Friday, November 14, 2008

The automobile economy on the North Coast

The right kind of stimulus

How will Obama get it right?

Permit me to make a modest request of everybody who lives north of the Ohio River: If it’s not too much trouble, could you please, if you are still employed, just quickly get your coat on and go buy a Chevrolet Malibu, a Ford Focus, or a car made by Chrysler? Please.

Because if we all buy a new American-made car soon, then maybe America won’t slide from recession into depression, and maybe there will still be some people left alive in the area north of the Ohio River a few years from now.

I’m calling for a patriotic act of automobile consumerism because of recent scary events, and because some recent elite political discourse is even scarier.

Earlier this week, when a German banker suggested that the actual value of General Motors Corporation was zero, the entire stock market fell off a cliff.

Meanwhile, down in Washington, some of our most respected think tankers seem to be confused about whether the American automobile industry needs to stick around.

Let me point them to a guide for the perplexed.

A study published last week by the Center for Automotive Research ( took a look at what could happen if the 239,341 people who work for GM, Ford, and Chrysler were to be laid off as a result of their companies shutting down.

If there were a “rapid termination of Detroit Three U.S. operations in 2009,” as some predict, CAR estimates that there would be a loss of $298.2 billion in personal income over the course of three years. Worse, there would be a loss of 2.9 million jobs in 2009, with a slight recovery for a third of those workers over the next two years as they find jobs elsewhere—including at Honda and Toyota. Losses of state and federal tax revenue would be more than $156 billion over three years.

Most of the unemployment would occur right here on the North Coast—upstate New York, Pennsylvania, Ohio, Wisconsin, and of course Michigan. Most of the fiscal distress at the local level would occur here, where the picturesque snow has just begun to fall. In most of these communities, there are already large-scale problems with housing foreclosures, credit contraction, persistent unemployment, outmigration, urban abandonment and a couple of other tough issues, including sick folks with inadequate or non-existent health insurance who keep showing up at emergency rooms for the most expensive kind of care there is.

In the Buffalo area, another 10,000 or so unemployed people would cause significant strain on overstretched county and state services that our genius elected officials want to cut even further, immune as they are to the news that Obama won the presidency on a promise to raise the revenue he wants to invest in our future.

The key to that program will be how its parts fit together—yet some intellectuals still quibble. If now isn’t the time for a federally funded effort to restore some economic stability, and a large-scale federal program to address healthcare, infrastructure, and environment, then when, pray tell, would that time be?

The good news is that President-elect Obama wants the Detroit Three to stick around long enough to make energy-efficient cars—specifically, plug-in hybrids—and get them into the market. The other day, Obama asked George W. Bush to direct toward this purpose some of the $700 billion that Bush and Congress have made available to rescue Wall Street.

Some say that no amount of “stimulus” from Congress or the president can help the Detroit Three unless their CEOs and boards of directors join the two million newly unemployed—to which I say, Hallelujah, throw them all out. And smack the United Auto Workers upside the head, too, for having bargained for bullshit work rules and stupid stand-alone benefit plans that should all be subsumed into a national Medicare system. Andy Stern of SEIU should invite the UAW in for coffee and explain to them that it’s time to get on board for single-payer healthcare.

Detroit has saddled America with the problem of decades of infamously bad corporate and union decision-making. With automobile choices like Toyota, Honda, Kia, and the Europeans all available with lots of good prices, there is also the problem of who precisely is going to want to buy Chevy or a Ford or a Plymouth or a Jeep when all the balloons and banners at the dealership scream “This Company Is Bankrupt”?

Nevertheless, stimulus is the talk of the town.

This week in Washington, many highly-accomplished and truly smart people are convening at the several think tanks to hold forums on the transition from Bush to Obama. It is a festival for policy wonks that hasn’t been held since Bill Clinton was elected in November 1992.

