Obama's Test #1

One more rescue and a new consciousness will be permanently embedded in the fabric of American culture. We will indeed have joined in lock step with Europe’s social democracies, where the bureaucracy has assumed most normal adult responsibilities.

"A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector's workforce,'' Pelosi and Reid said in a letter urging Paulson to use some of the $700bln for a $50bln loan to the Three Stooges. What Pelosi really meant was "Preserving an antiquated industry is essential...." Even then, her first point is false; the second point is only true if one’s horizon in measured in months; the third is true - but so what? Let them find other jobs for goodness sake. Taxpayers owe vehicle assemblers a living? Why? How are they singled out?

Sure vehicle sales are slow; we all know that. Here, auto sales are at the lowest level since 1961. Daimler sales worldwide are off something like 20%, y/y. Vehicle sales in the UK were down 23% last month from Sep. An Essex online car dealer last week offered two Dodge Avenger models for the price of one, an offer as the Guardian put it, "...is more usually seen on washing powder or packets of bacon." Change goes with the territory in a free mkt economy. It’s tough times for a lot of folk.

There can be no credible contagion argument favoring this industry. None. The same arguments supporting taxpayer repair of a world liquidity crisis do not apply. Let the unseen hand do its work. Failure, then the American phoenix of creativity. Out of this spontaneous order will spring a new invigorated vehicle industry. Out of taxpayer enabling will spring nothing but more problems, calling for an even more painful solution, end of the next cycle.

We expect Bush to hold the line. For the sake of his legacy, he better. Then it's up to Obama. A year ago in Detroit Obama assailed the US industry for failing to meet global demand for fuel-efficient cars. "The need to drastically change our energy policy is no longer a debatable proposition," he said. "It's not a question of whether, but how; not a question of if, but when. For the sake of our security, our economy, our jobs and our planet, the age of oil must end in our time." Well Mr Obama, the time has arrived. Will you adhere to this vision, or simply cave as you did with the Chicago machine? We’ll soon find out.

Robert Craven