Sometimes the power of a truth is measured by its very unspeakability.
"Detroit's basic problem is that they created a business model that doesn't have a snowball's chance in hell of surviving in a global economy," said South Carolina's Lindsey Graham at yesterday's auto bailout hearing. He was right in every detail except who authored the industry's current business model. Not a single one of the yakking Senators owned up to their own contribution to the homegrown auto sector's long descent.
The UAW’s labor monopoly, the real source of the Big Three’s troubles, would not survive 15 minutes without CAFE, i.e. the corporate average fuel economy rules. Never mentioned in polite company, those rules have done nothing to reduce gasoline consumption (it has gone up). The rules have been carefully designed, however, to turn the Big Three into a money-losing public utility making small cars at a loss in North America in competition with Toyota, Honda and Nissan.
The effect is deliberate, as Michigan Sen. Carl Levin proudly acknowledged last year after winning a renewal of the so-called two fleet rule to "preserve domestic jobs."
Somebody should explain all this to Barack Obama, who thinks a big confab of labor and management can make the Big Three "viable " with help from taxpayers. Only Congress can fix Detroit’s fundamental problem, by changing the CAFE rules. Treasury's Henry Paulson has been absolutely right to withhold TARP money from the Big Three. With or without a bailout, with or without a Chapter 11, they will remain unsalvageable until Congress itself acts. The key isn't money but a change in regulatory policy.
DESIGNED TO FAIL
by Holman W. Jenkins Jr.
THE WALL STREET JOURNAL
POLITICAL DIARY ONLINE
NOVEMBER 19, 2008