Let Mitt Romney Go Bankrupt
Because he just lost this race.
Our country hates hates hates industrial policy. But industrial policy just re-elected a President.
Creeping Unemployment in the New Battlegrounds: PA and MI
The big news of the campaign, once you get beyond Mitt’s kabuki storm assistance and auto bashing, is that PA and MI are battlegrounds again.
Maybe.
First, Restore Our Future PAC announced $2 million ad buys in both states. The the Obama campaign announced they’d buy ads as well.
Today, the Detroit News has a poll showing Mitt within 2.7% of Obama (though polling ended on the 29th, when Mitt’s deceitful auto binge began). In fact, while Romney and Ryan were “not campaigning” yesterday, Ann Romney was, here in Grand Rapids.
Some commentators suggest this is just Mitt’s effort to open up new battlegrounds as it becomes clear he won’t win OH and might not win VA (or FL, but that would be game over for him). That is, Mitt has to look viable, and by moving into MI and PA, he can sustain narratives that he still has a shot.
That may be what’s going on.
But it pays to look at what has been going on with the unemployment rate in both MI and PA (I’ve included OH for comparison and MN because it often gets thrown into these discussions).
MI’s unemployment rate is up 1% off its recent low in April (the downtick this month, and some of last month’s uptick, is probably due to the way the auto companies handled model year layoffs). Part of the uptick is probably due to Rick Snyder’s austerity plans; part is probably due to Obama’s failure to provide real mortgage relief.
PA’s unemployment rate is up .8% from its recent low in May. Here, too, Republican governor Tom Corbett has pursued austerity measures. In addition, PA is exposed to the Euro-related decline that has hurt much of the Northeast.
The point, though, is that both these states have the makings of a battleground state–including a white working class population that can swing with economic tides–plus rising unemployment. Obama is still ahead in both. A few more ads about the auto bailout–indeed, Mitt’s deceitful attacks on GM and Chrysler generally–will probably move MI back towards Obama. And the Philadelphia area was spared the worst of Sandy, staving off the possibility that Pennsyltucky would have unimpeded voting while the Democratic Southeast would have floods. So it’s still most likely Obama will win both by comfortable margins.
But one thing makes movement towards Mitt more realistic here than in, say, MN. The economy is getting worse again. And in spite of all Mitt’s unforced errors in recent days, and in spite of the way that Snyder and Corbett’s state level policies–which mirror those Mitt would adopt at the federal level–have almost certainly exacerbated unemployment, voters may still turn to Mitt as an alternative to a stalled recovery.
Mitt’s play in MI and PA is probably a ploy to look viable. But there are a lot of unemployed workers in both states who will help him along.
Why Does Mitt Hate Profit?
[I posted substantially this post yesterday, but the BlogGods ate it along the way. So I’m reposting.]
Along with the deceitful attack on Italians who make better car company owners than GOP Private Equity types and the Lee Iacocca spin, Mitt has rolled out a radio version of attack on the auto bailout. From Greg Sargent, here’s part of the script:
Barack Obama says he saved the auto industry. But for who? Ohio, or China? Under President Obama, GM cut 15,000 American jobs. But they are planning to double the number of cars built in China — which means 15,000 more jobs for China.
And now comes word that Chrysler plans to start making jeeps in — you guessed it — China. What happened to the promises made to autoworkers in Toledo and throughout Ohio — the same hard-working men and women who were told that Obama’s auto bailout would help them?
The ad continues Mitt’s deceptive insinuation that GM and Chrysler aren’t also adding jobs in the US, which they are doing.
But it does something else. It takes a decidedly anti-profit stance.
You see, there are two reasons car companies are so gung-ho to enter (or re-enter, in the case of Jeep) the Chinese market. First, because it’s growing; when I was working in China, auto people considered the rising Chinese middle class to be 300 million–almost an entire US full of population. And most of them were just aspiring to buy their first car. That’s a whole lot of first time car buyers to sell to, as compared to US consumers, who are driving less and replacing their cars at a slower pace given more durable cars.
The other reason to go to China? Profit margins are bigger there than here. When I was in Shanghai in the mid-2000s, the profit margin on Buick Regals was about $2,000, as compared to the roughly $200 profit margin on a similar car here. The margins are closer now (because manufacturing in the US has gotten cheaper and in China has gotten more expensive), but China still offers good profit margins. Selling Buick Regals or Jeeps in China allows GM and Chrysler to accept lower margins on cars here.
