Wednesday, November 19, 2008

Michigan's Possible Nuclear Winter

Brooks Patterson used those words to describe what will happen to Michigan should one or all of the Big Three go under.

Oakland County Executive L. Brooks Patterson said communities and schools would be devastated without the automakers. The county northwest of Detroit -- one of the nation's most affluent -- is home to Chrysler's sprawling headquarters, GM's Technical Center campus and a slew of auto plants and foreign and domestic suppliers that employ more than 40,000 people.

"If GM or Chrysler goes under, or both go under ... it will be a nuclear winter. We'll lose tens of thousands of jobs," Patterson predicted.

You think, well, that's just Brooks running his mouth again. That is the problem with Patterson; he tends to, let's say, exaggerate quite a bit. He's "colorful". No big deal.

Except Jack Lessenberry used the same description - and it wasn't in the Metro Times, where he tends to let loose.

Last night, I got a copy of the Center for Automotive Research’s new report on what it would mean to our economy if one or more of our domestic automakers were to go out of business.

What it reminded me of was the reports that used to describe what the United States would look like after a nuclear war. We are talking about millions of unemployed. Michigan would suffer far worse than any other state.

In today's Metro Times, Jack spells it out clearly, and this time he used the words "Great Depression" at the end. He concedes to the past mistakes of the automakers, but also correctly points out the actions of Republicans in Congress seem ludicrous in the face of the potential disaster of "near-instant loss of almost 3 million jobs nationwide". Take it away, Jack-

Incredibly, Congress is balking at using less than 5 percent of the bailout money to save this crucial manufacturing sector of our economy. That is, the Republicans in the current lame-duck session are the ones trying to do us in. Despite his party having been smeared in this month's elections, U.S. Sen. Richard Shelby of Alabama basically said Detroit could go impregnate itself.

"The financial problem facing the Big Three is not a national problem, but their problem. The legacy of the uncompetitive structure of its manufacturing and labor force," he said.

What that really means is that he hates unions; his state voted overwhelmingly against President-elect Obama; and he couldn't care less about what happens to any goddamn Dee-troit.

Will Congress allow itself to be bullied by the White House and Republicans that would love to hang this disaster around the necks of Democrats, seeing as how the full fallout will hit next year when the Democrats have control of government? That is the 25 billion dollar question. Shelby couldn't be more wrong when he says it's not "national problem" - that is what he wants you to believe in an effort achieve his goals. He's either being deliberately obtuse, or he's lying. An analysis today spells out in detail how many states are affected and what they stand to lose in both jobs and dollars - including Shelby's own state of Alabama, which receives around $2 billion from Ford.

While the automakers are often portrayed as a Michigan industry, more than half the states, ranging from the Atlantic to the Pacific and from the borders of Mexico and Canada, would lose more than 10,000 direct auto company and dealer jobs if the Big Three go under; with suppliers added, the number is likely to be more than 30,000 jobs in each of those states.

You really need to read the whole story to get the entire scope of what this means to states across the nation; but once again, Michigan will be Ground Zero of a Big Three collapse.

A doomsday scenario would put 157,000 Michigan residents currently employed by the Big Three out of work, plus an estimated 300,000 more who work for auto suppliers.

Granholm claims 400,000 jobs lost since the year 2000; now we are talking over 400,000 workers within a year if we get the full impact. These workers could eventually be absorbed by anyone who survives collapse, either domestic or international, but that hole will take us years to climb out of. What happens in the meantime will make all the problems of the past few years seem like a walk in the park.

Kathy Barks Hoffman gives us a bit of historical perspective from the early 80's, when unemployment shot up during a recession that hit the automakers exceptionally hard. Michigan experienced a decline of 2% a year in jobs from 1979-1983, and for comparison, we have experienced a decline of 5% overall from 2001-2008.

Back then, state unemployment nearly doubled from an annual rate of 7.9 percent in 1979 to 15.6 percent in 1982, including one month -- November -- where it hit 16.9 percent.

The auto woes caused state general fund revenues to drop nearly 7 percent in a single year from fiscal 1980 to '81, a loss of $335 million -- or $2 billion in today's dollars, according to Jay Wortley, senior economist for the nonpartisan Senate Fiscal Agency.

Michigan's automotive workforce is currently at 3.6% of our total employment. (another report puts it at over 10%) A failure of the Big Three is expected to push Michigan back into the double-digits in unemployment in very short order, and $2 billion is roughly the size of the budget deficit we fought so hard to overcome in 2007. This comes on top of reports that put our current budget deficit anywhere from $300 million - $600 million, (and even up to $1 billion dollars, if you believe MIRS). What does that all mean? It means that Mike Bishop just might get to make his cuts after all. And then some. Quality of life in this state will be non-existent. Kiss your schools, your cops, your health care, all that we fought so hard to keep, goodbye.

You can throw numbers around all day, paint all the possible scenarios, but in the end, it all adds up to Congress throwing Michigan into in disaster like we have never seen before. "Nuclear winter" is not an exaggeration this time, and quicker than you can say "Hello Governor Cox!", we will bear the brunt of this Congressional cowardice – and whatever fallout that entails. They can point to the past mistakes of the Big Three all they want, but does it make any sense to make Michigan, and the entire country behind it, pay this kind of price?

Brace yourselves.