Bailout Watch 288: WaPo Warren Brown: "The Bailout Isn't Enough"

by Robert Farago

Published: December 14th, 2008

Perception: All Detroit needs is deep restructuring and federal bailout money for long-term viability.

Reality: Wrong. Detroit needs what America sorely needs — a Congress with the leadership chutzpah to devise and implement industrial and energy policies that will help to keep native manufacturing industries alive. Detroit’s problem isn’t poor products or lack of products. It’s a national government still wedded to the debilitating siren song of cheap gasoline. It’s a nationally collapsed financial system. And it’s governmental hypocrisy — our willingness to pour tax dollars into foreign enterprises, most of them not unionized, while griping about doing the same for homegrown, unionized manufacturers largely responsible for building America’s middle class.

Robert Farago

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Ronnie Schreiber on Dec 14, 2008

TireGuy, I pretty much agree with much of what you said, but you didn't really respond to my point. It seems to me to be a violation of free market principles for the government to tell people how much they can make. I'm not a huge fan of minimum wage laws. I'm certainly not a fan of "living wage" or "comparable wage" laws. So the idea of maximum wage laws rubs me the wrong way, regardless of Detroit's need to restructure.

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Maxb49 on Dec 14, 2008

Robert this is a fantastic post.

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Ronnie Schreiber on Dec 14, 2008
Problem is this. Even a rudimentary examination of the data will show that most of that huge distributional disparity is made up of Social Security and health care mechanisms for the retired. Not big payoffs for transplant corps. If you keep throwing out this red herring, I’ll keep calling you on it. I'm not saying they smell but your retirees are red herrings themselves. If the discrepancy is retirees, one would assume that Florida and Arizona would have particularly high returns on tax dollars. For 1981-2005, Florida averaged $1.05 in federal spending per tax dollar and Arizona $1.17. By comparison Alabama averaged $1.40. I'm not a statistician, and there are exceptions like Texas and Tennessee, but nearly all the southern transplant facilities are in states that did better than Florida and Arizona. It would be interesting to see what has a greater correlation to return on federal tax dollars, the number of retirees or the presence of foreign owned auto plants. I'd be happy to look over any data you might link to. I haven't been able to find any breakdowns in terms of retiree benefits, infrastructure, contractors defense and otherwise, military bases, etc. From what I've read, defense spending is a factor. California has gone from a net gain to a net loss as defense plants have moved to the South. Tank production was moved out of Michigan (not to the South, but it still reduced federal spending). Defense bases are also a factor, with bases in the North more likely to have been closed under Clinton than in the South. True, there are good reasons for having military bases, particularly naval facilities, in warm weather regions, but I know of two Air Force SAC bases and an Army base that were closed in Michigan and they keep threatening to close the only remaining large military facility in the state, Selfridge ANG base. TACOM, what used to be the US Army Tank Command in Warren, is a shell of its former self. Other government spending by executive branch agencies and on GS employees, all 1.8 million of them, sucks up plenty of cash. In this case, the big winners are Wash. DC, VA and MD., though Alabama, Texas and Florida, with ties to NASA, do okay as well. Earmarks may also be a factor as they often pay for things that otherwise would come out of the state's general fund freeing up money for business incentives. Mississippi gave Toyota and Nissan each about $300 million to build plants there. In 2008 Mississippi got $282 million more than Michigan in earmarks. That's almost enough to build a transplant facility. Like I said, I'd be happy to look at the data and if I'm wrong I'll admit it, but either way a lot of money has been taken out of the Midwest and a lot of money has found its way to the South.

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TireGuy on Dec 15, 2008
Ronnie Schreiber : December 14th, 2008 at 9:50 pm TireGuy, I pretty much agree with much of what you said, but you didn’t really respond to my point. It seems to me to be a violation of free market principles for the government to tell people how much they can make. I’m not a huge fan of minimum wage laws. I’m certainly not a fan of “living wage” or “comparable wage” laws. So the idea of maximum wage laws rubs me the wrong way, regardless of Detroit’s need to restructure. It is also a violation of free market principles for the D3 to go to the government together with the UAW to ask for a bailout. If the point is about free market, then there is a very clear answer: no penny for the D3, let them go bankrupt. BUT: if the UAW and the D3 believes there is any reason for a bailout, then there must be consequences. And this includes the UAW and the automotive workers who with their overpay very much contributed to the situation of the D3.

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