Monday, August 2, 2010

A Little Credit, Please

I see that Jed Lewison over at DailyKos has raised a point shared by quite a few of us. The mainstream media does not have much to say about American automakers' return to profitability and shows reluctance to give much credit to the crucial role played by the Obama administration. As Lewison posted on Friday:

“President Obama is in Motor City today to focus attention on what he feels is an untold success story: the improving fortunes of American automakers thanks to the administration's decision to use TARP funds to bailout General Motors and Chrysler. Since the administration took action, the auto industry has added 55,000 jobs -- the best growth since 1999.”

Detroit's rescue plan cost $60 billion, an amount that is dwarfed by any number of other spending priorities. That amount would not last long in Afghanistan. And it is a tiny fraction of the amount the feds threw at the big banks.

The critics are silent on the number of people employed by the automakers. This means not just the new jobs, but more importantly, the far greater number of jobs that were not lost because Detroit is still in business. Those workers are collecting paychecks, not unemployment. They are paying taxes on that income, a far higher share than most on Wall Street pay.

A relatively high portion of those paychecks goes to main street America. This is an economic reality that Washington's village people ignore. The guy or gal working assembly at one of the myriad Chevy or Chrysler plants receives a paycheck which is then usually deposited in a local bank or credit union, which then loans overwhelmingly to others in that same community. Much of the multiplier effect takes place within the community.

The auto industry also employs many other companies indirectly; e.g., the huge number of component suppliers. These manufacturers are filling orders and maintaining their own employment precisely because Detroit is still in business. Their workers also are paying taxes on their earned income, and they also have multiplier effects that benefit their own communities. It should be obvious that if the automakers went under, many of their component suppliers would have gone under as well.

Those who criticize the White House plan are missing the primary lesson. This is not, and should not be, the subject of an ideological purity test. It was more about doing what you can with what you've got. The benefits to the economy as a whole are direct and profound, for the government's role has returned both GM and Chrysler to profitability, and it has kept many thousands of employees working and not on unemployment.

$60 billion was a bargain.

No comments:

Post a Comment