Bailout Watch 399: A Bailout By Any Other Name

Edward Niedermeyer
by Edward Niedermeyer
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.

Go figure.

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2 of 22 comments
  • Kurt. Kurt. on Feb 18, 2009

    @no_slushbox, Economists are among the cheapest whores out there. My wife is an economist. She's frugal, but if my bank account is any evidence, she's not cheap!

  • RangerM RangerM on Feb 18, 2009
    “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.....” If we're going to pay reparations, shouldn't we start with the former slaves first? Any former slaves around?

  • GregLocock Two adjacent states in Australia have different attitudes to roadworthy inspections. In NSW they are annual. In Victoria they only occur at change of ownership. As you'd expect this leads to many people in Vic keeping their old car.So if the worrywarts are correct Victoria's roads would be full of beaten up cars and so have a high accident rate compared with NSW. Oh well, the stats don't agree.
  • Lorenzo In Massachusetts, they used to require an inspection every 6 months, checking your brake lights, turn signals, horn, and headlight alignment, for two bucks.Now I get an "inspection" every two years in California, and all they check is the smog. MAYBE they notice the tire tread, squeaky brakes, or steering when they drive it into the bay, but all they check is the smog equipment and tailpipe emissions.For all they would know, the headlights, horn, and turn signals might not work, and the car has a "speed wobble" at 45 mph. AFAIK, they don't even check EVs.
  • Not Tire shop mechanic tugging on my wheel after I complained of grinding noise didn’t catch that the ball joint was failing. Subsequently failed to prevent the catastrophic failure of the ball joint and separation of the steering knuckle from the car! I’ve never lived in a state that required annual inspection, but can’t say that having the requirement has any bearing on improving safety given my experience with mechanics…
  • Mike978 Wow 700 days even with the recent car shortages.
  • Lorenzo The other automakers are putting silly horsepower into the few RWD vehicles they have, just as Stellantis is about to kill off the most appropriate vehicles for that much horsepower. Somehow, I get the impression the OTHER Carlos, Tavares, not Ghosn, doesn't have a firm grasp of the American market.