A Tale of Two Auto Industry Business Plans

As Detroit’s lobbyists rack up the expenses trying to paint the Big Three and the UAW as innocent victims of the credit crunch, American workers cheer the groundbreaking of an American automobile plant in the American heartland by Honda, which has been producing vehicles in Marysville, Ohio for more than a quarter century now.

Let’s not forget that it’s these companies – the one’s capable of making the investments in manufacturing, the one’s who are leading the way in terms of producing fuel-efficient, comfortable, stylish vehicles that Americans have been inclined to purchase – that are implicitly taxed and burdened when their competition is subsidized.

A “bailout” costs taxpayers/consumers in many more ways than one.

New Talk Better than Old Talk

A few months ago, I was a little miffed at the good folks over at New Talk for hosting a discussion on what to do with the No Child Left Behind Act in which the moderator immediately put scrapping the law off-limits. How things have changed! Today through Thursday New Talk is hosting a discussion specifically asking whether the law should be canned. It’s an especially timely topic given some developing ideological battles, and a topic worth contemplating in its own right. So check out the New Talk. Not the same as the Old Talk!

Everything Is a Security Issue

Anyone who sells to the Pentagon can claim that theirs is a strategic industry. In a war, enemies could cut off shipments from foreign producers, subsidy seekers say. Government then needs to protect American steel makers, shippers, shipbuilding, and so on. Those making these arguments avoid discussing the long odds that foreign supply will be interdicted or that the United States will fight a war that lasts long enough for it to matter.

Consider Wesley Clark’s op-ed in Monday’s New York Times. Clark notes that the Army buys a lot of vehicles from US automobile companies. Therefore, he says, bailing out the big three is a security issue. But letting US automakers go bankrupt does not mean they will stop making trucks. Even if they did, there are still foreign automakers that manufacture in the United States and would be happy to sell to Uncle Sam. And even if domestic automobile production disappeared entirely, we could still import. No imaginable enemy could close the sea-lanes that we use to bring in vehicles from Europe and Japan. Clark doesn’t address any of these holes in his argument. Nor does he let his lack of experience in the automobile business stop him from telling Detroit how to run its business.

In Sunday’s Washington Post, Joby Warrick offers similarly shaky analysis about the financial crises’ effect on US security.  Economic difficulty impacts every security issue, so you can always find an expert to tell you how the downturn heightens the odds of some particular nightmare.

Warrick suggests that lowered federal revenue could require cuts in defense spending, leaving us more vulnerable. Maybe, but the doubling of non-war defense spending since 2001 has bought us plenty of security to spare, by this logic. Warrick cites specialists who say increased global poverty will cause instability, which will cause terrorism. But there is no clear link between instability and terrorism. 

Warrick says “many government and private terrorism experts say the financial crisis has given al-Qaeda an opening,” which they may use to “probe for weakening border protections and new gaps in defenses.” Does anyone know what that means? The article never explains what defenses we’re talking about, let alone what gaps a downturn will open in them. It does not tell us why we should we view Al Qaeda as a carefully reckoning organization that probes and times its attack to US events, rather than groups of guys who attack when they can. The article cites analysts who say that the downturn could speed the day where China overtakes us economically. But China is not immune from economic distress. Nor it is clear that China’s rise is bad for US security.

The article could be turned on its head: “Global Downturn likely to slow China’s rise, undermine terrorist fund-raising, and eliminate wasteful defense spending, experts say.”

Gridlock Puts Brakes on Big 3 Bailout (for Now)

The Associated Press is reporting today that “Stalemate dims prospects for $25B auto bailout.”

Here’s the lead:

WASHINGTON (AP) - Prospects dimmed Monday for enactment of a $25 billion bailout for the faltering auto industry before year’s end, as congressional Democrats and the Bush administration seemed headed for a stalemate. Help for Detroit’s Big Three, which have been battered by the economic meltdown that has choked their sales and frozen their credit, is falling victim to a partisan fight over where the money should come from. Senate Democrats said they would press ahead with their plan to carve out a portion of the $700 billion Wall Street bailout to pay for the loans, but aides in both parties and lobbyists tracking the plan acknowledged they did not currently have the votes to do so. The White House and congressional Republicans insist that the automaker bailout money instead come from redirecting a separate $25 billion loan program approved by Congress to help the industry develop more fuel-efficient vehicles.

