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November 6th, 2008

Opinion: Bail on Automakers for Public Trans



Cliff Mason, author of CNBC’s blog “Millennial Money,” argued yesterday that the government should forego any possible bailout of Detroit’s Big Three automakers, and instead invest those billions in expanding public transportation. Mason’s conclusion is that increased development of the U.S. public transportation system could lesson our dependence on vehicles. In addition to lowering our dependence on foreign oil, he claims it would cut the over 37,000 deaths caused by automobile crashes last year, as well as propelling another valuable argument towards lowering the drinking age (more public transportation options give young drinkers less of a reason to drive).

Mr. Mason does acknowledge that “double-digit unemployment” could result from allowing the automakers to “die,” yet concludes his piece by saying “what’s good for GM is not necessarily good for America.”

Oil prices have a lot to do with it. When oil prices peaked back in July, the news was full of stories documenting new alternative energy and fuel-efficient vehicles being developed by automakers that could eliminate consumer’s dependence on gasoline. Even though more Americans were leaving their vehicles in the driveway for the bus or train, the conversation remained focused on developing alternative “personal” vehicles. Under the circumstances, Americans remained more interested in finding ways to continue the development and expansion of personal vehicles, not public transportation.

Mr. Mason’s point of expanding our public transportation system is a smart one. The only way this may happen is to make public transportation available to people in all demographics. Unless you live in an urban area, public transportation isn’t always available just down the street, or on the corner. Even most suburbs have only limited public transportation to specific destinations.

Mason’s idea is a legitimate one, but will the U.S. pull possible automaker funding to support it? Not at all likely.

PAUL ADDS: I’ll argue that it’s not remotely feasible, as Mason concedes by admitting his plan would result in “double-digit unemployment and… a second great depression.” Such a public-works project that would far exceed the scope of the Interstate Highway System program under Eisenhower, which cost $425 billion (in 2006 dollars). And that’s just the construction cost; how many billions would be required annually to staff, run, and maintain thousands of small ‘mass transit’ systems?

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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