Clinton’s Recommendation For Purpose-Driven Stimulus Makes Sense
November 11, 2008 – Yesterday morning we had a chance to attend a Keynote Address from Bill Clinton at Rodman & Renshaw’s Global Opportunities Conference. We will go on record right now that the former President is a smart and thoughtful speaker, and his commentary on the current economic crisis, as well as his recommendations on how to navigate it were compelling and right on, in our opinion. One of the most salient points he made on the subject went to the heart of methodology:
Clinton made the point, with respect to bailouts and stimulus packages that they need to be developed and executed with a clear purpose of outcomes for the economy on the other side of this economic crisis that we are in, and not just with a ‘quick fix’ in mind. For example, one contentious scenario in the media, as well as on Capitol Hill, is whether to provide the auto industry with access to the $700 billion in allocated bailout monies approved by Congress.
Opponents argue that the free markets should play their roles, and that to offer bailouts for Detroit send the wrong message and are unfair. Proponents argue that the auto industry is critical to the economy, to jobs and that it will be necessary in the long-term to get us back on track. To be sure, these are oversimplifications of both sides of the debate, but generally get at the gist.
Clinton took the position that the auto industry should get help, but only conditional and with a purpose. He made the point that on a bipartisan basis for the last several years the auto industry has been getting a free pass on reforming its industry to address café (Corporate Average Fuel Economy) standards, to make them more fuel efficient with lower environmental impact, in a way that foreign manufacturers have been doing and in a way that is needed to be more competitive in the 21st century.
Instead, workers unions and manufacturers alike have gone to Washington time and again to ask to be left alone, and left to their focus of building trucks and SUVs – fuel inefficient vehicles. And Congress, on a bipartisan basis has played along. Now that we are in the mess we are in, Clinton argued that if Washington is to approve providing stimulus to the auto industry, it should come on conditions that are forward-looking, and focused on making the industry more competitive when the economy starts working out of recession.
There is no point in funding a bad business plan, and right now Detroit has a bad business plan. Change the business plan and you may get the financing assistance you need, but only after you demonstrate the longer-term viability of the business plan.
The current crisis, in many ways is an opportunity. It is an opportunity to take a hard look at elements and policies in the current economy that are either broken or inefficient and to address them. The auto industry is a perfect example of this, and Clinton’s point is well taken. He had similar remarks to make about investments in infrastructure and healthcare.
