LaRouche's Proposed Legislation for Rescuing the U.S. Auto Industry

PRESS RELEASE

LaRouche's Proposed Legislation
for Retooling the U.S. Auto Industry

Aug. 3, 2006 (EIRNS)—The following draft legislation was commissioned by Lyndon H. LaRouche, Jr., and is being circulated by LaRouche Political Action Committee activists on Capitol Hill and elsewhere as a model for emergency Congressional legislation.

1. Title: The Economic Recovery Act of 2006

2. Findings:

CONGRESS FINDS THE FOLLOWING:

Under the impact of "globalization," there is a massive and ongoing loss in the machine-tool capabilities of the U.S. economy. This danger is centered in the accelerating "outsourcing" and shut-downs of plants in America's most important and versatile machine-tool industry, the auto industry. 80 million square feet of auto capacity being is closed and machinery auctioned off over 2006-08, more capacity lost than in the last 30 years combined. 60 million square feet of aerospace/defense capacity are closed and machinery auctioned off since 1990. U.S. consumption of machine tools is only 60% of the 1980 level; of that consumption, 60-70% are imported machine tools; much of this stock, in turn, is being destroyed or sold off overseas as plants are closed; machining vital to national security, including defense and aerospace production, has been and is being outsourced.
The machine-tool sector is the core of an industrial economy where scientific and technological ideas are turned into new economic reality. If the U.S. auto-manufacturing industry is destroyed, the U.S.A. becomes a virtual "Third World" nation overnight. The nation's machine-tool-design capability, most of which is tied up in the U.S. auto-manufacturing and supply firms, is lost. The loss of the tool-making and closely related capabilities of that sector of industry would be a strategic disaster of incalculable, chain-reaction consequences, within our nation, and also the world at large.

The loss of auto plants means an economic disaster, approaching ghost-town proportions, for what are already highly vulnerable entire towns, counties, and cities, even states of the union.

The loss of employment of that machine-tool design segment of that part of the labor-force, means many times that number of skilled and unskilled employees out of jobs.
There were 250,000 net jobs lost in the automobile manufacturing/supply sector from 2000-2005, leaving a total employment at end of 2005 of 1,090,000. During 2006, there have been announced the shut-down/sell-off of 67 auto plants by major U.S. automakers and the biggest parts-supply companies alone, occurring and to occur in 2006-08, with the direct and indirect loss of another 250,000 net jobs occurring and to be expected in the auto sector.
We must accept the reduction in the number of automobiles produced by U.S. auto-makers, but replace that work immediately with a switch to other categories of technologically very high-grade products which the auto industry's machine-tool capacity is uniquely qualified to design and produce. The alternative mission for this purpose is chiefly in the category of needed, new economic infrastructure.
The United States suffers a worsening crisis in its public infrastructure. This breakdown is more and more painfully clear: in the failure of water control, transportation infrastructure, and power infrastructure in the Gulf States during Hurricanes Katrina and Rita; in the long heat-blackouts of hundreds of thousands in major cities in Summer 2006 due to failure of obsolescent power distribution networks and inadequate power capacity; in the lack of refinery capacity and dependence on oil imports; in the spread of fresh-water crises throughout the Western half of the country in the past decade.

The United States lacks railroad and mass transportation infrastructure, with shrinking air travel grids; its electric power infrastructure is falling behind under deregulation; it has lost fossil water and fresh water supplies for irrigation, and has inadequate drinking water supply in rural regions; its water control—especially upstream dams—and river navigation infrastructure is obsolescent; it has insufficient port and landside port-rail infrastructure; and insufficient hospital infrastructure for any serious public health crisis. This is given only a minimal estimate in the American Society of Civil Engineers' "infrastructure report card" which estimates the need for $1.7 trillion in investments merely to repair and replace obsolescent and broken-down infrastructure.
1. Each $1 billion of Federal funding invested in new, modern infrastructure creates approximately 50,000 jobs and $6 billion in economic activity.
2. States, cities, transit authorities, airport authorities, and other entities have thousands of ready-to-go infrastructure projects, which will create long-term capital assets for the United States and which can help stimulate the Nation's economy.
Action, by the U.S. Federal government and others, is urgently needed, to prevent an across-the-board collapse of not only the U.S. auto industry, but the counties, towns, cities, and states, and their people.