By selling high margin cars in China, US companies can be more competitive here, meaning they will be able to expand sales and therefore production here, too.
All this is implicit in Sergio Marchionne’s response to Mitt’s ignorant rantings.
Together, we are working to establish a global enterprise and previously announced our intent to return Jeep production to China, the world’s largest auto market, in order to satisfy local market demand, which would not otherwise be accessible. Chrysler Group is interested in expanding the customer base for our award-winning Jeep vehicles, which can only be done by establishing local production. This will ultimately help bolster the Jeep brand,and solidify the resilience of U.S. jobs.
Marchionne notes 1) you can’t sell in China unless you build in China, 2) selling in China makes the Jeep brand stronger, 3) making the Jeep brand (and its profit margins) stronger makes it easier to keep up US production.
Marchionne’s implicit point should be where this discussion is heading: free trade hasn’t worked out to be fair trade. China–and Japan and Korea–still protect their markets, meaning if you want to sell there, you’ve got to make cars there.
Mitt has promised to get tough on China. But his series of auto ads have made no mention–not a peep!–of how he’ll reverse this practice and make it possible for Jeep to export cars made in Toledo. Indeed, when Obama launched a trade dispute over auto parts in September, Mitt scoffed at the effort (and ignored Obama’s decent and sustained effort launching trade disputes, one of which pertaining to specialty steel recently won at the WTO).
“The president may think that announcing new trade lawsuits less than two months before the election will distract from his record, but American businesses and workers struggling on an uneven playing field know better,” Mr. Romney said in a speech to the Hispanic Chamber of Commerce in Los Angeles.
Mitt Romney wants to attack American companies for going where profits are. And he’s doing so without discussing why that’s necessary.
That makes him neither a tough guy nor a good businessman.
Lee Iacocca: Mitt Will Make It Easier for Auto Companies to Evade Taxes on Cars Built in China
As part of its effort to pretend that Mitt would be good for the auto industry, the campaign had Lee Iacocca sum up why Mitt would be good for the auto industry.
The first paragraph of specifics reads:
When Mitt Romney is president, he will reduce our nation’s corporate tax rate to 25 percent from 35 percent – currently the highest combined tax rate in the industrial world – so that American car companies can compete on a level playing field at home and abroad. He will also stop the extra tax automakers are forced to pay when they want to bring home their profits to reinvest in the United States. President Obama could have done this the day he took office since his party controlled both houses of Congress, but he chose not to. [my emphasis]
Obama, of course, has a tax credit specifically for manufacturing companies, meaning under Obama the auto companies would pay less than under Mitt.
But the other part–particularly against Mitt’s egregious claims that the auto bailout has helped Chrysler and GM move production overseas–is even more ridiculous.
Iacocca says Mitt would be better for the auto companies because he’d allow the auto companies to repatriate profits from overseas without paying taxes.
But that assumes, of course, they’re making profits overseas. It would mean they were doing precisely the thing Mitt is attacking–moving into new markets, like China.
So on the same day Mitt attacks Chrysler and GM for making and selling cars in China, generating greater profit it can use to support workers here, his campaign sends out a post boasting that Mitt would require Chrysler and GM to contribute less domestically on the profits they made by making and selling cars in China.
Italian Automaker Brings about Chrysler Success after GOP Private Equity Failure
I’ve been a bit tardy in responding to Mitt’s latest cynical ploy, to pretend that rather than expanding production and jobs in both OH and MI, Chrysler is outsourcing production to China.
The Detroit News’ David Shepardson has a good fact check on Mitt’s latest ad here. Greg Sargent rounds of OH papers mocking Mitt’s claims here.
But there’s an angle on Mitt’s claims that has been missed. His ad says,
Obama … sold Chrysler to Italians who are going to build Jeeps, in China.
As Shepardson notes, Chrysler used to build Jeeps in China for the Chinese market. Ford builds cars in China for the Chinese market. GM builds cars in China for the Chinese market (GM also exports Chinese-built subcompacts to Latin America). Chrysler’s return to the world’s largest car market is smart business, something any viable global brand needs to do.
If it’s a moral failing for Presidents to preside over private car companies trying to compete in China, then Mitt has a problem with St. Reagan, during whose Administration Jeep first made groundbreaking entries into the Chinese market.
