THE BLOG
12/21/2008 05:12 am ET Updated May 25, 2011

Bail Out Detroit -- Right Now!

There are times when the lack of foresight in Washington is truly dismaying -- and the government's talent for squandering our shared Green future is shocking. This is such a time. All three U.S. domestic automakers are going down the tubes at once. But their plight has been completely overwhelmed by the nearly incomprehensible but urgent process of salvaging the financial industry. The news cycle has moved past the Wall Street meltdown and is now at least considering the woes of Motown, but a familiar pattern of public and political opinion has kicked in.

Detroit probably never imagined that the country hates it quite this much. But based on attitudes afoot in the land, no one thinks General Motors, Ford, or Chrysler has done an even remotely competent job managing the stewardship of their Very Important Business (millions of workers would join the unemployment rolls if the domestics fail). Opinions have ranged from "Let 'em die" to "Let 'em go bankrupt--and then die" to "Grrr... all right, let's [teeth gritted] bail these doofuses out."

Now, it's beginning to look as if a deadlocked lame duck Congress and White House have kicked the bailout decision into 2009. This is astonishing. Because if -- and this is a big if -- we can get Detroit back on its feet, with much needed concessions to raise its sustainability game, then we will have established a vanguard for a Green New Deal. There's a very real, once-in-a-century opportunity to utterly transform a major American manufacturing enterprise. It will cost anywhere from $25 billion to $50 billion, depending on how the deal is structured. That's a bargain.

Contrast this with the financial bailout, a $700 billion sockaroonie that it now seems will lead to partial and (perhaps) temporary nationalization of the banking system. The banking system was plunged into this crisis because it lost its ability to create a good product -- meaningful, stable investments -- and instead had to engage in an elaborate form of financial chicken with a tsunami of risk. Critics say Detroit has been building junk, but if you bought, say, a Corvette last year, you still have something that contains residual value. You will have lost money, but you won't have lost everything.You can't say the same for a vast and sloshing ocean of mortgage-backed securities peddled by the our formerly august houses of moolah.

It's important to remember what the fallout from all this will be. No one will ever take a mortgage-related investment seriously again, unless it can be thoroughly vetted. Investment banking, once considered a fine profession for a smart young person to enter, has been transformed into a Ponzi racket overnight, practiced by seedy men in soiled overcoats, scheming in darkness. Meanwhile, Americans still need cars. Lots and lots of cars. It's a depreciating asset. And a terrible investment. No one makes money by purchasing an automobile. They buy one because they need to drive their kids to school and themselves to work.

This is why Washington must, must, must fund a Detroit bailout. It would constitute, of course, a soft nationalization of the auto industry, and it would put a smackdown on several southern states' attempt to become de-unionized hubs of carbuilding for the Japanese and the Germans (the UAW, for the record, is extremely pro-bailout because its knows that bankruptcy is game over for its ranks of pensioned, insured legacy members).

Still, it's virtually unprecedented that the American people have a chance to dictate future terms to an enormous component of the industrial economy. There's now broad agreement that, over the course of the next decade, we need to retool the economy to be an engine of environmental innovation. This will have to be a multistage process where the automotive sector is concerned. As I"ve argued, once Detroit is rescued, given the falling price of gas, it needs to be able to sell its most profitable vehicles, trucks and SUVs, to revive its cash position. But after that, we need to see some genuine, measurable process on fuel economy and emissions, followed by aggressive R&D in the areas of advanced and sustainable mobility. We could let Detroit fail and throw the money at the many future-car startups that are currently out there, but that won't provide enough product to market, in a speedy manner, to deliver the improvements we require.

We'll never have another opportunity to take millions of U.S. workers and transform them, practically overnight, into Green warriors. And we need to do it before Christmas. The North American International Auto Show, which will be staged in Detroit in early 2009, can't be a funeral. It has to be a rebirth.

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