Governors - Policy Bimbos versus Thinkers

This afternoon after visiting with a couple of my colleges, I was driving to my hotel for the evening and listening to NPR. One report that they had was from three of the participants in the meeting today between the President elect and a group of governors. NPR had the Governor of Michigan (former actress/model Jennifer Granholm), the Governor of Colorado (Bill Ritter) and the Governor of South Carolina (Mark Sanford).

NPR cannot be said to have been very fair about their discussion of the bailout for the auto industry. Granholm is not bothered much by the facts and quite content to pimp for her hometown industry. The same could be said of Bill Ritter. I am not sure why he thinks throwing good money after bad is such a good idea but he does. In addition he also said that the feds should fund tons of new infrastructure projects. He made the absurd statement that the FDR programs in the 30s helped us get out of the depression. That is utter nonsense. Indeed, if anything the alphabet programs were emotionally but not economically satisfying. Ritter and Granholm seemed to be operating off the talking points of the UAW and the (not so) big 3.

They made two arguments which should be answered. First, Granholm kept repeating that the auto industry some how influenced one job in ten - with the strong implication that if the bailout were not granted that our jobless rate would immediately grow by that full amount. If the figures are true (and economic multipliers are often based on silly facts) even if the big three completely failed in bankruptcy not all of those jobs would disappear. It is pretty clear that some parts of our auto industry (especially those not burdened with the legacy costs of the big three might even do better. The converse of her arguments are even more telling - if the bailout were granted we would be implying that the legacy costs should be a public responsibility.

Second, Ritter made the point that the extensive list of public works projects that each governor had on their wish list would improve the economy immediately. Frederic Bastiat destroyed that argument in the eighteenth century when he did his famous paper about the benefits of breaking windows to promote employment. When you add the public works projects that each state has not funded (and it is a very large list) you would soon have the federal government setting priorities for the states. Many of those projects would have little benefit outside their own state borders. One other issue that bothered me was California specific. On the November ballot Californians adopted a series of bond measures which presumably would have the same stimulative effects that Ritter talked about - why would a new list be more stimulative than the one established, and paid for, by California voters?

But then came Governor Sanford. The NPR interviewer asked him if he thought that a federal bailout would help a) the auto industry and b) his state. He said no to both. He was polite but firm. He suggested that South Carolinians would better be able to help themselves by not taking federal "bailouts" funded from increasing the deficit. Ritter compared the unemployment rate now (7%) to the great depresssion (then as much as 30%) which shows he is either ignorant or dishonest (or both). Sanford also said the auto industry could benefit from going into Chapter 11 to renegotiate some of the legacy labor costs.

I was impressed by Sanford's approach. He is realistic and at the same time committed to improving trade (which he explicitly supported). Sanford was polite but forceful. He made his points in an environment where the NPR interviewer was predisposed to increasing deficits to deal with the credit/productivity problem. If this is the next generation of GOP , there is hope.