Marc Dunkelman is vice president for strategy and communications at the Democratic Leadership Council.
Just weeks after the Bush administration pulled GM and Chrysler back from the brink of near certain bankruptcy, much of the domestic auto industry is once again at the precipice. What has become clear is that there is no panacea. Those who depend on Detroit for their livelihood are being squeezed—and there will be sacrifices no matter how the new administration approaches GM's and Chrysler's requests for help in the short term.
But over the long haul, Washington should not be kept from making the most of a rare opportunity to counter what President Obama described in his inaugural address as "our collective failure to make hard choices and prepare the nation for a new age." Neither conservatives nor progressives are pleased with the dilemma Congress faces each time the auto industry is near collapse. And so those on both the left and right share an interest in reforming the system to protect the workforce while allowing the invisible hand to discipline poorly performing companies.
In sum, Detroit's impending bankruptcy could be the impetus for a truly post-partisan moment.
The Big Three's shortcomings, by now, are well documented. They failed to anticipate the demand for fuel-efficient vehicles. For years, they have been dogged by the costs of employee benefits considered lavish by the standards of foreign car manufacturers. And although their trucks and SUVs kept them in business when the price of gas was low, they still haven't learned how to produce passenger cars that most consumers want to buy.
Why hasn't Washington been willing to let GM and Chrysler go belly up? Because the implications of bankruptcy in Detroit have been viewed as too dire for the broader economy. Suppliers would fold, dealerships would close, pensions would vanish, healthcare benefits would disappear and, as the dominoes fell, more mortgage holders would fall behind, credit would become more expensive, and the downward spiral would exacerbate the current recession.
Certainly, the dreadful consequences of the nuclear option—letting any of the Big Three go out of business—have empowered Detroit to avoid making the reforms required to ensure the industry's long-term success. Shielded from the invisible hand, GM and Chrysler have not, to date, made the painful tradeoffs—paying the up-front costs of mothballing superfluous brand names, for example—required to reorient their product lines with consumer demand. In the meantime, the American economy has evolved. Fewer workers spend their entire careers at one company—or even in one industry. "Defined-benefit" has frequently been replaced by "defined-contribution." Post-retirement healthcare is rarely guaranteed.
The irony, now, for those who believe that Detroit's seemingly antiquated social contract ought to be relegated as a relic of the past, is that the nation's failure to build a new social contract—one that separates benefits from the continued profitability of individual firms—is now working to shield the very market forces that drive innovation.
If only GM's retirees knew that their benefits would be protected in the case of GM's bankruptcy, the invisible hand could be brought down on the corporation with force. If only Chrysler's employees knew that healthcare would not disappear the day the corporation answered to its creditors, the UAW might not be so desperate to ensure the corporation's liquidity.
In a world where the race to the bottom prevents businesses from affording the kind protections that Detroit promises its workforce and retirees, the nation is faced with three options. The first, simply to allow market pressures to squeeze more and more productivity out of a workforce receiving fewer and fewer benefits, will exacerbate the growing wealth gap that has left many families struggling to afford a middle-class lifestyle. The second, to shield benefit-rich businesses from the pressure and discipline of the market, will likely demand government bailouts ad infinitum.