I was there in 1992, and I hope to keep participating this year, too. The great difference between then and now is the level of specificity in all the policy papers—and the air of confidence that the smart folks exude about our policy choices.

I line up with the interventionists. Brand-new Nobel Prize-winner Paul Krugman says that Obama and the Democratic Congress have to do something huge. Comparisons to the New Deal are everywhere. “Barack Delano Obama” is their man of the hour.

But one gets the feeling that the permanent mandarinate in Washington, the old establishment, prefers speaking in broad, broad strokes, and that nobody important quite understands the specific stresses of the places where we live.

It’s real simple up here where the streets are paved with rust. The automobile industry must be kept afloat. A large change in healthcare financing has to be engineered pretty quickly so that the stressed-out North Coast states don’t go bust and so that the stimulus-packaged Detroit Three don’t waste their stimulus credits on the stupid “legacy” benefits packages.

And federal guidance as well as fiscal help has to flow to state and local governments, because if they are left to their own devices, state and local politicians will undermine federal stimulus plans by cutting the hell out of their workforces just at the very time when the stabilizing impact of public workforces is most needed.

It really is time for Barack Delano Obama. But it’s awfully hard to get this stuff right.

Thanks to the visionary leadership of my old boss, dozens of aged Buffalo Public School buildings are being renovated with New York State matching funds that Albany has hinted it wants to cut. Imperfect though this spending is, it’s imperative that the spending continue.

Joel Giambra, the former Erie County executive, saw a regional economic and social benefit to putting up regional (county) tax dollars in order to leverage Albany’s dollars and get Buffalo’s Joint Schools Construction program going. The $1 billion project underway is putting 21st-century technology into the urban core.

The Ciminelli construction firm has a massive public contract that employs engineers, architects, and construction workers. The local economy is benefitting with the high wages being paid. And Lou Ciminelli is a good corporate citizen: He has put up more than a million of his profits to endow the Buffalo Philharmonic Orchestra.

What’s not to like about the Joint Schools Construction program? Equipping schoolhouses in the urban core with state-of-the-art technology means investing in the stuff that helps prepare children to compete in the competitive world. This is precisely the kind of “high-return investment” that economists like Nobel Prize-winner Joseph Stiglitz call for. Even Edward Glaeser, who warned Buffalo against more infrastructure-focused investment, still insists that it’s inputs into people that matter—especially education.

But a lack of coordinated policy means that we’re not getting the bang for our buck that we could and should be getting.

Every day, to get to school from the subway stop, my daughter and her classmates walk past at least half a dozen derelict, abandoned houses, including two directly across the street from her school.

Buffalo State College geographer Dr. Wende Mix has used GIS to make maps of the neighborhoods in Buffalo where the vacancy and abandonment rates are insanely high, up to 26 percent in the Masten Park area, anywhere from six percent to 15 percent in most of the rest of Buffalo. Even where schools are being renovated, the abandonment rate is nuts. And wherever houses are vacant, the context for these schools means that they are islands rather than what they should be—resources for community uplift.

The stimulus of the school reconstruction project is great, but the urban core’s fundamentals have not changed. Abandonment of old houses, depopulation, persistent poverty, teenage girls who follow the practice of Sarah Palin’s daughter and get pregnant without benefit of spouse…there are forces at work here that are greater than any stimulus package can address.

So even after the Obama version of the New Deal is enacted (if it is enacted), we will need a president bold enough to attack the structural problems that have impoverished the North Coast.

The racial antagonism that led to white flight in the 1970s is abating, but the cities are still abandoned, the sprawl continues, and the think tankers still don’t understand that not all road money is money well spent.

Let us hope, though, that the outgoing Bush administration, the incoming Obama administration, the permanent mandarins of the think tanks, and the Congressional majorities all come together so that we get an adequate stimulus package—so that we shall still have the choice to purchase a GM, Ford, or Chrysler product in the coming years, preferably the plug-in hybrid that Obama wants them to make.

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