3. Purposes:

CONGRESS ADOPTS THE FOLLOWING PURPOSES:

To prevent the wholesale loss of the U.S. auto industrial sector, with its vital, large-scale and versatile machine-tool capabilities and skilled workforce; since it is rapidly being lost, Congress must act with speed and force.
To reverse by Federal investments the neglect, decay, and deregulation of critical economic infrastructure of the United States; and to foster the building of projects of a new national infrastructure using 21st Century technologies of transport, power, navigation, water purification, and others.
To preserve a national strategic machine-tools reserve and associated skilled workforce, from among auto industry plants otherwise being idled and discarded and their production outsourced by the automaking companies.
To save skilled and industrial jobs, and to create new such jobs, by retooling these idle plants and capacity, to machine and produce the bill of materials for infrastructure projects in power, rail, transport, water management, and energy; to create many tens of thousands of semi-skilled and unskilled construction jobs indirectly through the construction projects involved in the building of new infrastructure.
Congress adopts for these purposes, the model of functioning of the Reconstruction Finance Corporation (RFC) and its amendment, the Defense Plant Corporation (DPC) Act of 1940, by which thousands of auto and other industrial plants were retooled for—at that time—defense production. Half of all auto industrial capacity was idle at the time of the creation of the Defense Plants Corporation in June 1940.

4. Titles:

Title 1: Federal Infrastructure Plants Corporation. Creates a Federal public corporation, the Federal Infrastructure Plants Corporation, to assume control of, and operate—directly or by contract—the discarded and unused plant-and-equipment capacity of the automobile/auto supply sector; and other unused industrial facilities, military base, or shipyard facilities.

Title 2: Infrastructure. The Corporation shall fund and carry out, and may aid other public agencies or corporations and state or local government agencies in carrying out, projects of new, modern economic infrastructure including a) passenger and freight rail transportation, including regional and national high-speed rail corridors, magnetic-levitation trains on priority routes, and light-rail and mass transit systems; b) electric power production, including third- and fourth-generation nuclear power plants, and electric power distribution systems; c) fresh water purification and desalination infrastructure, d) modern water-control and water-management systems; e) ocean ports and inland navigation freight-transport systems; f) hospitals and public health infrastructure.

Title 3: Powers.

The Corporation is authorized 1) to produce, acquire, and carry strategic machine tools and other industrial machinery needed to produce bill of materials for infrastructure projects; 2) to purchase and lease land, to purchase, lease, build, and expand plants, and to purchase, and produce equipment, supplies, and machinery for the manufacture of bills of materials for new economic infrastructure; 3) to lease such plants to private corporations to engage in such manufacture; and 4) to engage in such manufacture itself.
The Corporation may make loans to, or purchase the capital stock of any corporation for the purposes of Title 3A.
The Corporation is further authorized to contract with state or local agencies wishing to use idled auto plants and machinery for infrastructure projects, subject to Title 3D; or to contract with firms wishing to lease auto plants and machinery for such contracts, subject to Title 3D; or to purchase auto product lines and auto-supply product lines where necessary to prevent loss of industrial employment to foreign producers.
Contracting and Employment: The state, local agencies, or contractors are required 1) to maintain all plant facilities open and in repair, and at least maintain work levels, b) to provide preferential hiring of members of the pre-existing workforce who want to continue to work at the plant facilities, c) to be subject to Davis-Bacon rules for Federal contracting, d) to spend 90-95% of issued funds within two years of commencement of the project.

Title 4. Engineering Survey of Plants and Facilities. An engineering survey of these plants and other facilities shall be carried out by the U.S. Army Corps of Engineers (USACE), to determine and plan for their potential employment in producing the bills of materials for modern infrastructure projects.

Title 5: Board. The Corporation's Board of Directors shall include the President; the Secretary of the Treasury; the Deputy Secretary of the Army for Civil Affairs; and the Secretaries of Transportation, Agriculture, Energy, Education, Labor, Housing and Urban Development, and Health and Human Services.

Title 6: Funding of the Corporation. The Corporation to be provided a capital-budget stock by issuance of 2%-interest, long-term special-purpose bonds by the Treasury to the Corporation, for discounting at Federal Reserve banks. The corporation to be under the authority of the Secretary of the Treasury.

The authorization of issuance of credit from the Treasury, through issue of special-purpose bonds to this Corporation, is up to a limit of $200 billion in each of Fiscal Years 2007 through Fiscal 2011; and $300 billion in each of Fiscal Years 2012 through 2016.