If Detroit Dies, So Does the Nation's Manufacturing Economy

[FreakinDJ]

If Detroit Dies, So Does the Nation's Manufacturing Economy

Friday, December 05, 2008

Commentary by Thomas I. Palley, Ph.D.

The financial crisis that began in 2007 has been persistently marked by muddled thinking and haphazard policymaking. Now, the United States Treasury is headed for a mistake of historic and catastrophic proportions by refusing to bail out America’s Big Three automakers.

Make no mistake, if Detroit’s Big Three go bankrupt, the perfect storm really will have arrived with a collapse in both the real economy and the financial sector. This threat means that the financial bailout funds authorized by Congress can legitimately be used to support the automakers. Treasury’s refusal to do so is a monumental blunder that risks a general meltdown, the consequences of which will extend far beyond America’s shores.

Proponents of a bailout for the Big Three have emphasized the enormous job losses associated with a bankruptcy scenario, including not only jobs directly provided by the automakers, but also jobs with parts suppliers, auto dealers, and in the transport and advertising industries.

These job losses will then be multiplied locally and nationally. Lost wages will reduce consumption, causing additional job cuts, while factory closures will reduce investment, hitting employment in capital goods industries. Lost incomes will also drive down tax revenues, resulting in public-sector employment cutbacks.

Moreover, the automakers are essential for closing the trade deficit, and their demise could bring another surge in imports. The automakers are also the backbone of American manufacturing, driving advances in manufacturing technology that will be needed if America is to be a world leader in the coming “green” transportation revolution. Additionally, the Big Three are vital to national security, supplying important military transportation assets. Lastly, bankruptcy will impose massive costs on the government’s Pension Benefit Guaranty Corporation (PBGC), potentially undermining its financial stability.


http://www.americaneconomicalert.org/view_art.asp?Prod_ID=3090

[BobRossi]

1. The auto industry built the middle class.

And it has sustained it for decades. If anyone thinks that this economy can survive based on a nation of consumers and hamburger flippers they really need to check into rehab ASAP!

[FreakinDJ]

2. Thanks Bob

It is the Real Estate moguls who look to killing manufacturing industries as a golden opportunity to make a quick buck and they are just as complicit in the current economic crisis as the banks.

Until several 1000 of these shysters are rounded up, tossed in jail or lose the licenses for falsifying loan applications, and defrauding applicants we are doomed to repeat this cycle of economic melt down

Is Manufacturing Weighing Down the U.S. Economy?

Ever since we started ranking the Best Cities for Doing Business in 2004, the bottom rung of the rankings has been largely dominated by older industrial cities where factories have long been abandoned and once booming economies have dried up. The 2008 list bears this sobering fact; among the largest regions surveyed, Detroit sits on the bottom at No. 66, with Warren Troy-Farmington Hills, Mich., Cleveland, Providence, R.I., Philadelphia, and the New York twins -- Rochester and Buffalo -- doing only slightly better.

The same pattern can be seen on the lists of midsize and small cities, where the bottom rankings consist largely of former industrial towns along the Great Lakes belt, including Ohio, Michigan, and Indiana. Dayton, Ohio, falls last at No. 96, lying at the bottom of the midsize list of cities. Among the small metros, Battle Creek, Mich., languishes at No. 173, with Michigan cities Saginaw and Flint doing only slightly better.

http://www.inc.com/articles/2008/07/is-manufacturing-weighing-down-the-us-economy.html

[GeorgeGist]

14. BASS ACKWARDS ...

CONSUMERS BUILT THE AUTO AND HAMBURGER FLIPPING INDUSTRIES AND THE PROFIT MAKERS DESTROYED THE CONSUMERS.

[rateyes]

3. And, the only way to save the big three is to get people to start

buying automobiles, for which they need money. We need a HUGE stimulus package directly to the poor and middle class---$10,000 for every adult making under 100,000 a year, and a HUGE jobs program building infrastructure.

[tekisui]

9. You are exactly right.

It doesn't matter how good a product a company makes or how important keeping an industry alive is. If no one can afford the product, it is doomed.

[sarcasmo]

4. The Republicans want two classes, the ultra rich and those that serve the ultra rich.

[notesdev]

5. Oddly enough

That state of affairs was why I left Manhattan, there were only those two classes of people left, I wasn't part of the former, and wanted no part of being in the latter.

[sarcasmo]

6. Good for you to realize the situation.

[lumberjack_jeff]

7. The manufacturing economy IS the real economy. n/t

[machI]

11. There is always Defense

Sell American weapons abroad. Send out American soldiers as mercenaries for the big oil companies to fight and illegal ware in Iraq.

[bvar22]

8. American Manufacturing & a prosperous Middle Class was killed in 1993....

...with the passage of NAFTA and subsequent "Free Trade" deals when our "representatives" decreed that American LABOR must now compete with Slave Labor in 3rd World countries and State Owned Industry in Communist countries.

The current struggles of the UAW were directly caused by the politicians who sold out the American Working Class in 1993.

[Mari333]

12. yep.

and reagan did his part in the 80s to break up the unions, dump OSHA standards, and Clinton admin helped it along with NAFTA. I saw this crap starting way back.

[WI_DEM]

10. Bush may be responsible for two major American cities dying during his terms--New Orleons and

Detroit. What a miserable record.

[noamnety]

13. and if it lives, the environment dies. n/t