There seems to be a growing consensus in Washington that the federal government needs to bail out America’s auto industry. The Wall Street Journal reported today that Sen. Harry Reid (D-NV) and Rep. Nancy Pelosi (D-CA), in a letter sent Saturday, “formally requested that Treasury Secretary Henry Paulson consider giving ‘temporary assistance to the auto industry‘ using money originally appropriated to shore up the banking system.”

President-elect Barack Obama also supports this position. During an appearance on CBS’ Face the Nation, Obama’s Chief of Staff Rahm Emanuel said that “there are existing authorities within the government today that the administration should tap to help the auto industry.”

If the auto industry bailout occurs, two things need to happen. First, it needs to have much stronger oversight than the bank bailout did. As CQ noted, “reports continue to circulate about the banks potentially hoarding portions of the $250 billion Treasury has offered to invest in exchange for senior preferred stock, or using the money for purposes other than lending.” Sen. Chris Dodd (D-CT) pointed out, “That was never the intent; that’s an abusive use of taxpayer money.”

More importantly though – as Pelosi and Reid said – “federal aid should come with ‘strong conditions,’ such as requirements that car makers build more fuel-efficient vehicles.” Bill Scher at OurFuture writes, “With the auto industry in dire straits, we taxpayers have maximum leverage to demand the cars necessary to help lower energy costs, cut carbon emissions and reduce our dependency on foreign oil.”

As John Podesta, President and CEO of the Center for American Progress Action Fund – who is currently on leave to head the Obama transition – said on CNN’s Late Edition:

I think we’ve got to stabilize the current situation, but we also have to build for a stable long-term path so that they’re producing the kinds of efficient vehicles that we need in this country.

Podesta added that “the auto industry directly employs about 250,000 people and if you think about the ripple effects, they are the backbone of our manufacturing economy.” Indeed, according to estimates, one in 12 U.S. jobs is tied to car manufacturing, and a bailout of the industry could help boost the U.S.’s ailing manufacturing sector.

In a statement, Dave McCurdy, president and CEO of the Alliance of Automobile Manufacturers, said that the auto industry, if rescued, “will be on the leading edge of the new energy economy“:

Our engineers and designers continue working toward the next technology breakthroughs that will even further reduce oil dependence and carbon dioxide emissions. Our work toward meeting a national solution could create the biggest wave of ‘green jobs’ our nation has seen.

This is a promise that the next administration and Congress need to ensure the auto industry keeps.

Over the weekend China unveiled a “massive” $568 billion stimulus plan to “loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.”

The announcement sent markets around the world soaring as it eased fears of a huge dropoff in Chinese demand.

This emergency spending by the Chinese government will invest “the equivalent of almost a fifth of its gross domestic product last year on infrastructure.” The $568 billion is approximately 18% of China’s $3.3 trillion 2007 GDP.

An equivalent investment by the United States government in infrastructure and emergency spending would cost over $2.4 trillion, or 18% of the United States’ $13.8 trillion 2007 GDP.

This is 15 times the size of Speaker Pelosi’s proposed two-part $160 billion stimulus, and 12 times the size of Center for American Progress’ “Green Recovery” proposal that would invest $200 billion in green infrastructure and alternative energy priorities over two years.

In a column today, Nobel Prize winning economist Paul Krugman points out that much of the failure of FDR’s New Deal stimulus was that it was not large enough.

He writes, “My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It’s much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little.”