The linked article reports on the UAW’s opposition to General Motors’ restructuring plan, which relies heavily on shutting down U.S. plants and outsourcing production to countries like Japan, China, Korea and Mexico. (In case you’re not aware, Chevy Aveo and Pontiac G3 are already imported from Korea. GM plans to do much more of this.)
This presents the Obama administration with quite a paradox. As the major stakeholder in GM, the government is now responsible for approving or disapproving GM’s plan. However, given the current climate of extreme trade policy and tax regulations that favor foreign production, no recovery is possible for GM that doesn’t involve outsourcing production, which will dramatically worsen the trade deficit. But, at the same time, no plan by the government to restore the economy and our nation’s fiscal health is possible if a balance of trade isn’t restored. So what’s Obama to do?
My prediction is that he will approve GM’s plan and hope that changes in the trade climate and in tax regulation in the meantime will make their plans to outsource production moot before it ever comes time to implement them. He’d better hope that’s the way things unfold because, as unemployment rises beyond 10% and climbs into the teens, there’s going to be a real groundswell of anger if people see more jobs being exported.
As this recession wears on, Obama will find that bank bail-outs, optimism and happy talk of economic “green shoots” won’t restore prosperity. He’ll eventually have to confront the collision of economic forces that underlies the ruination of our economy.