Tuesday, November 25, 2008

Saving the auto industry

The airwaves and the print media are brimming with prescriptions for saving the US auto industry, warnings about what will happen if it is allowed to collapse, and finger pointing at auto executives, unions and governments.

Much of the rhetoric assumes that if the government fails to bail out the automobile industry, it will collapse, leaving millions of people jobless and millions of retirees without their pensions.

Clearly the auto industry is in serious straits, and some serious measures will be needed to save it. However, a government bailout, or loan as the auto executives insist on calling it, is precisely the wrong solution. A bailout will give the auto companies breathing space – which they can use to wait for the programs they already have in place to bear fruit, and for economic conditions to improve. But the auto companies have serious problems that need to be dealt with now: worker and retiree pay and benefits, union contracts that give overseas manufacturers a huge advantage, management’s tendency to concentrate on big cars and SUV’s because they have higher profit margins (or did until recently). These problems can only be solved by the auto companies, possibly under new management. A Chapter 11 reorganization would allow the auto companies to continue operating while they sort out their problems.

Does government have a role in the automotive turnaround? Certainly. Government can help by freezing the unfunded mandates they have imposed on the auto industry: fuel consumption, emissions, crashworthiness. Not that anyone is opposed to cleaner, safer, more economical cars, but how much better off would we be if the government offered a prize to the first auto company to meet a goal instead of fining those who don’t meet it?

Sunday, November 9, 2008

Observations November 5, 2008

Now that the fears of conservatives have been realized in the election of Barack Obama to the Presidency and the increased Democrat majority in the House and the Senate, it’s time to assess what went wrong.

Usually there is not one single issue that leads to the demise of a party, and this case is no exception.

In 1994 Newt Gingrich’s Contract with America fired the imagination of voters and led to Republican majorities in the House and the Senate. With the election of George W. Bush in 2000 Republicans controlled the legislative and executive branches.

But all Republicans are not conservatives. Some Republicans played the same games the Democrat majority had played for years: earmarks, big budgets, appointing cronies to positions under their control.

The Bush Administration began with great hopes: The “No Child Left Behind” act; the promise of saving Social Security by establishing personal investment accounts with a portion of the Social Security tax money; the Bush tax cuts. The events of 9/11/2001 gave Bush an opportunity for greatness that he seized. But the attack on Iraq was a far messier affair. Faulty intelligence and a utopian idea that democracy could be established in the Middle East, combined with underestimates of the needed resources led to a long and bloody war. It’s true that we are winning, but are we fighting for the right reasons? Perhaps because of the Iraq war the Bush Administration lost sight of Social Security reform, and failed to push it when they had a majority in both houses.

In November 2006 the voters, fed up with the war in Iraq, and perhaps with the Bush Administration’s failure to enact initiatives like Social Security reform, installed Democrat majorities in both houses of Congress. Since that time there has been a leadership vacuum in the Republican Party. Conservatives have battled with the liberal Republican establishment—the so-called “Country Club Republicans”. Some Republican actions like the House members who refused to vacate the House last August following an adjournment that occurred before Congress had dealt with the energy issue, attracted favorable attention, but it was too little, too late. Newt Gingrich’s American Solutions and his books, “Real Change” and “Drill here, drill now, pay less”, have attracted a strong following, but not yet enough to turn any tides.

Conservatives need to unite around a program the voters can support. The outlines of such a program might be:

1. Make the Bush tax cuts permanent
2. Reform Social Security, ideally by establishing personal accounts, but any program that protects taxpayers and recipients without bankrupting the government should be fair game
3. Work toward a foreign policy that observes the ideals of America’s founders as embodied in the Constitution and the pronouncements of men like John Adams. While I don’t agree on every point, Ron Paul has valuable insights into what America’s foreign policy should look like
4. Develop a comprehensive energy program that encourages exploration and drilling for petroleum in the near term, clean coal, nuclear and other sources such as wind, solar and bio, and aims for energy independence
5. Reconsider our association with the Republican Party. This doesn’t mean we should desert the Republicans for a third party (although that’s a possibility), but that we should work for the election of conservatives, whether they be Republicans, Democrats, Libertarians, or whatever.