Holman Jenkins's Latest on the Proposed Auto Bailout

From his column in today's Wall Street Journal, "A Bailout that Won't":

Forget Chrysler, which has needed a bailout from Washington or Stuttgart in three of the last four recessions. The tragedy of GM and Ford is that, inside each, are perfectly viable businesses, albeit that have been slowly murdered over 30 years by CAFE. Both have decent global operations. At home, both have successful, profitable businesses selling pickups, SUVs and other larger vehicles to willing consumers, despite having to pay high UAW wages.

All this is dragged down by federal fuel-economy mandates that require them to lose tens of billions making small cars Americans don't want in high-cost UAW factories. Understand something: Ford and GM in Europe successfully sell cars that are small but not cheap. Europeans are willing to pay top dollar for a refined small car that gets excellent mileage, because they face gasoline prices as high as $9. Americans are not Europeans. In the U.S., except during bouts of high gas prices or in the grip of a Prius fad, the small cars that American consumers buy aren't bought for high mileage, but for low sticker prices. And the Big Three, with their high labor costs, cannot deliver as much value in a cheap car as the transplants can.

Jenkins puts his finger on a key problem here. If the government's goal is to get Americans to drive more fuel efficient cars, the way to do that would be to raise federal gas taxes steeply. Then, Americans would effectively be forced to buy smaller, more fuel-efficient cars, and the domestic automakers would be able to sell them the sort of more expensive, higher-margin small cars they successfully sell in Europe. Politically, of course, it's easier for Congress to raise CAFE standards than raise gas taxes.

"Obama Hears a Giant Sucking Sound"

Holman Jenkins in Wednesday's Wall Street Journal, "Obama Hears a Giant Sucking Sound". Excerpt:

His friends advise Barack Obama to launch a "New" New Deal. Maybe that's because the old New Deal is sinking fast.

Mr. Obama's one deeply false note during the campaign was his harping on "deregulation" as if that were the source of current troubles. His real problem is the crack-up of the world FDR built.

Fannie Mae was a New Deal creation, subsidizing the securitization of mortgage debt. FDR's successors piled on the subsidies for housing debt and incentives directed at low-income borrowers. Kaboom.

Then there's the UAW, born in 1935. For decades the UAW steadily traded away domestic auto market-share to imports and transplants to keep its aging membership toiling away toward their golden pensions and collecting wages and benefits twice those of their competitors. It worked for a while . . .

Mr. Obama must be looking around and beginning to suspect he will be pouring his political capital, along with considerable taxpayer capital, down bottomless holes for the next four years. He won't be building a legacy as the new FDR, but cleaning up after the last one.

Jenkins mentions AIG in this column too, and makes a point that most in the mainstream media seem to have missed: the notorious lavish retreat for independent insurance agents is part of how insurance companies get those agents to sell their products. Similar events are held all the time by mutual fund companies wholesaling their funds to financial planners or pharmaceutical companies marketing their drugs to physicians. It's how business is done, and now that the U.S. government essentially owns AIG, it is in the taxpayers' interest for AIG to get agents to sell its insurance policies.

The photo above, of Obama touring an auto plant, ran alongside the Jenkins's column.