At Wednesday's Facebook town hall meeting, President Obama made a bold and fairly controversial statement about the American car business:
[W]e essentially saved the U.S. auto industry. We now have three auto companies here in America that are all turning a profit. G.M. just announced that it's hiring back all of the workers that it was planning to lay off. And we did so, by the way, at the same time as we were able to increase fuel efficiency standards on cars for the first time in 30 years. So it can be done, but it takes a balanced approach.In 2009, Obama was uniformly reamed by the political right for the Detroit bailout, in spite of the fact that the GOP had few issues with diverting a vastly greater portion of national treasure -- fueled by foreign borrowing -- to the rescue of the Wall Street. But he's fully justified in now celebrating the Motown auto renaissance.
Going beyond bailout denial
Of course, it's bigger than that. Timothy Egan nicely summarized the situation a year ago:
Saving the American auto industry, which has been a huge drag on Obama's political capital, is a monumental achievement that few appreciate, unless you live in Michigan. After getting their taxpayer lifeline from Obama, both General Motors and Chrysler are now making money by making cars. New plants are even scheduled to open. More than 1 million jobs would have disappeared had the domestic auto sector been liquidated.As the U.S. manufacturing sector surges forward and leads us out of the Great Recession, it's becoming apparent to anyone paying attention that the Detroit bailouts were a fantastic investment. The logic was simple, based in the core principles of capitalism and democracy: money invested in profitable productivity will grow exponentially and be widely shared.
The bailouts converted some ardent critics, notably the Atlantic's Megan McArdle, who offered this after visiting the New General Motors (GM):
The bailout wasn't a good idea, and it will probably cost billions.... At least in this case, we got something in return: a functional car company, resurrected from the ashes of the old GM's bloated carcass.The auto industry was the last line of defense
Obama's Facebook town hall comment echoed McArdle's analysis, but I think it was meant to signal more than that, headed into an election year. Obama is aware that two kinds of American market capitalism have been in competition over the past 30 years.
The older version produces goods and services and makes money that's redistributed most vitally in the form of employment. This is the engine that can create a million jobs that needed saving in 2009. It's symbolized by Detroit and has been vilified by free market ideologues who hope to cripple the unionized and politically moderate middle class.
They favor the newer version, which creates chaotic capital imbalances that, under the twisted rubric of "creative destruction," enable reckless investors on Wall Street to put productive sectors of the economy at great risk. The tech sector has already been blown up once. The housing sector had every bone in its body broken and is still in traction. The auto industry would have been the final domino.
Wish they could see me now!
It's pretty clear to see which version makes more sense. The banking sector returned to profitability shortly after its massive bailout and has thus far done nothing to sustain a recovery or reduce unemployment. And since the U.S. automakers started making money again? Hiring has resumed and consumer credit -- new cars loans and leases -- has begun to flow.
This raises an interesting question. Obama was clearly saving something by saving the auto industry. But by bailing out the banks at roughly the same time, did we save the financial system -- or just a mutation of it? Makes you winder what the unemployment rate would be now if we'd committed a few hundred billion to manufacturing instead of banks.