Bailout Watch 399: A Bailout By Any Other Name
It’s been a while since we’ve been graced with a good emotionally-charged argument for a “moral obligation” to bail Detroit out. These canards were a dime a dozen during the initial bailout push, as every Michigan-based opinion writer spilled ink by the barrel describing the myriad ways in which America owed Detroit big time. From winning WWII to spearheading racial tolerance. From fighting for the rights of the proletariat to exercises in moral relativism. It seemed that Detroit backers had leveraged every possible emotionally-charged issue to clear the way to the federal teat. But just when we thought that the flow of intellectually dishonest bailout blackmail had slowed to a trickle, we found one of the best examples yet.
A Marketwire release states that “DBusiness magazine is sending individual copies of its March/April 2009 issue to President Obama, members of the White House staff, every U.S. Representative and Senator, members of the newly-formed Presidential Task Force on Autos, along with various Department secretaries this morning.” Why? An article therein makes it look like DC owes Detroit more than the other way around. Needless to say, the argument doesn’t pass the smell test.
The article in question, written by Mr. David Littman of the Mackinac Center for Public Policy, purports to “evaluate for the first time the rise of Detroit’s auto industry and quantifies a major portion of the value it added to our nation’s GDP.”
Mr Littman’s conclusion? Detroit has added $60 trillion worth of “value” to the American economy (in current dollars) since 1900.
In a nod to misleading pro-Detroit analysis of the past, Littman’s figure does not include “wartime arms and defense that Detroit and its supplier base have contributed to the nation’s security, safety, and prosperity during World War I, World War II, and every other international conflict.”
Now, Mr. Littman is a retired chief economist for Comerica bank. So I’m not about to take issue with his $60T number. The problem comes when dBusiness magazine argues that “based on the first-of-its-kind analysis, it is the opinion of DBusiness magazine’s editorial staff that the federal government has a moral obligation to spare the Big Three automakers from bankruptcy action. In fact, the editorial staff believes the federal government should nationalize one or all three of the automakers before a bankruptcy filing is submitted.”
Except for the minor detail that these trillions of dollars in “value” created by Detroit were generated in a for-profit system which handsomely rewarded the creators of this value. Only the most extreme environmentalists would argue that the auto industry is a fundamentally undesireable national asset. Recent criticism of Detroit stems from a disconnect between automakers and consumers, itself the product of a decades-long decline in innovation and quality.
The idea that a certain amount of “value” generated by a given industry puts the government in debt to said industry is a self-serving and destructive approach to the political economy.
A quick look at Littman’s other work on Detroit’s predicament suggest that he’s a fan of reduced corporate taxes and government regulation, and that he believes “the federal intervention on Wall Street (the “trillion dollar bailout”) was the antithesis of what the competitive markets of capitalism would permit.”
But then he’s also been named Michigan Man of The Year by the state Chamber of Commerce, and has written columns for the Detroit Regional Chamber. And it appears that things in Michigan are so dire that a prominent local free market economist is OK with his work being used to justify a centralized, state-run automotive sector.
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