Its the bailout!

Michigan’s better than the nation economy for the last year or so is primarily the result of the federal government’s huge bailout of the domestic auto industry. End of story! As I wrote previously it is big government in action and working.

While the Republican presidential candidates argued in the state’s primary that Michigan, the country and the domestic auto industry would be better off if General Motors, Chrysler and the many suppliers who got federal assistance went bankrupt, former President Bush was having none of that. As Bloomberg reported: “I didn’t want there to be 21 percent unemployment,” Bush said in a speech yesterday (Febuary 6, 2012) to cap the annual National Automobile Dealers Association convention, attended by more than 20,000 people. “I didn’t want to gamble. I didn’t want history to look back and say, ‘Bush could have done something but chose not to do it.’ And so I said, ‘no depression.’ … “I’d make the same decision again if I had to,” Bush, 65, told Stephen Wade, the dealers association’s outgoing chairman.”

That is 21% unemployment nationally. Think how much higher it would be here. Instead, because both Presidents Bush and Obama put the interest of American workers ahead of ideological purity, the domestic auto industry is alive and well and once again driving the Michigan economy.

The evidence is captured well by George Erickeck of the Upjohn Institute in a terrific presentation on the Grand Rapids metro economy. Erickcek asks “Is the state as auto dependent as before the recession?” His answer: YES. The evidence: location quotients of 8 for auto assembly and 7 for auto suppliers before and after the recession. Location quotients are a measure of how over (or under) concentrated a state is an industry compared to the country. Presenting in December, Erickcek estimated that 39% of the state’s job growth from 2009 Q3 to 20011 Q3 was auto related.

So as has been true for decades – no matter who is Governor or President or which party controls the Michigan legislature – when the domestic auto industry does well, so does Michigan and when it does terrible, as it did for the last decade, Michigan does terrible. The difference this time is that it was so terrible that it went broke and without the bailout would be gone (or close to it).

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