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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

February 7, 2012 at 9:45 AM

Chrysler, Dirty Harry and the bailout

Clint Eastwood’s powerful and moving “Halftime in America” Super Bowl ad for Chrysler has been denounced by some Republican operatives as partisan shilling for President Obama. Eastwood and Chrysler deny it. What’s undeniable is that Mr. Obama, despite tremendous political pressure to do nothing, used federal money to keep Chrysler and General Motors out of bankruptcy liquidation. (Help for Chrysler began in the waining days of the Bush administration). Challenger Mitt Romney opposed the bailout, an irony coming from this son of the man who rescued American Motors.

Playing counterfactual history is always risky, but what if Washington had done nothing? Ford didn’t need federal help. The Japanese transplant factories were also safe. Still, it’s unlikely that GM and Chrysler could have gone through Chapter 11 proceedings like an airline and come out fine. Union-haters would have enjoyed seeing the United Auto Workers decertified and pensions eliminated (and this helps the middle class…how?).

But the auto industry is much more than two or three companies. Had GM and Chrysler shut down, an entire economic ecosystem of suppliers would have been destroyed and the damage might well have taken Ford down, too. It would have devastated a Midwest already reeling from bad trade deals and offshoring of jobs. Millions of jobs might have been at risk.

In reality, the auto industry is one of America’s last remaining large-scale high-tech manufacturing sectors (aviation is another). It’s this “scalable” manufacturing that is most important to a solid middle class — small outfits and mom-and-pop entrepreneurs aren’t enough. In return for federal dollars, both companies are now on a solid footing. GM has regained the spot as world’s largest automaker. Mr. Obama made the right call — certainly a better one than the huge bank bailouts that failed to curtail the behaviors that caused the financial collapse. It may be his best domestic accomplishment. It that brings a political advantage, as Dirty Harry would say, “Go ahead, make my day.”

Still, it’s telling that the ad and American policy are all about the cars, just like it’s 1970 and gasoline will always be cheap. The Obama administration had an opportunity to frame the issue of expanding our transportation choices and setting attainable goals that would have shown parochial Americans, for example, that high-speed rail works. Suburbia could also have been retrofitted with rail transit. Entire industries could have been built here, and with them manufacturing jobs, along with those for construction and operations. Instead, there was the misbegotten Florida high-speed daydream that quickly died — a project in a car-crazy state that guaranteed failure. Mr. Obama backed off. He didn’t mention rail once in his State of the Union speech. Amtrak is again under siege. It may be halftime in America, but it’s not 1970. The bungled chance to prepare for a high-cost energy future, lower greenhouse gases, ease traffic congestion and create many new quality jobs in transportation will be one of his signal failures.

And Don’t Miss: American exposure to the Eurocrisis || The Economist

Today’s Econ Haiku:

Bernanke’s talking

Stocks are up at the moment

A wrong noun and poof

Comments | More in Auto industry, Bailout


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