fact that failure of what we know as “Detroit’s Auto-Industry” *WILL* result in an economic catastrophe in Michigan that will dwarf this severe one-state recession we’ve already been living in for 8 years now.
In other words, and I wish someone like Senators Levin or Stabenow or Governor Granholm (or anyone with a megaphone big enough to shout this important declaration from an MSM mountain-top high-enough for people nation-wide to hear (and understand) it) would just come out and clearly state the fact that the failure of the big 3 in the terms being bandied about by talking heads everywhere will wipe out middle class families in this state. period. (To say nothing of the effects on the poor, which will undoubtedly be (and in many instances, already are) more severe, as donations to food banks & charities dry up with a declination in disposable income across the board)
The double-standard (b/w bailout treatment of wall-street vs. blue-collar-working main street) is certainly felt acutely here, and there appears to really be no more “give” in the safety nets of anyone in the region. People have already been tapping their savings, 401ks, etc. just to pay the bills… when those finally dry up, there is nothing left. Lose the jobs on top of it and who knows what will become of this once-proud manufacturing hub.
One might make the argument that the decline of the automotive industry in Michigan, and its correlative effects on the southeast Michigan community, has been taking place since the riots of ‘67, and that Coleman Young (apart from whatever most people think of him) was unable to stem the adverse economic tides of the ’80’s (inflation, etc.), and that the core of the city has just continued to limp along since then, without any real or apparent ability to pull itself out of it’s doldrums (as did Houston, Denver, etc.) and revitalize itself to an extent that would be sustainable, with or without the big 3, such that the failure of a bailout package could not be the only thing causing Detroit’s issues at the moment.
However, I really feel that is the wrong way to look at it. Despite all those problems, Detroit–the city, the community–has been working diligently to bring itself back, diversify, attract new business downtown, expand public transit with a woodward light-rail system, etc. over the past few years… picture us as a fighter who’s been knocked down a bit, but is getting back up on his/her feet. Those arguing against the bailout also seem to have only begun paying attention to the industry 2 weeks ago, and have missed the fact that there has been a significant amount of restructuring and redirection taking place over the past few years, with major assistance/concessions from the unions, new vehicle programs (eg. the Volt for GM; Ford’s hybrid line), and legacy cost cutting where possible. People here know what has been happening, and have been working to address the problems.
Failure to extend a bridge loan, however, or to help the automakers get through the biggest financial crisis in generations with a sliver of the money that was thrown at wall-street without any questions being asked will amount to no less than taking a two-by-four to the back of every hard-working Michigander just as they struggle up from the mat.
Of course, Saginaw, Flint, Warren, etc. will continue to decline even further, and you will see a rapid descent into the second failed-state region/economy of the past four years: 1. New Orleans, 2. Detroit.
I guess this is a rather long way of agreeing with you, and echoing much of what you’ve said above… Thanks for giving voice (from outside the region) to the perspective of those of us here who’re still holding out hope that the vital, years-long turn-around process (and that’s what it takes folks, by the way, it’d be nice to just infuse cash into a struggling bank and be done with it, but industrial change of this scale takes time) will not be stifled and stymied by a short-sighted Congress that appears not to recognize the fire with which they are playing…
Ross raises something that I hadn’t really thought through — that the economic Katrina will be even more devastating than I thought. I was thinking about the immediate consequences — which would be as what the flooding was to New Orleans.
But there’s a second level to this: the long term impact, which could be exacerbated by the USG’s failure to respond effectively to the current crisis (much as the USG’s bungled response to Katrina made things worse). What we’re really talking about is the need to respond quickly before things get really, really, really bad — so bad that there will be no way that the USG (not even under Obama) can spend enough money to save Michigan from long-term suffering.
Ross’s point about the need for a Michigan politician to stand up and start shouting also is important. The problem, however, is that, as Tom Friedman noted on Face the Nation this weekend, these very same politicians have spent the past several decades doing everything they can to insulate the Big Three from the market — fighting CAFE standards, pushing for tax breaks, etc.
Part of what we’re seeing now is the product of forty years of Michigan’s Senators and Members of Congress doing everything they could to protect the auto industry from the realities of the market. And up to know, the Big Three was more than willing to let that happen, largely because it meant they could make more money. As Friedman noted this weekend, we shouldn’t just be talking about firing the heads of the Big Three, we also should be talking about accountability for those responsible for what can only be called codependency politics.
Now thateven the power of the Dingells and Levins of the world no longer can protect the Big Three from the realities of the market, they’ve come hat in hand to Congress to ask for a bailout. As I noted last week (and as Ross noted above), I think Congress has to make that happen (and not just the stopgap measure being put together today).
But one of the conditions must be an end to codependency politics. The protectionism and apologias need to end now. Because if they don’t, we’re not bailing out the autolmakers, we’re merely postponing their day of reckoning.