Should US save carmakers?

Should the US government step in to bail out ailing American industries? President Carter says "yes," at least where the deeply troubled automobile industry is concerned.

Senior economist Arthur F. Burns disagrees, telling reporters at breakfast that "if [US firms] cannot compete successfully, they don't deserve to exist."

"I don't want to bring [special help] to the automobile industry," said Dr. Burns, former head of the Federal Reserve Board and now chairman of the newly formed Committee to Fight Inflation, a glittering constellation of former US Treasury secretaries and other mostly Republican luminaries.

Mr. Carter, meanwhile, entering the lions' den of Detroit -- a major center of unemployment and site of next week's Republican nominating convention -- pro posed a "historic" compact between government and the nation's troubled carmakers.

The President, stopping briefly in Detroit on his way to Japan, said he wants changes in future automotive regulations that would, he claims, release $500 million in cash for domestic carmakers.

He proposes major loan guarantees for car dealerships, many of which either have closed or struggle against bankruptcy, plus special aid for cities with high automobile-related unemployment.

Finally, said Mr. Carter, he would ask the International Trade Commission for an accelerated ruling on a petition brought by the United Automobile Workers to limit imports of foreign cars.

Nearly one out of four cars sold in the United States now is made in Japan, principally by Nissan (Datsun), Toyota, and Honda.

Until now, the White House and its trade officials have opposed any limits on imports, stressing instead the need for Japanese carmakers to open manufacturing plants in the United States.

Dr. Burns expresses sympathy for US workers thrown out of jobs, but sees the plight of the automobile industry as symptomatic of deeper failures within the American system.

On a recent trip to Japan, he said, he heard, time and again, something "shocking."

Japanese manufacturers told him that they "hesitate to build automobile plants in the United States, for fear they could not build the same high-quality cars in the US that they do in Japan."

"The great American public," said the adviser to several past residents, "has become the lobbyist for the Japanese." Americans buy Japanese products because they find them to be of top quality.

Somehow, Dr. Burns adds, the "work ethic in the United States must be restored." Pumping special government aid into ailing industries is, in his view , not the way to go about it.

Dr. Burns opposed, for example, the government's $1.5 billion loan guarantee program for Chrysler, the largest government aid package ever tendered to an American corporation.

Allocating that much credit to Chrysler, backed by US Treasury bonds, said Dr. Burns, means that other "well-managed, successful enterprises [as opposed to Chrysler's performance] either are denied credit or can get less."

On restoring the work ethic, the former Fed chief admits to having no good answer. As a beginning, he would establish productivity councils "factory by factory, shop by shop, office by office," where management and labor representatives could meet, at the working level, to discuss how to improve their output and meet their common needs.

On another red-hot political topic -- a tax cut -- Dr. Burns believes any tax reduction this year "would be premature."

Such action, he says, "would attack a short-term problem -- unemployment brought on by recession -- and would not address the more serious long-range problem of inflation."

The anti-inflation committee headed by Dr. Burns calls for a "scheduled reduction in business taxes in each of the next five to seven years," small at first, larger later on.

Such a program, said Dr. Burns, "would not nourish inflation," but should foster productivity. While he would support foster productivity. While he would support faster tax writeoffs on buildings and equipment for business, Dr. Burns prefers a steady lowering of the corporate income tax rate.

So far, he said, his committee has not tackled the question of when, or how, to cut personal income taxes, despite families that are experiencing a growing tax burden in two ways -- higher "bracket creep" due to inflation, and higher social security, or payroll, taxes.

"Our country," said Dr. Burns, "is experiencing difficulties [chiefly built-in inflation and productivity decline] that force priorities in shaping a tax cut." Later on, he adds, he would look sympathetically at the case for a personal income tax cut.

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