A Cautionary Fail

In a little noticed item of not-so-breaking news this week, we learned that the financing of state governments has for the first time ever become a largely federal endeavor. That is to say, federal transfers now account for the largest share of state government finance. More than sales taxes, more than property taxes, and more than state income taxes. Uncle Sam is increasingly the fuel in our states' gas tanks.

It is probably conservative to say "the government that governs best governs least," but it is absolutely part of our federal heritage to say "the government that governs closest governs best." These principles seem to be evaporating before our eyes. The latter is perhaps even more important than the former. It simply means that the closer the government is to its voters, the more accountable and responsible we can expect it to be. Small town mayors are more accountable to the citizens of the small town than is the president of the United States. The state legislature is easier to control than Congress (see my posting here).

Federalism has always been an integral--but threatened--part of our governing system. Our founders recognized the diversity of the states and appreciated the valuable contributions this rich tapestry would make to the national good. However, there have always been those who saw one-size-fits-all solutions as optimal. For these well meaning elitists, imposing national standards was a lofty goal. When the federal government forced the states to enact a 55 mph speed limit on penalty of lost highway funds, my native Montana essentially told them to pound sand with a $5, no points "failure to conserve energy" fine. The state got its money and no one drove 55.

The point has broader implications, if the states become a mere organ of the federal government, then our power to control our government suffers immensely. Why elect a state legislature at all, if their only role is to dole out the federal dole? Who needs a governor if the president is calling the shots from 1600 Penn. Ave.? There are important reasons to have local services funded by local dollars and allocated by local officials. These are accountability, accountability, and accountability.

So why then, does the federal government have the money to fill gaps in state and local governments? Why does the federal share of funding continue to grow? Hmmmm. Could it be that no local government would get away with the reckless borrowing, high taxing, ballooning government strategy the feds are following? Well of course not: their voters would never stand for it. Only the 535 impersonal, distant, and arrogant power-aggregators in Washington can pull off that trifecta.

Red, White, and Blue

Yesterday I actually heard the President of the United States announce that Italian Fiat was saving Chrysler mere moments before he implored the public to buy "American" cars. The plight of the auto industry has held my attention for any number of reasons I suppose: I grew up in a car culture for one, and I consider myself a capitalist for another. I wrote awhile back that GM might be better called "General Misery" and advocated its deconstruction. However, after the events of this week I find myself increasingly flummoxed. Where are the capitalists?

Everything about Ford has always been embarrassingly unexceptional. From Henry Ford's model naming system ("A"-"T" in that order) to his insistence on black paint only, to the company's hopelessly Madison-Avenue-free logo design: the enduring Blue Script Oval-- nearing its 100th birthday. Ford has long played second fiddle to its larger cross-town rival GM. Ford has rarely entered pop culture the way GM has-- we never drove our Ford to the levee, Lucille got a ride in the Oldsmobile while Valerie never got a go in a Mercury, and Coup De Ville just rolls off the country-western tongue easier than Continental. In any event, Ford has literally been the unsung hero of the American automobile industry.

The minivan may have saved Chrysler (the first time it received a federal bailout) in the early 1980's, but the Taurus saved the entire domestic industry. Ford's bold new sedan went on to sell more than 7 million cars. It was the first domestic vehicle to adapt Japanese manufacturing techniques. Before it was allowed to whither on the vine, the Taurus was the best selling car in the world. Ford's trucks have literally helped build the country. Long before Toyota thought of copy-catting the F-Series with its ill-conceived "T-Series" Ford was outselling all of its domestic truck rivals combined.

Which brings us to today. As the federal government, foreign companies, and the United Auto Workers all peel off pieces of Chrysler and General Motors, one would be forgiven for thinking that these two companies represent the sum total of American auto manufacturing might. The big question now is whether the government will end up with a controlling stake of GM before or after bankruptcy, and whether Fiat will really be able to pump life into Chrysler after bankruptcy. The president prognosticates about the need to preserve "an American auto industry" as though only nationalization of these two companies can achieve that goal. In 1943 it was Ford that took production of the B-24 from 1 day to 1 hour. Pilots slept on cots waiting for planes to roll off Ford production lines. If America needs an example of a domestic manufacturing capability, might it not look to the one who has so often saved the day?

Today Ford has the best mid-sized sedan in the world. The Ford Fusion is not only rated better than Camry and Accord on quality, but its 2010 hybrid version is touted as a strong challenge to the Prius. Sales of the model are up over 20% this month alone. Ford's initial vehicle quality started overtaking Toyota in 2007. It beat Wall Street estimates in the first quarter, is outselling Toyota in the U.S., and has yet to take a dime in taxpayer money.

So why has Ford dropped out of our national discourse?

Why isn't Ford outraged that the taxpayers are propping up its competitors? Why isn't the public looking to Ford as the champion of the domestic auto-industry rather than to Washington? Ford is reinventing itself with product-led quality and design (In addition to Fusion, the new Taurus, Mustang, F-150, and Lincoln MKT are widely praised). It is doing so the old fashioned way-- on its own dime. No one seems to care-- and that scares the hell out of me.

A world in which a business innovates in spite of government obstacles, without government subsidies, and in the face of unfair competition is no world at all. When the government becomes your competitor, installs your union in management of its nationalized companies, and demands unrealistic design criteria you become Atlas to a world you cannot possibly support.

I still think it is possible Ford will sell its product the same way it always has: without a lot of flash or noise. It would be nice if a few more people stood up and asserted that the United States HAS a viable domestic auto industry, if the government would get the hell out of its way.