Obama In Detroit: Fuel Efficiency, Health, & Industrial Competitiveness

Barack Obama made his most detailed economic proposal to date on May 7, during a speech in Detroit. He proposed a sensible remedy for helping automakers while also curbing America's energy consumption. Under his plan, the federal government would help the industry pay for some retiree health benefits if automakers invest in more fuel-efficient vehicles. The partnership idea, which hack economists like Mankiw criticized as an unjustified bailout, would cost an estimated $7 billion over 10 years. Umm...that's cheap.

Auto-makers in Detroit say they're failing because of huge pension and health liabilities. It's not the only cause of their failures, but the problem is systemic across US industry. The auto-makers have a key, legitimate gripe. They're competing against foreign companies whose workers already benefit from universal health care systems, so their balance sheets aren't encumbered by the same obligations. GM and Ford are offering all their manufacturing employees money, sometimes as much as $120k, to walk away. It's cheaper to do that and outsource production. The employees of airlines, airplane manufacturers, and lumber companies are losing their jobs because pensions are going the way of telegraph poles, even though the major portion of those pensions were worker-funded through their unions. The costs have risen, the money wasn't invested well, what was paid in is now outweighed by liabilities, so it's hard to compete.

The automobile manufacturers in Detroit turned on a dime to become the arsenal which won WWII, it was called the "American Miracle" at the time, and that's what Obama kicked off his speech with. He then pointed out that American dependence on foreign oil makes us vulnerable, and that burning oil accelerates global warming. So he offered Detroit a deal: If you make fuel-efficient cars, and I know you can, I will pay for your health care and pensions:

"A clean, secure energy future will take another American Miracle. It will require a historic effort, on the scale of what we saw in those factories during World War Two. It will require tough choices by our government, it will require sacrifice from our businesses, it will require innovation from our brightest minds, it will require a sustained commitment from the American people. It's also going to take leadership on the "Can't do, won't do, won't even try" style of politics of the past. Leadership willing to take on the doubters and the cynics and simply say, "Believe me, we can do it if we really try." I will be that kind of President. A President who believes that America can, a President who believes that when it comes to energy, the challenge may be great, and the road may be long, but the time to act is now. Who knows that we have the technology and we have the resources, and that we are at a rare moment of growing consensus among Democrats and Republicans, unions and CEOs, evangelical Christians and military experts who understand that this must be our generation's next Great Task."

None of the quote above was read off a tele-prompter, nor was any of his speech. It was all off the top of his head, and he was in command; he just came out and said it, what our challenge is as a country: invading other countries to lock up their oil won't work; we have to reduce oil consumption and build another engine. He was greeted with sustained, thunderous applause and whoops of joy by the attending elite. Detroit thinks he "gets it."

Obama has also recognized the crease in which to drive the splitter of a universal health care wedge, and how to generate support for it: Big Business is demanding it. This far outclasses the 3,000-page Clintonian Cryptonomicon plan for health care. We don't need 3,000 pages. The return on investment of health is simple. In World War Two, the Nazis took millions of prisoners and people in concentration camps and worked them in factories for war production. Worked them to death. They had work output per person until average death figured down to the calorie. Whereas the US sent Rosie the Riveters into factories, paid them unheard-of wages and double-overtime on top of that. Guess who won?

Workers need good wages and good health care, and while individuals might not count for much in this cock-eyed world, the corporations they make things for count for a lot. The ability to compete is crucial, and a good, equitable system of health care which makes people healthy is competitive bedrock. Finally, someone understands those fundamentals again, and had the courage to say it in public.