David Frum's seductive vision of the Moderate Mitt that might have been

David Frum, as I noted last week, has been a consistent, clear-eyed and constructive critic of today's extremist, dead-end GOP.  His ebook Why Romney Lost is terrific as to diagnosis, though as usual I shake my head at the critique of Obama at the beginning and the rather hasty policy prescriptions at the end. I would take issue, too -- as I think Frum kind of does with himself -- on a perhaps moot point: the degree of responsibility Romney bears for his loss.

The basic premise is incontrovertible: the party forced Romney too far to the right:

In poll after poll, big majorities described the Republican nominee as favoring the wealthy over the middle class. 1 No surprise, therefore, that throughout the spring and summer of 2012, Obama held a multi-point lead.  over Romney, despite the president’s sub-50 percent job-approval rating. Then, in the final month of the election, Romney’s team at last released “Moderate Mitt from Massachusetts” from his six-year seclusion. Abruptly the election tightened (location 34).

Romney Rules special edition: the meta-ethics of the post-truth campaign

Paul Krugman dubbed Mitt Romney's drive for the presidency the post-truth campaign. Steven Benen chronicles 20-50 verifiable instances of Mitt's mendacity every week (a record future generations will marvel at). I like to focus on the campaign's meta-ethics -- its explicit justifications for willfully misleading the public.  

That has happened on at least four occasions. Here they are*, in reverse chronological order:  

1) The most recent is the most egregious: the campaign is defending an ad, now running in Ohio, that gives the clear false impression that Chrysler is going to move its U.S.-based Jeep production to China, whereas the company has merely stated an intention to build Jeeps in China for the Chinese market. The ad follows on the heels of a false statement by Romney last week that Chrysler was moving U.S. Jeep manufactures to China.  Asked by Buzzfeed, to explain the ad, an unnamed Romney aide responded, ""What's in there that's false? Are they building Jeeps in China or not?" Context doesn't matter; artful omissions are okay; deliberately creating a false impression is okay.

Concluding unscientific local auto market survey

Some years ago, before the financial crisis, I used to beguile the time during my 3-mile runs by keeping score of how many Asian, European, and American cars passed me (Asian, because it taxed my memory too much to try to split out the Korean cars, which at the point were few).  Typically, slightly less than half the cars I counted would be Asian (though not uncommonly a bit more than half), with Euros and Americans more or less splitting the difference.  A representative Asian-European-American split would be something like 34-20-17.

I stopped doing this for a long time, partly because I switched my route to more off-road, mainly I think because I just got bored with it. Recently, I started up again -- not sure why.  And I'm here to report that if the convalescent U.S. auto-makers are doing credibly in the U.S., it's in parts other than South Orange/Maplewood, NJ.  Here, according to my unscientific survey, the number of domestic cars on the road has collapsed -- and Asian cars have gained on Europeans, too. My most recent count was 52-19-7 (wrote that one down); another was something like 37-14-5. (Of course, given my hiatus, this difference tracks what's happened over the last few years rather than the last few months.)

Don't crow, but savor the moment

Recall the warnings in fall 2008, as the auto industry teetered and  Bush stepped up to the plate with the first lifelines to GM and Chrysler, that their bankruptcy could a) cause the collapse of the U.S. auto industry and vastly accelerate the loss of jobs, then already in freefall; b) destabilize the financial system through losses on loans and credit default swaps; and c) be the death of both companies, since Americans would never buy cars from a manufacturer that went into bankruptcy?

The industry is far from out of the woods. But still -- today, on the front page, the WSJ's Jeff Bennet and Mike Ramsey take stock and finds some really, really good news:

After the Crash, Auto Towns Revive

FLORA, Ill.—A year after the U.S. government swooped in to rescue two crippled auto giants, the car business is showing signs of life again—and so are local economies across the heartland that depend on it.

As soon as General Motors Co. and Chrysler Group LLC finished racing into and out of bankruptcy court last fall, orders for headlamps and other car parts began streaming back to two factories here in this southern Illinois hamlet. The factories quickly re-hired about 400 of their 550 laid-off workers, giving Flora, Pop. 4,772, a big shot in the arm.

Local businesses are perking up. The Best Western just outside town occasionally fills all 41 of its rooms again. And shoppers are less scarce in Joe Etchison's appliance store. "Last year, people were sticking with the basics and skipping the stainless-steel refrigerators," he said, walking his downtown showroom trailed by Taz, his dog. People have "figured out the world has not ended."

Similar scenes are playing out across the Midwest, where the speedy stabilization of GM and Chrysler appears to have helped towns tied to the auto industry to get back on their feet more quickly than they may have otherwise.

Three circles of economic hell after a Big Three bankruptcy

As auto industry Armegeddon approaches, many are crying "let 'em eat coke." Let the Big Three go through bankruptcy hell and rise from the ashes, cleansed of their legacy labor costs, like the steel industry. Or keep on truckin' through bankruptcy, like the airlines.

Today, three separate sources brought home to me, in very different ways, the likely cataclysmic effects of auto industry failure.

1. On the Times op-ed page, former energy secretary Spencer Abraham argues that the airline and steel industry analogies are flawed. Bankrutpcy for an automaker will mean liquidation because

To purchase a car is to make a multiyear commitment: the buyer must have confidence that the manufacturer will survive to provide parts and service under warranty. With a declaration of bankruptcy, that confidence evaporates. Eighty percent of consumers would not even consider buying a car or truck from a bankrupt manufacturer, one recent survey indicates. So once a bankruptcy proceeding got started, the company’s revenue would plummet, leading it to hemorrhage cash to cover its high fixed costs.

No revenue means no DIP financing and no rebirth. Abraham ticks off the knock-on effects: a "cascade" of bankruptcies among parts makers, a squeeze on surviving automakers as suppliers fear to extend credit, liquidation of the Big 3, three million jobs gone in the first year, new burdens on government healthcare and pension guarantee services, enormous credit strains on banks holding auto loans.

2. Also into today's Times, Zachery Kouwe and Louise Story lay out the multiple levels of the financial sector's exposure to auto industry debt: $100 billion that the automakers owe directly to banks and bondholders; another $47 billion in loans to Big 3 affiliates backed by auto leases and loans; billions loaned to Cerberus in its leveraged buyout of Chrysler; untold billions more to parts suppliers, dealerships, and of course increasingly distressed consumers.

3. Finally, in today's FT, Wolfgang Munchau reminds us that in the wake of a big 3 bankruptcy credit default swaps would once again prove themselves, in Warren Buffet's phrase, financial weapons of mass destruction:

Naturally, [a carmaker bankruptcy] would be bad for the US car industry itself. But it might be even worse for the banks, especially those that got involved with credit default swaps – probably the most dangerous financial products ever invented. CDSs are unregulated shadow insurance products that investors buy to protect themselves against default of corporate and sovereign bonds. Protection against a default by General Motors was among the most sought-after contracts.

Some have called for a "managed bankruptcy." Looks to me like a managed bailout, with all stakeholders giving up something in advance, would be a lot less risky.