THE BLOG
02/03/2012 04:21 pm ET | Updated Apr 04, 2012

Industrial Policy Would Make U.S. A Winner

The words jumped off the page at me like they were written in 36-point type, while the rest of the New York Times article were in 10-point type.

The headline of the article certainly grabbed me: "White House Offers Plan to Lure Jobs Back To America." But the passage that really got me, written by the story's author Annie Lowrey, said the Obama administration's package of proposals might add up to what economists call "an industrial policy," a term, she wrote, that the White House is loathe to use.

Are you kidding? Loathe to use? Could this really be true?

Back in 2008 and 2009 when the financial sector was in chaos, my retirement fund was plunging in value and auto industry chieftains were in Washington asking for bailouts, I was asked to go on television frequently to talk about the industry and whether it deserved help from the government.

I often found myself as the lone defender of the auto industry bailout idea against CNBC's Dennis Kneale and Larry Kudlow or think-tank conservatives who kept saying the government should not be picking "winners and losers."

I talked often about the biggest reason the auto companies were in such trouble was because the U.S. lacked something that has long been in place in Germany, Japan and China: an industrial policy. U.S. companies, I argued, were competing against rivals in other, smarter countries where companies operated in a predictable set of home-field industrial policies such as national healthcare and public pensions.

In my book, an industrial policy is a package of interconnected policies in a national government designed to maximize economic growth, employment and sustainable prosperity. These polices would encompass tax, trade, energy, environmental and healthcare policy.

How would it work? What would the effect be? Not to be glib, but I envision that when an infrastructure project like a major bridge was being built, an industrial policy would keep all the decision makers on the same page from day one. There would be no talk of buying the bridge in sections from a Chinese company that would ship it to the U.S. to be assembled by temporary workers from Mexico. It would be supplied by a U.S.-based company, or if a foreign company, one that operates in the U.S. and pays fair wages. It would be constructed by U.S. workers whose cost to their employer was made competitive with foreign workers in part by a national healthcare system.

I can just hear the critics shouting, "Dream on Comrade."

The exact passage from the Times article reads thus: "the administration has put together a far ranging set of proposals: cutting taxes for manufacturers that produce goods in the U.S., taking away tax breaks for businesses that move jobs off-shore, doubling a tax deduction for makers of high-tech goods." Then it reads: "It all adds up to what economists might call an industrial policy, the out-of-favor practice of using tariffs, taxes and other measures to help a particular industry. The White House avoids the term because it implies that the government is picking winners and losers. It argues that its proposals are a moderate plan to aid businesses deciding whether to move jobs overseas."

Why does a much needed "industrial policy" designed to create more jobs for Americans have to involve picking winners and losers among industries? In my world, a real industrial policy would be designed to pick the United States as a winner, not the auto industry, nor the steel industry, nor any other single industry. It would be in place to boost the U.S. economy, increase the tax base, put more people back to work and provide more jobs for new high school and college graduates. And it could accomplish economic growth while not killing the environment.

Where the plan for an industrial policy all goes to hell is the way our political system works. There is a huge lobby, for example, representing private healthcare insurance companies, an industry whose only mission is to serve as a gatekeeper to decide who gets treated and who doesn't. No other industrialized country has this industry the way we do, and none want it. We have powerful members of Congress who despise labor unions and will vote against a cure for cancer if it stands to benefit a union. We have members of Congress who have taken a strange pledge to an anti-tax lobbyist in Washington not to raise any tax anywhere, so that conversations about real policy never even take place if there is a new tax on the table.

Washington seems incapable of thinking about more than one thing at a time. One day they lock horns in a caged death match over healthcare. Another week, they go into the snake pit of energy. A month later there is a hearing about small-business regulation. But there is no whole context in any of these discussions about how all these things work together, play off one another and are interconnected. Everything is a one-off. Everything is ad-hoc.

And so what we end up with are dysfunctional laws and policies about energy, tax policy, trade, healthcare and environmental protection that have nothing to do with one another and work at cross purposes.

This could change if there was a movement to establish what the White House doesn't want to utter and the Congress doesn't understand: an actual industrial policy.

If any members of Congress or the administration want to know what it looks like, take a sabbatical and spend some time in Munich, Shanghai or Tokyo. And by all means, get out of Washington for a while.

Grand Blvd. is a weekly column about cars from David Kiley. For more of his writing, and everything about cars, head over to AOL Autos.