Taxpayers have never had less reason to be sanguine, having seen scores of billions of their dollars disappear unaccountably into the maw of two corrupt Middle East governments that the United States had installed by arms and hundreds of billions more pledged to rescue financial institutions that had played recklessly with the nation’s credit system. So why should taxpayers be philosophical about lending still another $34 billion to prodigal automakers who say they are too broke to go on?
If the money were reserved only for the deserving, all of that money would still be in the treasury and Congress would not be entertaining the idea of bailing out Detroit. But we are all in the breach now. None of us will be immune to the pain if the American automobile industry perishes. Congress should demand a detailed plan from the manufacturers for restructuring the industry to meet the demands of consumers and to operate with greater efficiency, but in the end the government must preserve the bedrock of American manufacturing.
In faraway Arkansas, which for years has tried and failed to join the ranks of the automaking states, we would not be untouched by the collapse of the domestic carmakers. Among the 3 or 4 million jobs that would be shed as the closures ricocheted through the economy are thousands in Arkansas. Some 70 Arkansas companies manufacture and supply parts to the automakers. Companies all across the country make vehicle parts; Detroit merely assembles the vehicles. The annual revenues of Arkansas companies that supply parts directly to the automakers or products indirectly related to car production approach $100 million. The freight companies headquartered in Arkansas, like Arkansas Best and P.A.M. Transport, would be hard hit.
There would be some satisfaction in letting General Motors, Ford and Chrysler take bankruptcy, as some, notably the losing presidential aspirant Mitt Romney, have suggested. Romney said they could then restructure and follow a different path, shedding union-won wages and fringe benefits along the way. Maybe, but how does a giant like GM recapitalize from bankruptcy, especially in the current credit crisis? Even if they emerged from bankruptcy, they could not regain their market share at home or abroad. It would still be an economic disaster of huge proportions for the United States.
Gen. Wesley Clark, the former Supreme Allied Commander in Europe, offered another reason to rescue the companies in an op-ed article last week in The New York Times. “Aiding the American automobile industry is not only an economic imperative, but also an international security imperative,” the retired Arkansas general wrote.
He recalled President Eisenhower’s observation that it was America’s economy, not its military, that ultimately won World War II because the automakers, sitting atop a vast pyramid of tool makers, steel fabricators and component manufacturers, became the arsenal of democracy by producing the hardware that made the American military invincible. The same was true of the Persian Gulf wars. The United States may need the domestic automakers again.
There also is the reassurance of history. After the first oil crisis in 1979, Chrysler was going under and pleaded for a $1 billion bailout. President Jimmy Carter worked out a deal to guarantee $1.5 billion in bank loans. Chrysler revived, restructured and paid off the loans in four years. The U. S. treasury actually wound up making money from Chrysler stock warrants.
If Congress pledges the $34 billion in some form which the Big 3 requested Tuesday, we have to remember that we are not protecting their executives and investors or even the union laborers who have been so harshly scorned in the debate but, in the end, ourselves.
