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Saturday, November 22, 2008

Sometimes the Anti-Regulation Crowd Has a Point

New York City mayor Michael Bloomberg has made a number of admirable stabs in the direction of creating a greener New York. He hasn’t always succeeded and he hasn’t always been helped by the state (which nixed congestion pricing for cars in midtown) or the feds (who just quashed the requirement that we move to hybrid taxis).

The recent experience of the Episcopal General Theological Seminary in Chelsea suggests that Mayor Bloomberg would help his own agenda if he could clear some cobwebs from —and create some efficient interconnections between—a variety of city bureaucracies.

The Seminary has been trying to replace its heating and cooling systems with geothermal power: safe, clean, efficient, and close to free once you’ve paid off the (substantial) capital costs. To do this, they need to drill a number of very deep wells, to tap the groundwater under Manhattan (drill there, drill quick!). The system is online, though not yet complete.

So far, according to the project manager, quoted in the New York Times, they have gone 50% over the initial budget estimate, and taken three times as much time as they should have. They ascribe both of these problems to the inefficiencies of the 10 regulatory agencies from which they required permissions.

I am in favor of the MTA making sure that a drill bit doesn’t tear through the roof of the A Train. And I’m inclined to see most anti-regulatory quailing as the self-interested cant of cynical ideologues (I know, lets deregulate the financial sector! That’ll work out really well!).

But when the response of the city Department of Transportation, after a three month delay, is reported to be (again from the Times) that they can’t report on status, because the project “has no status,” when their answer to what can be done to get the project moving? is, “you can’t get it moving,” well. . . sounds like a regulatory failure to me.

Sunday, November 16, 2008

Automotive Bailouts: The Neverending Story

With GM now having elbowed its way to the front of the queue, The Detroit Three—with barely a burp or a thank you for the $25 billion they were just given to cajole them in the direction of cars efficient enough to perhaps help them survive—are back at the government nipple.

GM claims, with some credibility, that it has only months to live if it doesn’t get another cash infusion and fast. The combination of pathos and avarice is fascinating. I’m reminded of that sweet little plant in Little Shop of Horrors—the one that needed human blood (oh just a LITTLE more) to survive.

I don’t think many civilians, myself included, know what the bankruptcy of one or more of the Detroit Three would look like (I’m seeing more and more publications adopt this over Big Three, for obvious reasons).

Speculation ranges from a hardnosed: not much; Toyota would buy the viable factories and the number of vehicles sold, and auto workers employed, in the US would remain more or less the same.

To. . . apocalyptic: The. World. Will. End.

I don’t have any philosophical problem with government intervention. Within reason, and under the right circumstances, I don’t have any problem with government loans or subsidies. I have a great deal of sympathy for the plight of the line workers, both those directly employed by the industry and in the ancillary industries that domestic auto manufacturing supports. All of that said, it isn’t clear to me who, if anyone, would be meaningfully helped by another bailout or series of bailouts.

It has been alleged that almost a third of health care spending in the US every year goes to the last thirty days of life. Granted we don’t have little readouts on our foreheads that tick down those last thirty days; one could go through fifteen days of expensive and intensive intervention and then live another twenty years in decent condition; a good percentage of the time, however, that money and those efforts end up being thrown at people who clearly have no meaningful chance of recovery, and no meaningful chance of a decent quality of life if they do recover.

Similarly. . . Well going back more than thirty years now, the American automobile industry reminds me of those cancer patients still smoking by holding the cigarettes to the holes in their throats. Doesn’t make sense to give them money for cigarettes; not clear that having them on oxygen is good for them or for anyone within the blast zone either.

David Halberstam pointed out one evocative example more than twenty years ago, in “The Reckoning: How Japan Beat the United States in the Auto Industry War and Rewrote the Rules of International Business Competition.”

The short version is: In 1958 Ford invented E-Coat painting technology (give paint a positive charge; give auto body parts a negative charge; you get full coverage in every nook and cranny and substantially increased rust resistance). This quickly became the industry standard, foreign and domestic. Ford, however, took until 1975 to get the technology into *half* of their factories; it wasn’t until 1984—more than 25 years later!—that they finally upgraded every one of their plants.

Can American industry innovate? Yes. Are they willing to invest in the future at the expense of this quarter’s profits? Detroit hasn’t been much inclined in that direction for quite some time now.

Airlines mostly keep flying through bankruptcy; retail chains also, for the most part, remain in business as they work through Chapter 11; not clear why the same would not be true of the Shrinking Three.

I oppose capital punishment and can’t therefore in good conscience advocate for executing a large swath of the American Automotive Nomenklatura (although we might consider this a form of euthanasia). If the federal government is to step in (which seems all but inevitable): 1. Executives should have their epaulettes torn from their shoulders, their ill-gotten gains stripped from their Swiss bank accounts, and be shown the door—Lead Parachutes for Everyone! 2. Everything possible should be done to safeguard the pension and medical benefits of retirees. 3. The government should have its loans secured by the companies’ assets. 4. There should be ironclad fuel economy standards imposed on the industry.

President-Elect Obama says he wants to rejuvenate the American Economy by getting us off imported oil and facilitating the growth of a sustainable transportation and industrial infrastructure. Well, Green Power to him! He’s likely to be involved in an automotive bailout even before he takes office. If he does what he’s said he wants to do, I’ll be very happy.