Stop Bailing and Let ‘em Sink
The CEOs of America’s Big Three flew to DC this week (in their corporate jets) to ask for a combined $25 Billion in “bailout” money ($10 billion to $12 billion for GM; $7 billion to $8 billion for Ford; and $7 billion for Chrysler).
Catastrophe, doom and gloom will befall us all, of course if any one of these companies fail. GM has said that without government aid, the company would run out of operating funds as early as early 2009.
But the electorate and a few conservatives have said “Enough”. Even some politicians are reading their emails – Sen. Jon Tester (D., Mont.) said the idea of additional government intervention isn’t popular with voters: “People in Montana are experiencing bailout fatigue”.
Read these articles as to the sorry state of the American automobile manufacturing industry, how it got to this point, and the losers and winners of any proposed bailout.
At the very least, the bailout of the auto industry
- Aligns liberals with big business. That is the upshot of Obama’s proposal for a $50 billion bailout of the Detroit automakers. It is actually a plan for de facto nationalization which will turn the Big Three into permanent wards of the state whose purpose is not to make a profit but to serve the “social goals” set by government. (Pelosi wants “green cars”).
- Aligns fiscal conservatives with the taxpayer. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk
- Will not serve the companies or taxpayers. Chapter 11 Bankruptcy is the only viable option, and exists for just this situation. GM as it is cannot survive without long-term government life support. If it gets that support, it can’t change enough and won’t change fast enough.
- Perpetuates the demise of the UAW. RON GETTELFINGER, the president of the United Auto Workers, is taking a hard line against any talk of wage or benefit reductions for union members as he joins with Detroit automakers in the quest for emergency federal aid to rescue the Big Three. “The focus has to be on the economy as a whole as opposed to a UAW contract,” he said recently, declaring that the industry’s problems are beyond the UAW’s control.
Comments
By Unus on November 19th, 2008 at 3:57 pm
So here’s an Alice in Wonderland twist on logic: the US taxpayer should provide $25 billion to a company that already blew through an intial $25 billion, otherwise the “societal costs” would be “catastrophic” for the industry and economy.
And, only in Wonderland, will the failure of one company lead to the collapse of it compeitors. Ask Toyota if they want Ford or GM to be bailed out??
Mock Turtle: Well, I never heard it before, but it sounds uncommon nonsense.
By cumbersome on November 24th, 2008 at 10:00 am
Although I’ve never read the book ” All,I need to know, I learned in Kindergarten”, the title sounds appropriate for personal life and business.
When will American companies get it right? When they know there will be no
one to bail them out. As we mature through life, we learn from our mistakes.
If our parents (government)coddles us(corporations)and fix all our problems, we will turn into whining, spoiled adults (corporate jets, lavish business trips) through-out our lives.
Let them take a hit and grow stronger from their experience. Change would involve re-negotiating with labor unions. We cannot continue to trade in an international community and “live high on the hog”, while our trading partners
live in grass huts. A more level playing field is inevitable. Obama can spew all the rhetoric he wants about losing jobs to foreign countries, but it will continue to happen unless we stop trading, open air-polluting factories, erect off-shore drilling rigs, tear-up the landscape for mining of raw materials, etc. And that ain’t gonna happen.
So lets keep trading and, hopefully, we will help pull them up, rather than them drag us down.
By Prometheus on November 25th, 2008 at 3:22 pm
Cumbersome – Thank you for your thoughtful post. This is just the type of cogent dialog this blog seeks.
I made a trip to my local taxpayer-funded library to pick-up a copy of Robert Fulgram’s book, “All I Really Need to Know I Learned in Kindergarten”. Thanks to my neighbors for making the book available – please see Treasury Secretary Paulson for your bailout.
As to your comments: 1) “When will American companies get it right? When they know there will be no one to bail them out.” What is being perpetuated by the current and soon-to-be administration is a moral hazard of tremendous scope. Moral hazard is an economic concept founded in the insurance business. The premise is that people will take greater risks, or engage in more risky behavior than otherwise, because they believe they will not bear the full consequence of their actions. That is, another party will bail them out. Sound familiar? As to your comment, there is no evidence that anyone in this government or the next fully realize the long-term impact of their actions. Either that or they fully realize the consequences of their actions and are overtly trying to co-opt a broad swath of the US economy. Scary thought – read (or of course re-read, Atlas Shrugged) and correlate the terms of Directive 10-289, to the current path our government is pursuing. Some bloggers have already taken up this watch.
I also agree with your comments about international trade policies and practices which offer to “pull-up” others, with a policy of economic growth. It seems for now though, we need to right our own ship (at least before it gets hijacked by Somali pirates).
Keep posting and spread the word about this blog.
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