Wednesday, February 25, 2009

Pulling the Pin: Part 3

Some articles that complement or offer another view from what I had in Part 1 and Part 2.

I had a conversation - a very short one - with another attorney about national health care. He told me a story his doctor told him about the long waits in Canada. I said GM needs it, it will come. Which is the point of Renew Auto Industry? Start With Real Health Reform:
"But before another bailout check is inked, wouldn't it make sense to get the auto giants – even if they are not so giant anymore – involved in addressing what really ails their industry?"

***

The truth is that U.S. auto firms are being battered by a global economic collapse that has undermined car sales everywhere, leading to demands for government bailouts in every country where cars are made. But the even greater truth is that U.S. firms have been hit harder than many of their competitors by stalling car sales.

That's because it costs more to make cars in the United States. Even though U.S. autoworkers have accepted pay cuts and efficiency schemes that mean they make less than autoworkers in many other countries, the enormous expense imposed by this country's for-profit health care system places an extreme burden on firms that manufacture vehicles in the U.S. How extreme? It is estimated that health care costs add as much as $1,400 to the cost of a car made in an American plant.

So a new bailout, without a serious focus on health care reform, is at best a temporary fix, as three Democratic House members from the hard-hit manufacturing states of Ohio and Michigan explain in a new letter to GM CEO Richard Wagoner, Jr.

To me, Dear Gov. Kaine: Spare Some Stimulus Cash? comments in some strange way on Thomas Friedman of Part 2.

"Almost immediately, what seemed like a simple exercise in Internet-era good government morphed into something more personal. Amid widespread calls for fixing roads and aiding teachers came a host of digital submissions that sounded more like pleas, or prayers."

And Let's Just Pull the Covers Over Our Heads. Or NOT. seems to me to be in the same neighborhood.

I recommend perspective. Perspective not that we deny the severity of this near-depression. To be sure, there are plenty of reasons to worry:

  • It's global in nature;

  • It has come upon us with shocking, whiplash-inducing speed;

  • It seems inexorable, deserved, the Puritanical comeuppance for a decade or more of living extravagantly in "sand state" McMansions, furnished with super-large flat panel TV's and navigated by Hummers, consuming energy recklessly; and to the extent this narrative rings true we feel chastened, like children rightly sent back to our rooms after immature behavior, and the small voice in the back of our minds chants "we deserved this, and we brought it on ourselves, so we have no ground on which to resist or fight back;"

  • It's striking at the heart of our 21st Century economy, the financial sector, as opposed to being a classic inventory hangover, consumer pullback, sustained oil price spike, or isolated tech bubble;

  • Speaking parochially about our industry, we have been joined at the hip to the financial services sector for as long as the boom was going on, and even before that. The New York "white shoe" firms all made their reputations on core connections to bulge bracket investment banks, and to some extent those reputations lived on until the very recent past. I suspect they'll endure beyond this interregnum, in fact.

But let's get back to perspective.

I believe two characteristics will separate the strong from the weak firms coming out of this episode. They are: (a) cultural glue; and (b) the quality of leadership.

Then there is Robert J. Samuelson's Obama's Stunted Stimulus:

The case for a huge stimulus -- which I support -- is to prevent a devastating downward economic spiral. Spending is tumbling worldwide. In the fourth quarter of 2008, the U.S. economy contracted at a nearly 4 percent annual rate. In Japan, the economy fell at a nearly 13 percent rate; in Europe, the rate was about 6 percent. These are gruesome declines. If the economic outlook is as bleak as Obama says, there's no reason to dilute the upfront power of the stimulus. But that's what he's done.

***

The case for a huge stimulus -- which I support -- is to prevent a devastating downward economic spiral. Spending is tumbling worldwide. In the fourth quarter of 2008, the U.S. economy contracted at a nearly 4 percent annual rate. In Japan, the economy fell at a nearly 13 percent rate; in Europe, the rate was about 6 percent. These are gruesome declines. If the economic outlook is as bleak as Obama says, there's no reason to dilute the upfront power of the stimulus. But that's what he's done.

But these paragraphs in E.J.Dionne's Obama's FDR Moment may be the most important of this post:

But Kanfer worries that if the downturn persists, "people will say, 'Give me somebody who knows the answer.' "

"When people get really frustrated," he went on, "they really want answers more than reason."

And then Kanfer acknowledged that he was taken aback by what he had just said.

For a president who mistrusts the passions and reveres cool reason, it was a timely warning on the eve of the most important speech of his young presidency.

Right now, I have my fingers crossed.

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