If you’re tempted to believe the proliferating rhetoric about America’s withering automobile industry, please listen to Dan Griswold’s Cato podcast today or read the paper he and I wrote on the subject before deciding to drink the Kool-Aid.
The declining fortunes of American icons Ford and GM have inspired numerous commentaries about the demise of the U.S. automobile industry. But the top 10 selling cars and top 10 selling light trucks in the United States are all made in America. U.S. output of motor vehicles and parts was also 68 percent higher in 2005 than in 1993, which compares favorably with overall manufacturing output growth of 56 percent over the same period.
How can that be, you might ask, when Ford and GM lost a combined $16.7 billion in 2005 and together plan to eliminate more than 60,000 jobs in the next few years?
Well, this isn’t your father’s automobile industry.
The days when the “Big Three” and the U.S. auto industry were synonymous, and when seeing a foreign car on the street prompted rubbernecking are long gone. Today Honda, Toyota, and Nissan (and other Japanese, German, and Korean companies) are all important and growing players in the U.S. auto industry.
Since the early 1980s, Japanese—followed by German and Korean—automakers have been building production facilities in America. These companies, which employ American workers, pay local and federal taxes, and buy most of their parts and materials from other U.S. suppliers, are every bit as much a part of the domestic auto industry as the Big Three (or “Big Two and a Half,” now that Chrysler is just a division of Daimler-Chrysler). While the Big 2.5 still dominate U.S. production, the foreign-owned share continues to rise, approaching one-third of total domestic production today.
That’s great news for U.S. consumers, whose choices are no longer constrained by the high-priced, low-quality offerings of what was once a domestic oligopoly. Since 1993, the general price level in the United States has risen 38.2 percent, but the price level of a new vehicle has increased by only 4.1 percent.
Certainly, the shifting industry landscape has produced winners and losers within the United States. Most of the foreign nameplate plants have been built in the American South, or otherwise outside of the rust belt states (with a few notable exceptions). But none of these plants, save one (a joint venture involving GM), employ unionized workers, and their market shares have been increasing. Of course, there’s much more to this changing picture than the fact that one group is unionized and the other isn’t, but it is an interesting fact, no?
The state of Michigan has by far been the biggest loser in this transformation. The state has seen a large decline in jobs (and tax revenues), and the auto industry promises to be the marquis issue in this fall’s governor’s race. The Republican nominee, Dick DeVos, recently lambasted the Bush administration for not doing more to arrest the decline of Michigan’s auto producers. Unfortunately, that’s par for the course for Republicans of late, who increasingly seem to have never met a bailout they didn’t like.
The government has no business interfering in the marketplace—particularly one that is working so well for the vast majority of Americans. But if there is any action the Bush administration can and should take—which would incidentally help U.S. auto producers—it would be to revoke some or all of the 160 antidumping measures in place against 21 different types of steel products from 32 different countries. U.S. government intervention on behalf of the domestic steel industry has created a dangerously concentrated market, and without adequate steel imports, steel producers can and have run roughshod over their customers, including the auto producers.
Ultimately, the decisions that brought successful foreign nameplate auto producers to invest in U.S. facilities, as opposed to exporting from production platforms abroad, are based on a variety of factors that are subject to change. Market considerations like transportation costs, labor and materials costs, access to transportation, and access to materials all ultimately contribute to such investment decisions. When access to raw materials is hampered, and thus more costly (as it is with steel in the United States), the benefits of the other considerations are mitigated.
Today, U.S. prices for corrosion-resistant steel (the primary component used in auto bodies) are $100 per ton higher in the United States than in Europe, and $200 per ton higher than in China. At some point, the price differentials will render production of autos abroad for export to the United States more cost-efficient than investment in the United States. If Honda, Toyota, Nissan (and for that matter, Ford and GM) reach that conclusion, then we’ll be witnessing a genuine crisis in the U.S. automobile industry.
John Tierney wrote his Saturday New York Times column from Amsterdam, where he found that contrary to what U.S. drug warriors would have us believe, lenient Dutch drug policy hasn't wrought the end of Dutch society.
I do think, however, that libertarians should hesitate before citing the Dutch as a model. Last year, I attended a forum at the Dutch embassy on drug policy in the Netherlands. I was underwhelmed.
