As a sitting president and a president-elect maneuver over how to bail out Detroit – and ultimately how to convince the Big Three to radically change their ways -- there may be some instructive lessons in the Middle East peace process.
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The Middle East? At first blush it may seem a bit farfetched. But all complex, intractable negotiations – especially those involving ancient, entrenched interests in which sheer survival is at stake – share something in common.
In Jerusalem, as in Detroit, all the parties in their hearts know roughly what the final economic settlement will look like – they just can’t figure out how to get there. In the case of the Israelis and the Palestinians, a political map of a proposed boundaries between Israel and a Palestinian state has been kicking around for nearly a decade; while there are countless arguments about how to divide specific neighborhoods the broad outlines of a deal are well understood. It’s the trust that’s absent.
In the case of the Big Three, the map shows of which plants stay open and which close, how many jobs must be eliminated, and what kind of cars need to be produced before Americans will buy them instead of foreign models that are, increasingly, made-in-America. There’s even a widely-discussed two-state solution: GM and Ford, with Chrysler, now privately owned, merging into the surviving parts of GM. The arguments are mostly over how fast it happens – and whether there is still enough time left to strike a deal. Again, there is no trust: the unions believe the companies are trying to break them, the retired think their pensions are under assault, the company executives don’t want lectures about prudence and planning for the future from a Congress that has run up trillions in deficits.
The analogy, granted, is imperfect. Already, I hear some skepticism:
In the Mideast, the negotiations are all about survival – which is why no one is willing to give ground. But in the Midwest, isn’t there broad agreement about what where the industry needs to head?
Maybe so, but that broad agreement has existed for 30 years – and we’re still talking about the same goals. Now we’re running out of time, fast. So I called Dennis Ross, who negotiated arms-control agreements before he tried to negotiate Mideast peace accords, to see if he could diagnose what was going wrong in dealing with the Big Three.
“One of the things I find in most negotiations is that even if you can figure out what the ultimate outcome is, the mystery is in how you create conditions to get to that outcome,” Mr. Ross said. “It’s always about convincing people it’s time to move, that there won’t be a better time, and the longer you wait the worse it gets.”
In this case, it’s clear that American automakers need to be producing more fuel efficient cars, spewing less carbon into the atmosphere, at costs competitive with Japanese, German and South Korean manufacturers who are operating in the U.S. without the legacy costs of big pensions and health-care benefits. But no one wants to be the first to take the hit. That was clear last week, when the United Auto Workers refused to agree to a plan that would cut their total compensation to the level of workers in the Japanese and German plants in the U.S. – at least until they knew whether the manufacturers, their creditors and their suppliers would also suffer.
Isn’t that the negotiation the car czar is supposed conduct, once we get one?
Maybe. But imagine what happens when the car czar finally gets the automakers, the unions, the creditors and the suppliers into one room. What happens when he tells the unions how much their compensation will be cut, when he tells the creditors they can expect to 30 cents on the dollar, and when he tells the car companies that they have exactly five years to get their fuel efficiency to 40 miles per gallon and to drastically cut emissions?
“As the czar makes each pronouncement,” predicts David Rothkopf, a former Commerce Department official, “every one of those guys is going to stand up, one by one, and say ‘Excuse me, I have to make a phone call.’ They’ll be dialing back to members of Congress, looking to neutralize everything the czar is doing.”
O.K., so how does the czar’s plan turn into law?
It’s not easy. If it had become law, the legislation that passed the House but died in the Senate would have allowed the czar to force the companies into bankruptcy court – meaning a judge would be in charge. (It’s harder to make a phone call to turn around a judge – but it’s not unheard of in some jurisdictions.)
Of course, everyone hates the idea of bankruptcy – would you buy an SUV from a company in Chapter 11? An alternative would be to give the czar the powers of the military’s base closing commission. The idea of the commission was to take the politics out of the decision over what bases would be abandoned. Congress got the commission’s list and could vote to approve it or disapprove it, but not mess with it. Imagine the same for a plan to bail out the companies in return for specific factory closings, new product standards, energy efficiency and environmental targets.
Any other bright ideas out there?
There’s one with a lot of appeal: Cash for clunkers. As Alan Blinder, the professor of economics at Princeton and a former vice chairman of the Federal Reserve wrote earlier this year, the overall economy, the environment and the carmakers all stand to profit from these programs, which pay drivers ofr truly aging cars – say, more than 15 years old – to get them off the road. One study in California has estimated that cars built before 1995 contribute 75 percent of all the pollution spewed out of America’s tailpipes. The exact number is hard to confirm, other experts say, but the notion is right: If the government could get 5 million old cars off the road, by offering up $5,000 each for cars that may be worth only a few hundred dollars to a wholesaler or junk dealer, it would clean up the air and create some demand for Detroit’s newest offerings.
Mr. Blinder estimated that program would cost less than $20 billion, which seemed like an impossibly large number when he proposed it in July, but sounds like the cost of an oil change today. It’s nothing new: Several cities and states have tried versions of the program over the years, meaning there is a lot of experience out there for the Federal government to tap.
But there’s no guarantee people will turn in the clunkers, especially if they cannot get financing for the purchase of a new car. And some people are as attached to their cars as they are to their homes – and they won’t bite.
I tool around Washington in a 1996 mid-life crisis classic with six figures on the odometer, a dead radio and a Blue Book value that hovers below what the government would probably pay me to crush the thing into a small cube. It’s expensive to run, and more expensive to fix. But I love my clunker, and you can tell the czar I’m not giving it up.