And if Mitt has a problem with Chrysler (or Ford or GM) building cars in China to sell in China, then he had better prepare to get far tougher with China than he has threatened to do so far. China still slaps huge tariffs on cars made outside of the country, so to be viable in the world’s largest automotive market, you have to build in China. That is the crux of the argument American car companies (and Midwestern politicians) have been making for decades: while the US allows imports from all countries, Japan and Korea and now China make it very difficult to export to those countries. This is not fair trade.
But I’m most offended by Mitt’s insinuation that selling Chrysler to an Italian company–he doesn’t mention Fiat by name–was disloyal.
Recall Chrysler’s recent history. Chrysler’s most recent strong point was the early 2000s, when it succeeded in developing nifty (albeit gimmicky) cars with shortened development cycles (think PT Cruiser). But as Daimler took more control over Chrysler, it invested less in the brand. GOP Private Equity firm Cerberus bought its first 80% of the company in 2007 and picked up the rest in 2009.
Cerberus had no intention of bringing Chrysler back to its former strength. Rather, it wanted to strip out the finance side of the company (it was investing in GMAC at the same time) and sell off the rest. But with the impending financial crisis, it never managed to pull off the trick (though it did get a bank bailout in the very last days of the Bush Administration). Meanwhile, it virtually put the Chrysler model development on autopilot while it tried to find a way to cut its losses.
Thus, when it came time for bailouts, there didn’t seem much to bail out at Chrysler. Unlike GM, which really had started making a turnaround, Chrysler had no product in the pipeline to suggest it would be worth bailing out (though it did have a few super efficient factories in the US).
Choosing to bailout Chrysler was the most difficult decision Obama made during the auto bailout. I’m not even sure I would have chosen to bail it out. And it was difficult precisely because a bunch of Republican vulture capitalist types–people like former VP Dan Quayle and former Treasury Secretary John Snow–had stripped the company.
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In came Fiat and its Steve Jobs-like CEO Sergio Marchionne. Read more →
Congressman Tim Ryan’s 4 Reasons Obama Is Winning Ohio
The Alliance for American Manufacturing just had a press conference with Congressman Tim Ryan, who represents Youngstown and part of Akron, Ohio, to talk about the role that China is playing in this year’s President election.
Earlier in the day, in the wake of the release of a WaPo poll showing Obama with an 8 point lead in OH, Adam Serwer had suggested, “There’s a great piece of journalism to be done about how Obama nuked Romney in Ohio.” So I asked Ryan for the four top reasons why Obama is doing so well in OH.
He listed, in order:
- The auto bailout (Ryan’s district also includes GM’s Lordstown Chevy Cruze plant)
- Obama’s successful WTO trade complaint against China’s tire dumping (which affected Akron)
- The Administration’s investment in education and research
- Mitt’s campaigning against Proposal 2, which protected collective bargaining for OH’s public workers
As Ryan said of Mitt’s anti-union campaigning, “he was against [OH’s teachers, police, and firefighters] when they needed him.”
Obviously, Ryan’s not an unbiased observer. But he does represent a bunch of Ohioans who appear poised to swing the election to Obama.
Maybe Mitt shouldn’t have spent so much time demonizing workers?
Latif, the NDAA, and Mitt’s Moochers
Amy Goodman is doing a 100 city tour to support public outlets that carry Democracy Now. She also gave a talk about the importance of independent media at Grand Rapids Community Media Center.
And, she had me–live!–on her show.
Man I’ve got a lot of hair!
Now that MI’s Unemployment Has Gone Up over 1%, Will the Press Report It?
I’ve been a little mystified by reporting on Michigan’s unemployment of late. There was this NYT story that gave credit to Rick Snyder credit for, “presiding over an employment rebound in a state that not long ago had the highest jobless rate in the nation” (and which I beat up here). There’s this MLive article that reports, “the state’s jobless rate has dropped from a high of 14.2 percent in August 2009 to 9 percent last month” without noting that that 9% was .7% higher than recent lows. And even this AP report on Rick Snyder’s decision to lay off a almost a quarter of the unemployment staffers (with the part timers Snyder laid off last month, 35% of unemployment staffers have been cut) didn’t say that unemployment actually started creeping up before Snyder made the layoff decisions.
Unemployment went up again in the last month, to 9.4% (some of this likely stems from a shift in model year layoffs and will probably go down next month), effectively reversing the last year of job gains and up 1.1% from its recent low.
Will the Snyder-loving press start reporting these job losses?
To be fair, I don’t think Snyder deserves all of the blame. Obama’s failure to provide real mortgage relief has been a big weight on economic growth in Michigan, even as the auto bailout and the energy investments have added jobs.