The Dutch treat drug use a little like the way the public health crazies in this country would like to treat obesity. That means there is freedom to ingest some illicit drugs, but with massive government intervention, oversight, and a panoply of PR campaigns and state-funded treatment, and very little in the way of holding users responsible for using drugs, well, responsibly.
At the forum I attended, Dutch officials were quick to correct any misunderstanding Americans might have that Dutch citizens are actually given any real freedom over what they put into their bodies. The Dutch government, they assured us, loathes and despises marijuana every bit as much as the American government. They just prefered to steer the Dutch people away from it with propaganda and heavy regulation.
That's certainly a step up from no-knock raids, mandatory minimums, and confidential informants. But it's still a far cry from a government that treats its citizens as adults capable of making their own decisions about intoxicants.
I have received hundreds of incoming emails in response to my articles suggesting that federal civilian workers are overcompensated (see here and here).
Many emails have been rants claiming that I'm an idiot or don't know what I'm talking about. Very few of those opposed to my arguments expressed any interest or curiosity in the actual underlying government data.
Some emails have been supportive. Here are two that suggest reasons why federal pay has been growing much more quickly than private pay.
This one came from a federal worker in Maryland:
I thoroughly enjoyed reading your 13 August opinion piece in the Washington Post--thanks!! As a senior military officer in a command that employs a large number of civilians, I have become increasingly frustrated at the excesses of the civil service system. Not only have the salaries gone up through the cost of living increases, we're also paying more because of little control on promotions which has resulted in significant "grade creep." Until your article, however, I continued to hear the confusing mantra that our civil servants were underpaid. I am grateful because you have provided me with some ammunition for my next command personnel discussion.
Here's another from a retired federal worker in Virginia:
I would like to offer what I think are contributing explanations for the problem of excessive pay and benefits among the members of the Federal workforce.
First, the most salient explanation for overgrading in the Federal civil service is the conflict of interest posed by having the personnel function embedded within each Federal agency. Directors of personnel of Federal agencies report directly to their respective agency heads, all of whom have a vested interest in having as high a graded workforce as possible. Reporting to the directors of personnel are specialists called position classifiers. To be cynical about it, the responsibility of the classifiers is to write job descriptions that justify whatever grade levels that their respective managements want the jobs under them to have. In short, classifiers are wordsmiths who rationalize with contrived language raising position grades, almost never lowering grades. The result is that, over time, Federal job grades (and often titles) bear little relation to the real duties and responsibilities of the jobs to which they are applied. (Classifiers are a kind of inside joke among Federal employees.)
The remedy, it is obvious, is to take the personnel function out of the agencies and place it solely in an independent agency responsible to the White House, at least indirectly. Once that is accomplished, all the jobs in the Federal workforce should be reclassified and given realistic and appropriate grade/pay levels.
Social Security may still be something of the political third rail in this country, but the rest of the world continues to turn away from the traditional government-run model for retirement programs. A new survey by HSBC of industrialized countries finds that only 30 percent of their citizens believe that government should be primarily responsible for funding their retirement, compared to 43 percent who believe that individuals should bear the cost of the own retirement.
Regardless of country, there is little confidence in Social Security. Just 29 percent believe that their governments will be able to pay the benefits it has promised. When asked how to reform their country’s Social Security systems, 37 percent favored the introduction of some form of mandatory savings or personal account program, while just 13 percent would increase taxes to pay for promised benefits.
From today's Best of the Web:
"A Jefferson County [Colo.] geography teacher was placed on paid administrative leave on the second day of school for hanging several flags from other countries in his classroom," Denver's KMGH-TV reports.
The school district placed Eric Hamlin, a teacher at Carmody Middle School, "on administrative leave for insubordination, citing a Colorado law that makes it illegal to display foreign flags permanently in schools. . . . The school's principal escorted Hamlin out of class Wednesday morning after he refused to remove the flags of China and Mexico."
A district spokesman tells the station: "Under state law, foreign flags can only be in the classroom because it's tied to the curriculum." And what subject does Hamlin teach?
Uh, world geography.
Hat tip to James Taronto -- who, interestingly enough, shares the name of the Canadian capital.
[Editor’s note: Though he spells “humor” without a second “u,” Andrew Coulson was born and raised in Canada. He is aware that the nation’s capital is Ottawa, and that its Prime Minister is not Tim Hortons.]