What next for the Big 2.5?

by: Eric B.

Fri Nov 21, 2008 at 10:11:36 AM EST

Well, it shouldn't be of any surprise to anyone here that Congress put off taking action on the Big Three yesterday ... kicking serious problems down the road weeks and months at a time is nothing new to Michigan.  However, if I understand things correctly, the Big Three could try again for assistance in early December.  They're being told that they'll need to tell Congress what they plan to do with the money, and how it's not just throwing good money after bad (they've learned from experience, yet unfortunately the finance industry doesn't employ so many regular people).

Since I assume that the Big Three have in the last couple of months drastically altered their five- and 10-year plans (the things that make them credible to lenders and investors), I suppose it's only reasonable that they share some of it with Congress, who in essence is going to become a lender.

I'm assuming that in the end, Congress will do something, if only because the Democrats will be smart enough not to follow the Republican Party down the same path to regional ignominy, where the Party plays solely to a coastal support.

I've seen a lot of under-the-surface boiling rage that the money set aside to retool to a greener product line might be raided to placate Republicans.  If I understand it, in some corners use of that money would be a deal breaker ... if Congress wants to use that money, then the Big Three should get no money.

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I don't have much to say about that, except that it's idiotic. The simmering rage, that is, not the idea that the Big Three would first raid the money set aside to retrool.

The reason for that is Kit Bond and George Voinovich.  Even if Norm Coleman wins his recount (although this is highly questionable), and Saxby Chambliss wins his run-off race, you'll have 60 votes (assuming that all Dems vote to re-allocate $25 billion for retooling) in the Senate, and a more aggressive, eco-friendly majority in the House.  Anyway, it's stupid to set aside $25 to help retool companies that promptly fall into bankruptcy.

More than that, since the Big Three will have the burden of fighting CAFE standards lifted (with Dingell out of the Energy and Commerce chairmanship, no one's going to listen), here are a few things the Big Three could lobby on behalf that would both make surviving until the economy picks back up, and would also promote good, sound progressive thinking.

*--Replace CAFE with an aggressive gasoline tax.  I can't say it enough times.  CAFE is failed policy.  It was passed, not to address environmental concerns, but to curb dependence on Middle Eastern oil.  Today, we're more dependent on Middle Eastern oil.

By that metric alone, it's failed policy.  But, it's also failed as an ersatz climate policy.  Climate policy should be driven by a desire to cut emissions, not make people drive more efficient cars.

The problem with CAFE is that it doesn't address the use of gasoline.  I've said it before, I'll say it again ... each time you drive past a McDonald's, and see a line of cars at the drive-thru, you're seeing a failure of CAFE standards.  Every time you drive your car a few miles to buy one item at the grocery store, you're seeing the failure of CAFE standards.  Every time you see someone driving someplace they could have just as easily walked, you're seeing a failure of CAFE standards.  Not only are those behaviors making us more dependent on Middle Eastern oil, but also emitting greenhouse gases by the boatload.

The fatal problem is that the marketplace rewarded the Big Three for dodging CAFE standards.  That is, the bigger and less efficient the vehicle that was built in the 90s, the more people bought them.  And, those are the most profitable part of the auto industry.  In fact, back in the early days of this decad, Ford tried building more fuel efficient big trucks.  Guess what happened?  Ford stopped building them, because fuel economy wasn't something that concerned anyone.

The response to this, when I've pointed all of this out before, was that the Big Three ran aggressive marketing campaigns that somehow tricked the American public into buying too much car.

Well, ummm, anyone know anything about a river in Egypt?

The truth is that the American people have never had an appetite for small things, unless we're compelled to accept them as a matter of circumstance.  While the American consumer was buying oversized trucks in the 90s, he and she started at the tail end of that decade and through the middle of this one to buy too much house, and in suburbs that were increasingly distant from their workplaces. And, it's worth noting that no one cared even the slightest about fuel economy until the Arabs scared everyone into believing that they had to.  Once the Saudis figured out that the fastest way to get rich was to send a nation of oil junkies on a decades-long binge, they opened the spigots.

When did we see people's behavior changed?  I go back to Nolan Finley's column of a week ago.  Right about the time that gas prices hit $3.50 a gallon.  Bicycle racks filled up, and so did buses and trains (anyone remember the governor riding her bike to work, and taking the bus?).  People started looking for fuel efficient cars to buy, and used auto lots started filling with SUVs because no one wanted to spend hundreds of dollars filling them up every week.

So, the trick to both encouraging less waste of gasoline, which is the point of CAFE standards, and also lowering greenhouse gas emissions is to attack demand for gasoline.  I have no confidence that the American consumer learned much of a lesson over the summer.  It's like a horror movie, where the tension is occasionally broken by some gratuitous nudity.  By next summer, when prices go back up, expect more of the same terror-filled headlines.  Why?  Because it's a cycle that's been going on for the last several years.

An aggressive gasoline tax would break that cycle, by permanently keeping gasoline more expensive ... say, over $3.50 a gallon.  It would serve as the forerunner, by the way, of a general carbon tax, which is one of the two ways most experts think we'll need to use in climate legislation.  And, because the Big Three will be chasing customers rather than worrying about government mandates out of step with the marketplace, Congress could abolish CAFE.  Everyone comes away happy, even those growing voices who say that the way to rebuild the economy is through a plan that fixes and repairs our infrastructure, since the revenue through an aggressive gasoline tax would be earmarked for those kinds of things.

*--Universal health care.  The advantage that the Big 2.5's come to the table with is that employers don't provide health care for employees.  The number of dollars spent by the Big Three for both active workers and retirees is ... well, it's a really big number.

I've seen estimates that $2,000 of every car sold in the United States is to provide health care for workers and retirees. This, naturally, is before the costs for retirees becomes a UAW joint in 2010.

This means the marketplace is not a level playing field. It's tipped in favor of foreign competitors.

The Republican response to this has been that we should just make things worse for the American working stiff by shorting him on his health care.  I suppose that it one approach, althought it's not an approach I'd think that any sane human would first want to take.  I mean, there aren't many people who think that we should actively make things worse for people who come after us.  But, you get the Republican Party you get, and not the one you want.

Obviously, I think universal health care is a smart idea.  Not only is it unconscionable that members and former members of Congress see the emergency room as access to health care (...ahem, Tim Walberg, ahem...), but the idea that poor people go without so rich people can choose which heart specialist they go to is quite simply class warfare.  Beyond that, it puts American manufacturers at a competitive disadvantage, and puts America itself at a competitive disadvantage by driving up the labor costs of making stuff here.