Death sentence for Detroit

Also, let's not forget the polls that show most Americans will not buy a car from a carmaker in bankruptcy. 

The Big Three bridge loan failure: A death sentence for Detroit

Susan J. Demas

December 12, 2008 | Capitol Chronicles

 

Polls show most Americans don't want Uncle Sam to help the Big Three and I couldn't care less.

 

They're wrong, plain and simple, but it's not entirely their fault. The amount of misinformation floating out there on ye olde information superhighway and from TV anchors who should know better is staggering.

 

Certainly there's a bit of bailout fatigue. The $15 billion bridge loan that cleared the U.S. House on Wednesday is a lot of money. Senate Republicans slayed it Thursday and the deal looks dead.

 

This would be utterly devastating for the U.S. economy - not just Michigan's.

 

Now would be the perfect time for U.S. Sen. John McCain, R-Ariz., to be the statesman he is and end this political brinksmanship rooted in deep-seated denial of financial reality. He got hammered this fall for suspending his campaign to push for the $700 billion Wall Street bailout. No one could accuse him of playing politics now; this would simply be bold action for the good of the country.

 

The fact is, letting just two of the three domestic automakers go bankrupt means the death of 1.8 million jobs in just the first year alone.

 

Still don't care? Won't affect me or my state?

 

Try this. Taxpayers will see $66 million swirl down the drain in two years if just two of the companies go bankrupt. Bye-bye tax revenue; hello unemployment insurance.

 

The cost of bankruptcy is more than four times what the autos could get from the feds, according to a report by the Anderson Economic Group. CEO Patrick Anderson is a staunch fiscal conservative, so it's striking that he's not arguing that the free market should be allowed to work here.

 

The reality is, the more economically prudent solution is the bridge loan. Every taxpayer in America should be treated to a copy of this report.

 

Unfortunately, this won't stop the Big Three bashing because it's too much fun. What we have is an axis of ignorance of far-out environmentalists and free-market Republicans.

 

The left whines that Detroit's gas-guzzling dinosaurs rape the planet and there's karma in letting them wheeze out their last breath. Their greedy CEOs sucking up $20 million bonuses are the living symbols of what's wrong with capitalism.

 

Yeah, not very powerful stuff. That's why this hasn't really gained traction and even big-time liberals like U.S. House Speaker Nancy Pelosi are willing to lend Motown a hand.

 

The right, however, is scoring big with its version of economic nihilism run amok. It's the unions' fault, of course, and even reputable media are selling the falsehood that workers make $70 per hour. The New Republic has nicely debunked this myth and you'll notice that conservatives in Michigan, no matter how anti-union, haven't jumped on this bandwagon.

 

U.S. Sen. David Vitter, the Louisianan best known for using the services of the D.C. Madam, this week derided the bridge loan as being "ass-backwards" in a rambling speech that proved he knows a lot more about hookers than economics.

 

Southern Republicans smugly brag that their foreign plants will flourish if the domestic autos combust. Yeah, here's the problem. When auto suppliers start croaking - and they will - Honda, Volkswagen and Toyota will bleed, even more than they are now.

 

By the way, Japan, China and Germany haven't had any problem bailing out their automakers. Kind of an unfair disadvantage, don't you think?

 

Both sides agree that the Big Three got too fat and happy (true) and churned out cars people didn't want to buy (also true, but now even Toyota's sales plummeted 32 percent last month). Why? The credit crunch, which has pushed the Big Three to the brink, just as they were making the labor and technology overhauls they need to thrive.

 

Peel away the political spin, and that's the real cause of the current crisis.

 

But when economics get too complex, there's always the shorthand of blasting the Big Three titans for their nasty corporate jet habit.

 

There's a disingenuous double standard at work. The bridge loan pales in comparison to the tens of billions of dollars the feds have thrown at financial institutions like AIG and Citigroup. Their executives somehow escaped begging on Capitol Hill but the Big Three's humiliation (twice) provided hours of entertainment on C-SPAN.

 

At this point, the Big Three need a Christmas miracle. This is not a regional issue, but it's looking like Michiganders need to lead the way - and not just at the federal level.

 

Gov. Jennifer Granholm; Senate Majority Mike Bishop, R-Rochester; and House Speaker Andy Dillon, D-Redford Township, should be holding daily joint press conferences on the car crisis.

 

There are still some Mitten Staters who believe that Ford, GM and Chrysler are getting what they deserve and the rest of us will somehow be hunky-dory. They need to hear a strong bipartisan counterpoint to the dead-enders.

 

Letting the Big Three die isn't just cutting off our nose to spite our face. It would be a decapitation.

 

Susan J. Demas is a political analyst for Michigan Information & Research Service. She can be reached at sjdemas@gmail.com or http://susanjdemas.blogspot.com.