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Posted by on Dec 22, 2008 in Economy, Politics, Society | 7 comments

Dissin’ Detroit and Its Consequences for Conservatism

Now that President Bush has decided to go over Congress’ head and provide General Motors and Chrysler bridge loans through March, I think now is the time to see how the GOP and conservatives in general handled the issue. This is only my view and it’s the view of a crank living in Minnesota. However, in the glorious age that we live in, with handy little computers connected to the internet, one crank can share his views with the whole world and that’s what I am about to do.

In my opinion, I think the GOP and conservatism in general failed the test. We were correct on the merits: private businesses should not run to the government for help and should succeed and fail on their own. However, we failed in really looking at the situation around us and seeing if this we could apply this principle at this time. I think we were intellectually lazy, not willing to get from behind our computers and see what was actually happening on the ground. In the end, this shows a problem with conservatism in America in general and has hurt the GOP’s chances to make a convincing case in the Midwest.

I’ve read enough from bloggers at how we should not support a declining industry. For example, this is what David Brooks (a columnist that I normally agree with) said about the bailout back in November:

This (the auto bailout) is a different sort of endeavor than the $750 billion bailout of Wall Street. That money was used to save the financial system itself. It was used to save the capital markets on which the process of creative destruction depends.

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. A Detroit bailout would set a precedent for every single politically connected corporation in America. There already is a long line of lobbyists bidding for federal money. If Detroit gets money, then everyone would have a case. After all, are the employees of Circuit City or the newspaper industry inferior to the employees of Chrysler?

Brooks is thinking the danger here is that the government is going to try to save every failing company, thereby threatening capitalism itself. Give the money to these aging dinosaurs and they will just misspend it and make the same mistakes over and over.

But is that what’s going on here? Are liberals rushing in to end capitalism and create some new Peoples’ Republic?

No. Brooks and many others were looking at this from a philosophical standpoint and not a real time standpoint. They were talking about the vibrancy of the free market while at a time when the market is fragile and might not be able to mend so easily if one or more of the Big Three went down.

And that’s been the problem here. I think conservatives have been more concerned about the letter of the law than its spirit. They have held fast to a rule and not noticed if the times warranted such close adherence.

In normal times, I think it would make sense to ignore the pleas of Detroit. In many ways, they got themselves into this mess. However, these are not normal times. The housing cum financial crisis has made this economy fragile. While I don’t think we are rushing headlong into the Great Depression, Part II we are in a spot where doing the wrong thing could lead us down that road. Allowing the Big Three to fail would have created massive unemployment in states like Michigan, Ohio, Illinois, Indiana and Missouri. Those states would have to use already tapped resources to provide unemployment insurance. And it would have spread to suppliers as well. In some cases, that is already happening. A blogger at Autoblog sums up what is happening at a former workplace:

I’ve recently been in contact some former colleagues at TRW’s headquarters complex in Livonia, MI. Since the start of 2008 there have apparently been five rounds of layoffs at the technical center. In the most recent round in mid-November, one former co-worker with 32 years of experience as a skilled technician was laid off as were numerous other engineers and technicians many with 25-30 years or more of experience.

Much of my former department has been let go, as the work they were doing has been consolidated at another facility. The most recent publicly available information about TRW indicated that the company had over 66,000 employees worldwide with 4,000 in the Detroit area, including 1,200 at the Livonia technical center. It’s estimated that as many as one-third of the people in Livonia lost their jobs in the most recent round of layoffs. These are mostly college graduates with bachelors and masters degrees, and many of these same people are having a tough time finding jobs because every other company in the field is also letting people go.

These engineers are technicians are being fired because the vehicle programs they were involved in have been delayed or canceled outright. Lack of a paycheck means these people will be spending less money in the community in coming months, leading to cascading business failures and job losses. This is the real cost of the financial mess on Main St.

Any potential demise would also hurt suppliers, which would in turn, hurt the foreign automakers that have plants in the U.S. since they get their parts from the same suppliers.

If the government did nothing and the Big Three collapsed, would we enter a depression? I don’t know, I’m a pastor not an economist. But I do think that with the economy has fragile as it is and with rising unemployment, I wasn’t interested in testing out that hypothesis.

In the end, I think conservatives did not do anyone a favor for not even trying to provide a solution and as the old saying goes, ideas have consequences. Don’t be surprised if come 2010, the Democrats use this failure during the elections. The Dems and Unions will run commercials about how the GOP was willing to put this economy at risk and many people will remember. They will not care that these bloggers and politicians were sticking to principle, they will remember that the GOP tried to stick it to them.

The sad thing is that 30 years ago, it was the autoworkers that Ronald Reagan went after to win the Presidency. Back then, those autoworkers were dissatisfied with the Democratic Party and started voting for the Republicans. It was in Macomb County a suburban county of Detroit where the term “Reagan Democrats” was coined. Three decades later, the GOP has basically told these people to drop dead and forced back into the arms of the Democrats. It’s yet another sign of how tone deaf the GOP has become and so willing to write off total sectors of the American populace for a thin slice that they think will carry them to victory.

Maybe a “bailout” was a great idea, but the GOP wasn’t that interested in presenting anything new. Creative destruction, as they say. Never mind if this time the destruction was the Apocalypse.

Again, I am not an expert, but I am the son of two autoworkers and have seen the hard times in my home state. In the past, I would have said this was the result of the economy and Michigan hasn’t moved forward. And I still think that is true. The Big Three have been slow to change and again, if it were normal times, I would say they should go hang. But we live in risky times and the GOP failed to see that and was willing to gamble with the lives of tens of millions of people. I believe in the free market, but I wasn’t willing to let such a massive calamity happen that could bring down the rest of the economy. I’m a conservative, but I am also loyal to my parents.

I don’t know what the answer is for conservatives here. But before we start throwing out that “elitist” charge at liberals, we might want to check ourselves.

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