Breaking Down the Auto Bailout

Breaking Down the Auto Bailout

The outlines of the GM deal suggest President Obama is sticking with Rubinomics. Will other Democrats be brave enough to stand in his way?


So this is how the auto bailout will work. American taxpayers pump tens of billions into rescuing General Motors from bankruptcy. Then GM pays us back by shipping more jobs overseas–the equivalent of four assembly plants. The federal money will directly subsidize more imports from abroad, enabling GM to double its car production in Mexico, South Korea and China and selling the cars into the US market.

Can someone explain how this is in our national interest? If that is the best deal Obama’s auto czars can come up with, then this angry taxpayer says: laissez-faire–let GM go down. Better to settle for bankruptcy court than provide public financing to further the destruction of US manufacturing.

The Obama administration has stumbled into the middle of the political train wreck known as globalization. The president is an orthodox free trader, notwithstanding his vague promises of reforming trade agreements. But the auto deal is not much of a recovery plan. It begins to look like another sly victory for the old order that has failed. The business plan the federal government is advancing for GM follows the free-trade model created by Robert Rubin and other Clintonistas during the 1990s. Do whatever you can to help US multinationals succeed in the global trading system and assume this represents the national interest– never mind the damaging consequences for US production and value-added jobs. That is how America became a debtor nation with its steadily weakening industrial base and stagnant wages. That condition became the predicate that led to financial crisis.

The president was probably hoping to evade the fight on globalization– at least for now–since he already has a lot of other large matters on his plate. His intervention on behalf of auto producers was billed as a temporary work-out–enough financial aid to get the companies through the collapse in consumer demand and refashion themselves for lean, mean production of smaller, cleaner cars. No one disputes that scores of thousands of jobs will evaporate in the downsizing.

But the unfolding facts demand full-throated debate and political resistance in Congress. The United Auto Workers sent a letter to Capitol Hill the other day that revealed the terms. GM’s restructuring plan envisions a doubling of the vehicles it will import from overseas factories, from 372,000 to 737,000, in the next four years. GM’s imported cars–already 15.5 percent of its domestic sales–will rise to 23.5 percent.

“The overall number of vehicles GM will be importing in 2014 represents the production of four assembly plants, the same number that GM plans to close in the United States,” UAW legislative director Alan Reuther noted. People already outraged by the bank bailouts should save some anger for the carmakers. “GM should not be taking taxpayers’ money simply to finance the outsourcing of jobs to other countries,” the UAW insisted.

US Steelworkers president Leo Gerard is joining the fight, taking the same message to the public with a traveling bus campaign that will hit thirty-six towns and cities. When the auto industry shrinks, Gerard explained, lots of steel workers will lose too because they are in the supplier chain at paper mills, blast furnaces and iron mines.

Yet this fight is not fundamentally about displaced workers. It is about the gravely weakening national economy. The US government pursues a uniquely backward strategy in its approach to globalization that is unlike every other advanced industrial economy, as I explain in my new book, Come Home, America. Other nations like Germany, Japan, France and of course China impose national obligations on their producers and multinational corporations–demanding that companies retain their highest value-added production and best-paying jobs in the home country. The US gives its multinationals a free ride–even assisting them in dispersing production and capital to low-wage economies while keeping open the US market for their imports. Our own companies game this system endlessly–producing cheaply abroad, then selling the “US brands” back into the home market.

President Obama has taken an important step toward changing this system with his recent proposals for taxing US multinationals more aggressively. That could be the start of something big–a more effective strategy that defends the national interest in the global system. Or it could be just more good talk. The outlines of the auto deal suggest the president is sticking with Rubinomics. Will other Democrats be brave enough to stand in his way?

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