Are bailouts of industries a good thing? Probably not, generally speaking. On the other hand, when in a financial crisis like the one facing America, they may be necessary. I find it peculiar that the financial “industry” (they manufacture or produce no goods; only facilitate production by others) could relatively easily obtain a $700 billion bailout but the auto industry has difficulty getting a dime. Note that should GM and Chrysler fail, it will have devastating impacts across the economy due to not only the umemployment of the car maker’s personnel but also collateral damage to all the companies that provide goods and services to the car makers.
Republicans in the Senate insist that the UAW give up wages and benefits that exceed the non-union labor costs at other car makers in America. This is nuts. Labor costs do make them less competitive with other companies. They were able to get over that handicap until now through the revenues they received from selling big SUVs, trucks, etc. Why can’t they do so now? Consumers are unable or at least worried about buying cars because of the financial crisis. Sure the car makers should have went with less expensive, more fuel efficient vehicles a long time of go. But if buyers didn’t want those oversized gax guzzlers, GM and the others wouldn’t have been able to sell them. Now that the buyers are unemployed, the price of gas jumped through the roof, and financing is tough, people are not buying cars. Not only that, but the car dealers can’t get inventory financing due to the financial crisis. The bottom line: the financial crisis is more of a factor in the car maker’s situation than the labor costs or their own management decisions–unlike the financial industry, Wall Street and the banks. It was the risky, greedy, management decisions of the latter that prompted the crisis and the need for a bailout. With unclean hands, they get relief but the car makers don’t?! Unbleepingbelievable!
Tags: auto bailout, financial industry, gas guzzlers, labor costs, Republicans
December 14th, 2008 at 10:23 pm
Jack,
You properly object to the bailout of the financial industry, but seem ready to support the same for an automobile industry that can’t seem to produce vehicles that Americans want to drive. I wonder how much you are willing to donate from your personal assets to the Detroit automakers?
I suspect that the answer is “little to none.” What gives you (or anyone else) the right to give away money that does not belong to you. Any and all of these corporate welfare programs are giving away the not-yet-earned assets of the not yet born.
You are old enough to remember the claim that we don’t have to worry about the national debt because we owe it to ourselves. Well, now we owe it to China among others and are getting deeper in the hole every year.
Anyway, if the culprit is the banks alone, why aren’t the foreign makers feeling the pinch as much as our own carmakers? The Japanese economy hit the skids in the early 1990s and is yet to completely recover.
And how does the outrageous payments to the financial sector justify similar treatment to other areas of the economy? Many are wondering when it will be their turn to receive a handout. It’s bad enough to exist on handouts. But handouts from government which produces nothing must inevitable be ripped off from honest, hardworking citizens.
You are quick to realize that the financial beggars produce nothing, why can’t you see that is even truer of the government that is dishing out what is looted from taxpayers?
I wouldn’t be so quick to blame car maker’s and dealer’s troubles on the financial climate. If it were true (and I don’t believe it for a minute), the financial bailout would be a boon to the auto industry. As for lack of inventory financing. I live in a rather depressed area and the car lots are full of cars, so I don’t think these guys are looking to add inventory.
The fact is that American auto makers are slow learners. Why? I don’t know.
Bob
PS I’ve been waiting for your reply to my last post. I am interested in hearing what you have to say.
December 18th, 2008 at 1:07 pm
Bob, I obviously don’t have the right to give away anybody else’s money and am not happy at parting with my own. On the other hand, I continue to pay taxes every year both to avoid going to jail and because it is part of the price of living in America. I see the automaker situation as being analogous to a patient with a weakened immune-system–easily susceptible to a virulent disease that comes along. In this case it is the financial crisis. Are they blame-free? Far from it. Nonetheless, their death throes will affect me and you. Right now there are states where unemployment compensation funds are near depletion. Those funds come from fees/taxes imposed on employers. Once gone, it will be general fund revenues (i.e., taxpayers supporting them). There are middle class people who have never been on welfare getting on it now. So, like the (Pennzoil?) ad of a few years ago, it is pay me now or pay me later. Let’s not forget that we are talking about a loan here; not a complete give away of taxpayer dollars to the automakers. For a more comprehensive perspective that makes my case, read Eugene Robinson’s op-ed from this past Sunday’s Washington Post here.
December 21st, 2008 at 1:36 pm
Jack,
Eugene Robinson’s arguments are full of holes.
Ad hominem argumentation seems to be his forte. Because the Senate didn’t cough up the funds the Republican White House demanded, he holds that they are suicidal lunatics (and he equates that with Republicans and “free-market fundamentalists).
Republicans in states with foreign car assembly plants are trying to scuttle the handout to strengthen their political position, while Republicans in other states are acting to weaken the party in those areas. Come on, now. Does this argument make any sense at all?
For Robinson, “renegotiating labor contracts qualifies as meddling.” But pumping our grandchildren’s assets to moribund automakers is not? Or, if it is then why is one type of meddling OK and another is not? Very inconsistent, Mr. Robinson.
He also doesn’t seem to know or acknowledge that the “housing bubble” was created by a government focused on keeping the votes of homeowners and the real estate industry. You could call that a pre-bailout.
And forget about the loan fantasy. If the automakers had good prospects, there are always investors looking for growth. It is precisely because the prospects of the auto industry are very bad that they are looking for a government handout.
I imagine similar arguments could have been made to bail out companies like US Steel or numberless garment and shoe manufacturers. We have also lost our piano industry and countless others. Where would you draw the line?
By the way, Robinson’s piece does not seem to be an op-ed. His Washington Post email address suggests that he is a staffer.
Robert