The story is already making me nostalgic for partisan gridlock and divided government, which will officially end on January 20, 2009.

My trade center teammate Dan Ikenson has been ably making the case in recent days that the bailout is a bad idea. What appears to be saving our country from wasting this huge amount of money is the much-bemoaned gridlock.

A key word in the story is “currently.” The plan does not “currently” have the votes to pass, but all that will change in 64 days.

In Education, the Big-Gov Battle Is On!

Last week, I heartily embraced the possibility, as voiced by the Fordham Foundation’s Mike Petrilli, that congressional Republicans might soon renounce their ill-fated foray into federal education control. The impetus for Petrilli’s conclusion was a Wall Street Journal letter from Michigan Rep. Pete Hoekstra (R), in which Hoekstra rebuked Republicans for abandoning principle and embracing “compassionate conservatism,” the big-government philosophy that brought us the No Child Left Behind Act.

Fights over federal education policy could very well be the battle for the GOP’s soul in microcosm, and big-government types have quickly pushed back against Hoekstra.

  • On November 15, the WSJ ran a letter by former Vermonters for Better Education Executive Director Libby Sternberg, who blamed Hoekstra and others like him for undermining NCLB and, as a result, “making it very difficult for grassroots education reform and school-choice activists to push forward the principles of choice and accountability embodied in” the law.
  • Today, Petrilli piles on and pitches for — you guessed it — national standards! (National standards that somehow aren’t “federal,” as you’ll see in the Washington Times piece Petrilli links to, but are nonetheless adopted as a result of federal “incentives.” See the illogic with which I have to deal?)
  • Not to be outdone, Petrilli’s boss, Chester E. “Checker” Finn, joins the fray, employing one of the uglier tactics of NCLB apologists: Finn implies that Hoekstra and his ilk don’t care about the poor. “I don’t doubt that his view of education is pleasing to the party’s ‘base,’” Finn writes. “But if it prevails, members of that base may cast the only Republican votes in future elections—and all those poor, minority and inner-city kids who live in districts other than Hoekstra’s will continue to be trapped in the miserable schools that NCLB, however clumsily, sought to transform (or extricate them from).”

Clearly, the big-government types want to tussle. Well let’s get it on!

Let’s start with Finn. For one thing, nothing is more irritating than the argument that if you oppose NCLB you just don’t care about “poor, minority and inner-city” kids. Poor kids might not be your first or even primary concern — you might care about all children, or all taxpayers, or even your own kids first and foremost — but to suggest that you just don’t care about poor children because you oppose NCLB? That’s little more than cheap rhetoric, and Finn gives not an iota of support for it.

Of course, there’s good reason to conclude that NCLB doesn’t help poor and minority kids. It certainly makes a lot of promises to them and spends a lot of money in their names, but there is no even close to conclusive evidence that NCLB is helping them, much less transforming rotten schools or extricating them from educational wastelands. Look at achievement gaps. Yes, the black-white gap has generally been shrinking since 2002, but if you look at either the reading or mathematics National Assessment of Educational Progress (NAEP) results, you’ll generally see slightly faster gap closure before than after NCLB. Ditto achievement for low-income kids. Of course, the data is a mixed bag, and there are tons of important variables in education in addition to NCLB that render neither gains nor losses conclusively attributable to the law. If anything, though, what evidence we have indicates that what we were doing before NCLB was working a bit better than what we have now.

It’s fairly easy to see why NCLB has caused no great academic upswing: it offers more deception than sunshine. Full proficiency? Maybe, but only if the “proficiency” bar is set really low. “School choice” for extrication from broken schools? Fat chance. Real “accountability” for federal dollars? Well, there have been lots of federal dollars spent, but from what we know about NCLB proficiency and choice, they have delivered little by way of accountability.

How about the permanent political exile Finn hints the GOP will face if it gives up on such stellar performers as NCLB and gets back to liberty-centric, small-government principles? You know, the principles that propelled Ronald Reagan to office in 1980 and congressional Republicans to power in 1994? Surely the electorate loves Washington solving all of its problems, especially with NCLB-esque intrusions?

Again, a little evidence would be nice, but Finn offers diddly. In contrast, Ramesh Ponnuru recently reviewed a host of polling results on whether people prefer more or less government, and less still seems to be winning.

