Don't Bail Out Automakers, Invest in Shipbuilding

Canada is discussing an interesting idea for an economic stimulus package, they are directing money directly into shipbuilding programs as part of the package. I'm personally not a big fan of government stimulus packages, they don't work very well normally because bureaucracy gets in the way of building effective packages. The New Deal was a good example. As an often politicized project to stimulate the economy during a depression, depending upon your politics one can find arguments suggesting it was critical to the country overcoming the economic challenges of the time, or it was a failure because it prolonged the depression. Such massive government investment projects are never as simple as the political rhetoric allowed, a more detailed review notes some of it worked, some of it didn't.

What didn't work was investment in the service sector. If you look at spending as a tree, the services sector becomes a stick, output with no tangible product that builds larger networks of economic growth. The New Deal investments in manufacturing on the other hand tell a different story, that tree branches out in a number of ways as a manufacturing facility networks with suppliers, subcontractors, and science to produce products. In many way the manufacturing investments of the new deal led to high production rates and more efficiency, was successful in building economic stimulus across several sectors, and ultimately put the US in position to be highly competitive industrially just as WWII arrived. The New Deal sealed the deal for the United States before Japan bombed Pearl Harbor.

In the spirit of encouraging government to be wise in investment during difficult economic times, the Canadian model is very smart, and it could be that several Senators see that. Emelie Rutherford of Defense Daily has an article titled Bipartisan Group Of Senators Calls For Obama To Boost Shipbuilding Support (subscription only) where eighteen Senators have called for the new administration to support "a robust shipbuilding budget and policies" for military and commercial vessels.

Their letter to Obama seeks support for Navy, Marine Corps, and Coast Guard shipbuilding efforts, and for re-energizing commercial ship construction.

It notes the 400,000 people employed by the U.S. shipbuilding industry, and says "thousands of jobs" would be generated with a "renewed commitment to shipbuilding that has been lacking in the past decade."

The article goes on to note the Senators who signed the letter.

Landrieu and Collins' letter is co-signed by: Sens. Ted Kennedy (D-Mass.), John Kerry (D-Mass.), Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), Barbara Mikulski (D-Md.), Benjamin Cardin (D-Md.), Bill Nelson (D-Fla.), Mel Martinez (R-Fla.), Joseph Lieberman (I/D-Conn.), Chris Dodd (D-Conn.), Thad Cochran (R-Miss.), Roger Wicker (R-Miss.), Olympia Snowe (R-Maine), David Vitter (R-La.), Daniel Akaka (D-Hawaii), and Sherrod Brown (D-Ohio).

Today, the US Shipbuilding industry is a mess following eight years of Clinton and eight years of Bush, and due to many, many factors is uncompetitive in the commercial market while also suffering from a seasoned (ie. old) workforce lacking young trained professionals. If Barack Obama does not take serious action, the shipbuilding industry in the United States will be mortally crippled for decades. This letter strikes me as a smart way to look at economic stimulus.

How bad is it? You know how there is this big political debate about offshore drilling? There is a dirty little secret, we couldn't produce more oil rigs even if we wanted to, they are building at capacity and growth simply isn't a real option. It seems to me we are probably going to lose the automobile industry regardless of whether the government bails them out or not, that industry is flat out broken beyond repair and all of those companies deserve to go out of business. Sad, but true. Doesn't mean those workers have to go without though, major investments in the Gulf Coast shipyards would revitalize that region and allow workers losing jobs in Michigan to go south and find similar work down there, where some training can not only revitalize a troubled industry but inject some confidence into the manufacturing sector as a whole.

I'd rather invest $35 billion into shipbuilding over the next 4-8 years of the Obama administration fixing that industry to be globally competitive than spending the same amount just to keep the automobile manufacturers in Michigan on life support for another year. The Coast Guard has extremely old ships is stretched thin right now, and could use the investment towards homeland security. The Navy has not retooled since the cold war, and is shrinking at an extraordinary rate.

In a time of global climate change on a planet covered 70% with water, in a time where the world will soon be competing for fresh water, in a time when the worlds population is growing at a huge rate but most people live in the littorals, and as world trade by sea has become the lifeblood of the global economic system it seems to me that investment in the nations maritime sector has never been more important to our long term national interest. The shipbuilding sector could also be the solution to the automobile industry problems as it relates to the workforce soon to face major cuts, after all the nation needs more than just frigates, and the need for ships like new ice breakers is just the tip of the iceberg, pun intended.