It sure is nice to see Michigan in the spotlight of national politics, isn’t it? Before the economic downturn all that anyone ever noticed was Detroit’s annual battle with St. Louis to be recognized as the most dangerous city in America. Now, suddenly, it is Motor City, U.S.A. again and the center of one of the biggest policy debates this fall.

Let’s start with the background: We are in a recession. Every major industry is dealing with limited availability to credit and a deep drop in consumer spending.

But Detroit was ailing long before the recession began. For decades, foreign competitors have taken market share from General Motors, Ford and Chrysler by building more efficient, higher quality and more affordable cars. Detroit turned to very profitable trucks and SUVs to make money. This worked relatively well until gas prices spiked earlier this year and sales of those gas-guzzlers plummeted. The fall-off in consumer spending this fall was just the final push toward a cliff that the Detroit Three had been marching toward for a long time.

Now, bankruptcy is a real prospect for two of the Detroit Three. They are hemorrhaging cash at incredible rates — rates that they cannot sustain beyond 2009, maybe earlier. The consequences of a G.M. or Chrysler bankruptcy on the rest of the economy could be drastic, not to mention the effect that massive layoffs would have on Michigan.

Back at the beginning of that story lies the root of this problem: The biggest difference between the overhead costs of foreign and domestic car manufacturers is health insurance. Our companies pay a lot; theirs do not (both Japan and Germany provide state-sponsored health coverage). As a result, foreign companies are able to spend more on research and development and offer cars with more features for a smaller price.

As solutions float around about how to save the Big Three, this discrepancy is often ignored. Take, for example, one solution that has been garnered a lot of recent attention.

Last week in The New York Times Mitt Romney, former governor of Massachusetts and a “son of Detroit” advocated, of all things, bankruptcy for Detroit. By his logic, the worst thing we could do to the auto industry would be to give it money — that would only perpetuate the problematic business models they have been maintaining for decades. If we let them go broke, they would be able to tear up their labor agreements and begin focusing on long-term goals instead of quarterly profits.

The blame, Romney suggests, lies primarily with the industry’s labor and pension agreements, which are too generous and keep domestic automakers from competing with their international counterparts.

And he’s somewhat right: When you factor in benefits and pensions, we have had some of the best-paid workers in the world. But that should be a point of pride. The labor unions cannot be entirely blamed for what is a systemic problem.

Universal health care, while surely raising taxes, would also take a significant burden off of our automakers who, either through a genuine concern for their workers or poor negotiating skills, are currently putting a lot of money toward pensions and health insurance costs. Having universal health care would greatly change the dynamic of labor talks and would most likely end up saving the company money, allowing them to produce better quality vehicles at lower prices.

Romney’s suggestion that we let Detroit go bankrupt is not completely illogical — the Big Three has needed repair for some time and instead of trying to patch it up with cash infusions it may be best to let it go down and see what is rebuilt in its place. But this strategy is far too risky and would inevitably result in huge job losses. Shifting the burden of health care costs to the government would also force the industry to re-organize itself without resorting to massive job losses.

House Speaker Nancy Pelosi is working hard to ensure that no bailout money is sent to the auto industry until a comprehensive plan is presented to show just how they intend to revise their business models. With strict oversight of government money lending, the Big Three will receive just the boost they need to make it through these beginning stages of our recession.

But what the Big Three really need is a level playing field with foreign competitors, and they won’t have that until we have universal health care. Recession or not, our automakers are failing and they need more than a few billion dollars to change direction.

Bryan Kolk can be reached at beakerk@umich.edu.

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