While we all have our eyes on Bernake, Paulson, Bush and $700,000,000,000,000.00 what is another $25,000,000,000,000.00 for some automakers. There were signs of distress and as the Financial Times reports (article) they have been lobbying Washington for sometime for a “loan”.
The continuing resolution provides funding for $7.5bn, which is the estimated subsidy on the loans – in other words, the cost to the government of providing them at well below market rates.
Well it is a loan after all so we are only giving them $7.5bn instead of $25bn because they have to pay it back. Where I ask did we get in the business of bailing out private industry? No it isn’t anything new unfortunately.
Most American cars are crap. They are ugly, fall apart, and aren’t worth the steel they sit on. Would I choose to spend my tax dollars on helping out a flailing industry? If the auto industry didn’t foresee higher gas prices, and thus a slowing of SUV sales well then they deserve to go out of business.
I’m leaving out the part about the autoworker. This isn’t about Ford or GM it is about the laborer who would lose their job. I think I’m going to have to do an article about Econ 101, but from and Austrian and NOT Keynesian perspective. All we are doing by subsidizing and bailing out all these corporations is encouraging mediocracy and unnecessary risk taking.
If I started an auto company and nobody liked my cars then I go out of business, my employees find other jobs, and life moves on. Instead we take taxpayer dollars that we have no choice in providing to the government and prop up failing industry. It is an easy sell because as Shelly Lonbard, and analyst at Gimme Credit, a corporate bond research company, told clients this week that
“blue collar workers are more sympathetic victims than ‘rich’ investment bankers. So it’s easier to defend loans designed to save close to 100,000 jobs in the shrinking US manufacturing industry.”
Question: Why is the US auto industry shrinking?
Answer: Labor unions, pension benefits, poor products, and government subsidies. Please add to this list in the comments as it isn’t all inclusive.
Who is next? Biotech, Johnson and Johnson, Microsoft, Amazon, Etrade… let’s just sprinkle some money to anyone who lobbies enough. I’m sick.