The Last Word: Government Motors?
July 31, 2009
I was in Detroit during the National Summit held June 15-17. I did not have the chance to attend that event, but read many of the presentations in their entirety afterward, as well as media reports of the event.
Bill Ford, chairman of Ford Motor Co. and co-chair of the event said to the attendees, “If there’s a silver lining to all of this, it’s that the rest of the country is waking up to the fact the industrial basis is eroding and that prosperous nations don’t let that happen.” Ford called for a national list of priorities that must go beyond rhetoric if the summit is to be successful.
Ford is on target. A robust, innovative manufacturing base is necessary not only for the economy but for national security. However, I would disagree with Ford that the American public is more uneasy about the amount of manufacturing in this country than who is in charge of the manufacturing. Specifically related to the automotive industry, a recent research survey by Rasmussen Reports shows that 64% of Americans want the government to get out of General Motors and Chrysler as quickly as possible. An AutoPacific poll found 80% of Americans want the government out of the car business sooner rather than later, and more than 50% say that GM and Chrysler should have been allowed to fail.
The fear that Americans feel about government intervention in private industry is well founded. Comments at the National Summit by Senator Carl Levin (D-MI) are indicative of why this fear is well founded.
Levin told the group that the tone has changed in Washington, DC, and that the real competitors for United States industry, “…aren’t the companies in China making small cars, but the governments who support them.” Levin suggested that what industry needs is an “aggressive active government with a policy to support industry.”
Levin, like most politicians, has a short-term memory. As far back as 2001, Congressman Don Mazzullo (R-IL, 16th District) was holding hearings on the state of manufacturing in the United States and introduced several pieces of legislation to strengthen it. One of the priorities, encouraging job creation for manufacturing in America, was accomplished in October 2004 with the American Jobs Creation Act of 2004, which provides a 9% tax deduction for manufacturing production in the United States. Mazzullo continues to push legislation that forces China and the other East Asian countries to stop manipulating their currencies to give themselves an unfair cost advantage over American companies.
So, if Levin advocates for government policy that reflects some of Mazzullo’s priorities-creating tax incentives for creation of U.S. manufacturing jobs or combating monetary manipulation-Americans can have confidence in government action. However, if Levin advocates creating policy that has the government choosing technology winners and losers (for example, electric vs. gas), rewarding political supporters (the United Auto Workers who have a 20% share in GM) or unfairly pits government-run entities such as GM or Chrysler over private–run companies, such as Ford, then Americans are right to fear Levin’s “active, aggressive government.”
Government intervention in manufacturing is a double-edged sword. During the 1990s, the feds stepped in to protect the semiconductor industry and that resulted in that industry gaining the breathing room needed to develop high-end valuable chips that allowed it to regain the world lead in chip manufacturing and sales. However, an “activist” approach does not bode well. Lawyers-44% of the total number of senators and representatives hold this degree as of two years ago-are not as knowledgeable as you, manufacturing professionals, about the intricacies of your business and industry. That’s just common sense.
While former President George W. Bush bears some of the blame in beginning the idea of federal bailouts of private companies and starting us down this path, in a recent speech he hit the nail on the head on how economic recovery, and thus manufacturing recovery, will occur by means of the private sector, not the government. The role of the government is to create structural policy that allows private companies to do what they do best-create wealth. And by extension, the best thing that manufacturers know how to do is manufacture.
People told Rasmussen they don’t like the government in the car business-they had some genuine apprehension. The rest of us, not polled by Rasmussen, should be concerned, as well.
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