Ah, but don’t people favor big-government education? That depends. Obama was a clear winner over John McCain on education, so at the very least it’s possible that the more education programs you propose, the more you’re thought to be “good” on the subject. It also appears that when you ask people’s opinion of “federal legislation” that “requires states to set standards in math and reading and to test students each year to determine whether schools are making adequate progress, and to intervene when they are not,” a little more than half of the population will like it. Surely these things indicate that the GOP has been on the winning education track the past eight years?

Or maybe not. Call your federal, standards-demanding legislation by its proper name — the No Child Left Behind Act — and you get just 50-percent support for it. Then, remove your leading description and ask about NCLB by its name alone, and suddenly just 41 percent of respondents report liking the law. So measures like NCLB are actually far from proven political winners, while big-government in general is still — subject, of course, to ever-changing world and national events — a likely political loser. 

Sorry again, Mr. Finn.

As for Sternberg’s assertion that opposition to NCLB by people like Hoekstra has somehow hurt “school-choice activists”? I’ve never seen anything showing that conservative and libertarian opposition to NCLB has damaged school-choice efforts. Indeed, much more plausible is that the “standards and accountability” crowd has hurt the school-choice movement, arguing that in the final analysis we need our political betters to tell our kids what to learn, and forcing libertarians and small-government conservatives to expend far too many valuable resources refuting their faulty claims

Ultimately, here is the problem, and big-government conservatives had better snap out of their Bush-era trance and see it: Top-down reforms like NCLB, no matter how well intentioned, will never transform the status quo. The people employed by the system have the greatest incentives and ability to control policy, and what’s in their best interest is to keep standards low and funding high. That’s why “proficiency” means so little. That’s why NCLB “choice” means so little. That’s why Reading First— beloved by the Fordham Foundation—is on its way out. And that’s why it’s time for big-government conservatives to give up their Utopian dreams of bending the system to their will, accept that Washington will only make education worse, and get back to fully supporting the only reform that offers true hope: universal school choice.

The Surreptitious Socialism of the Strong

George Will despairs that we already have a good bit of the socialism that John McCain warned about in the waning moments of his decade-long quest for Rooseveltian power. That is, we already have a lot of government redistribution of wealth, though we have almost no overt advocacy of socialism:  ”This is partly because Americans are an aspirational, not an envious, people. It is also because the socialism we do have is the surreptitious socialism of the strong, e.g., sugar producers represented by their Washington hirelings.”

Rent-seeking, economists call it–using the government to get privileges, such as a grant, a subsidy, a tariff, or a restriction on one’s competition. It’s one of those things we free-marketers rail against all the time, in papers on free trade, corporate welfare, government spending, and virtually every other activity of the modern state. More broadly, we point out, as Will did, that it’s impossible to have nonpolitical allocation of trillions of dollars of taxpayers’ money handed out by government. If you don’t want the powerful to lobby and manipulate in order to get their share of the money, then leave it in the marketplace. If you put it in the hands of politicians, expect political allocation.

Responding to Will, Christopher Orr at the New Republic says, “insofar as there are two kinds of spreading the wealth around, ‘rent-seeking’ (which we can all agree is bad) and ‘socialism’ (which Will implicitly concedes is less bad), conservatives are relatively more friendly to the former and liberals are relatively more friendly to the latter.” Hmmm. Is that so? I suppose if you think of the Bush administration as “conservatives,” then you have a good case. And Orr may be too young to remember actual conservatives back in the days B.G.W.B.

But I’m not. And I recall, for instance, the first program that Democrats rallied around when the Reaganites stormed ashore in 1981 with their pitchforks and meat cleavers in hand. Nexis confirms that a day after the administration made a broad budget-cutting proposal, these words led page A1 of the Washington Post: “The entire Democratic leadership in the House joined yesterday in warning the Reagan administration to keep its budget-cutting hands off the synthetic fuels subsidy program Congress created last year.” Democrats love corporate welfare, and even liberal intellectuals are far less critical of it than are libertarians and free-market conservatives.

And it’s not just corporate welfare. All the elements of the liberal interventionist state are both product and generator of rent-seeking. You can say that rent-seeking is an unfortunately inevitable by-product of having the government do good. But to want a $3 trillion federal government with vast regulatory powers that isn’t awash in rent-seeking is, as Milton Friedman wrote, like saying “I would like to have a cat, provided it barked.” Cats meow, and government money flows to those with political power.