But Snyder has cut a lot of job-supporting efforts put in place under Jennifer Granholm. Not to mention–by gutting unemployment insurance staffers–cutting public employment so far as to bring down the rest of the economy.
Rick Snyder, like Mitt Romney is promising to do at the national level, promised his business friendly ways would grow MI’s economy. Instead, it looks like they’ve dampened the efforts that were put into place.
Obama Launches Trade Dispute over Chinese Auto Part Subsidies
Back in January, the Alliance for American Manufacturing released a report showing that as China has provided billions in subsidies for auto parts manufacturing, US jobs in that segment have been declining. In March, a bunch of (mostly Democratic) members of Congress wrote a letter demanding the Administration do something about China’s unfair trade.
Today, Trade Representative Ron Kirk announced the Administration would ask the WTO to intervene.
United States Trade Representative Ron Kirk announced today that the United States has requested dispute settlement consultations with the Government of China at the World Trade Organization (WTO) concerning China’s auto and auto parts “export base” subsidy program. Under the program, China provides extensive subsidies to auto and auto parts producers located in designated regions, known as “export bases,” that meet export performance requirements. China’s program appears to provide export subsidies that are prohibited under WTO rules because they severely distort trade. The subsidies provide an unfair advantage to auto and auto parts manufacturers located in China, which are in competition with producers located in the United States and other countries. Based on publicly available documents, “export bases” made at least $1 billion in subsidies available to auto and auto-parts exporters in China during the years 2009 through 2011.
It’s one of a series of trade actions the Administration has taken (and just in time for election season!).
I worry, though, that this particular complaint is too little too late (though George Bush bears most of the blame). Even if parts manufacturers started leaving China because of this (a lot will remain because China often closes its own markets to parts unless you manufacture domestically), I suspect they’d come back to Mexico, not the US.
All that said, as Obama’s WTO disputes get more and more general, it may well bring people to realize what a myth this whole free trade thing has been all these years, that American workers are losing their jobs because other countries make sure they create jobs.
Update: Former Bush econ flack Tony Fratto points to something else that may come out of this.
The owner of 500 million shares of $GM is accusing China of subsidizing its auto industry.
In past disputes, China has threatened to look at ways we subsidize our manufacturing industry. This one may well cause them to do that (though with Chinese investment, for example, in subsidy recipient A123, they might prefer to profit of our subsidies).
Walt Kowalski to Speak at the RNC?
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Remember this ad? It played during the Super Bowl, Chrysler’s second great Super Bowl ad in a row. When it played, Republicans immediately accused Chrysler of running the ad as a sop to Obama for bailing the company out. Karl Rove blasted the ad.
I was, frankly, offended by it.
I’m a huge fan of Clint Eastwood, I thought it was an extremely well-done ad, but it is a sign of what happens when you have Chicago-style politics, and the President of the United States and his political minions are, in essence, using our tax dollars to buy corporate advertising and the best-wishes of the management which is benefited by getting a bunch of our money that they’ll never pay back.
Which makes the buzz–that Clint Eastwood appears to be Mitt’s surprise speaker tonight–all that more interesting.
A lot of people are talking about what an odd choice, ideologically, Eastwood is for the radicals that make up today’s GOP. He supports gay rights; Mitt’s Church bankrolled opposing them. He’s socially liberal; they’re not. He thinks climate change is serious; they think petroleum profits are.
But I’m most interested in the possibility that Eastwood is the big secret because of what I noted when the ad ran in February. The logic behind having Eastwood star in a Chrysler ad about Detroit is not Dirty Harry, but rather Walt Kowalski, the grouchy old former auto worker from Eastwood’s Gran Torino. And that Clint Eastwood character is actually a great fit for today’s GOP: At the start of the movie, it would not have been out of character for Kowalski to throw peanuts at an African American woman as he bitched about “gooks” and Jews. Over the course of the movie, he comes to realize the Hmongs who have moved into his neighborhood are just as much a part of America as he is.
Walt Kowalski, like a lot of Republicans, was an old white dude struggling to cope with the increasing diversity of his world.
But then there’s the other reason I find it appropriate. I described in February how Walt Kowalski came to symbolize Detroit only because of government investment.
Gran Torino, that tale of troubled old America coming into conflict with, and learning to love, the future of America, was shot in Detroit rather than the Twin Cities because of government intervention. Read more →