Tom Piatak

May 06, 2009

Kevin Gutzman wonders if I will recant my heresy in the matter of federal loans to the auto industry now that the Obama administration has apparently decided to forgive Chrysler’s debt to the federal government.  Nope. I don’t regret arguing in favor of federal loans, even though I disagree with the decision to forgive Chrysler’s debt.  As I pointed out in my initial piece, a collapse of the American auto industry will be expensive to taxpayers:  unemployed auto workers don’t pay taxes and they collect unemployment benefits, not to mention the automakers’ pension liabilities that taxpayers are already obligated to assume if the automakers cannot.  And given the number of Americans whose livelihood depends, directly or indirectly, on the American auto industry, these costs are quite large.  It is estimated that the liquidation of GM, Ford, and Chrysler would result in the loss of $150 billion in tax revenues over three years, excluding any pension liability.

I still believe it is important to maintain American manufacturing, which historically has not only provided many good blue-collar jobs but been at the forefront of American innovation. In addition to the many engineers who work at GM, Ford, and Chrysler, those companies support tens of thousands of outside R & D jobs. One of the most poignant stories I’ve read about the auto industry since the debate began last fall concerned an unemployed Chrysler engineer going back to school to get his MBA. Who can blame him?  As a high school friend who is a research chemist wrote to me in response to my initial piece on the auto bailout,  ?I have been seeing highly skilled research positions leave this country and put very qualified and educated people on the unemployment line all because they want to improve the bottom line.  So they send these jobs to other companies overseas. The American Chemical Society is worried about the lack of interest in science in America and the decreasing enrollment in colleges. Is it that difficult to see why the most intelligent youths of our country would skirt science and engineering when those industries seem to have no future here?  If we lose our manufacturing and all that it supports – research, engineering, skilled labor and teamwork – we lose what made us the greatest country in the world.?  None of this will change as long as we continue to adhere to a free trade ideology that encourages businesses to shutter plants here and send jobs abroad, puts a premium on MBAs and JDs over engineering degrees, and causes those displaced by plant closings to turn to the government. 

I do not regret standing by my native region.  I know what the auto industry means to the industrial Midwest, and I know what is likely to follow in its wake if it fails.  I especially do not regret standing against conservative and libertarian media outlets that, since the fall, have gleefully run one negative piece after another about the American auto industry.  The disproportion is striking:  Bloomberg reports that the federal government has spent, lent, or committed 12.8 trillion dollars to deal with the financial crisis.  The portion of that vast sum going to American automakers is minute, roughly .3%. If American automakers were coming in for .3% of the criticism for what has happened since then, I might never have written on this subject at all. 

I am not sanguine about the future of GM if, as seems likely, the Obama administration will try to dictate how GM builds cars, and I have some doubt about whether Chrysler will ever emerge from Chapter 11.  But all that means is that the people who won the election were leftists, not economic nationalists.  The case for helping preserve what free trade ideologues are eager to toss away remains.  Finally, I am reminded of this exchange between perhaps the leading conservative in popular culture and his son: 

HANK: The terrible truth is that America, the best country in the history of the world, no longer makes television sets. If I let this one fall apart, I let a piece of America die.
BOBBY: Well, couldn’t we just get a Japanese one?
HANK: Bobby, go to your room.