Drawing the line (update) Posted by: McQ
on Friday, November 14, 2008
Or perhaps a better question is, in terms of bailouts, where do you draw the line?
The NY Times is reporting that hopes for an auto bailout are dwindling and Sen. Dodd acknowledges that Republicans have the votes to block such a bailout.
But then there's Sen. McConnell signaling he's willing to go along with such a bailout using funds allocated to the auto industry differently (they were given loans to fund retooling for more environmentally efficient vehicles).
And there's little doubt that once Obama is inaugurated, such a bailout will indeed be passed. The only question, apparently, is will that be too late for GM?
That brings us to where lines should be drawn. Most of us who have opposed the bailouts from the beginning drew the line there. We've explained the moral hazard associated with the bailouts. We've pointed out the difficulty of saying "no" once you've said "yes". We've talked about where this will most likely lead. And here we are.
I see no end to this personally. It will extend the pain (the downturn) for years. It is also clear, watching Paulson twist and turn the other day trying to explain why he's not going to do what he said he was going to do with the $700 billion, that despite all the high-flown rhetoric, these guys haven't a clue. They're shooting in the dark and are on track to spend 5 trillion dollars they don't have.
Where is the line and how does one draw it now? Most likely, as the Heritage Foundation says, there will be little if any line drawing:
Of course, once you’re bailing out banks and automakers, there will be no justification for excluding other big businesses from feeding at the taxpayer trough. Airlines, hotels, construction, computers — all these industries are hurting as consumption retracts, and all of them have just as good a case that they need to be bailed out to protect jobs as the auto industry. Then there are the spendthrift states like California and New York that all want federal money not to mention all the major U.S. cities who are equally deserving. The bailout parade has no end.
"We must recognize that government intervention is not a cure-all" ... "Our aim should not be more government," ... "It should be smarter government."
"In the wake of the financial crisis, voices from the left and right are equating the free enterprise system with greed, exploitation and failure," Bush said.
"It is true that this crisis included failures, by leaders and borrowers, by financial firms, by governments and independent regulators," Bush said. "But the crisis was not a failure of the free market system. And the answer is not to try to reinvent that system."
"At its most basic level, capitalism offers people the freedom to choose where they work and what they do ... the dignity that comes with profiting from their talent and hard work. ... The free-market system also provides the incentives that lead to prosperity — the incentive to work, to innovate, to save and invest wisely, and to create jobs for others."
"Free-market capitalism is far more than an economic theory. It is the engine of social mobility — the highway to the American dream. And it is what transformed America from a rugged frontier to the greatest economic power in history ...
But the point of his words are lost in the cacophony of the economic turmoil and political upheaval in the US and the warning that abandoning or crippling that powerful engine is the last thing we should do will go largely unheeded,much to our detriment.
Again, Heritage points out where we're headed and pretty much asks the salient question:
All of these bailouts come at a heavy cost, and not just to the American taxpayer. Just like the mafia that wants to “wet its beak,” government money comes with government interference. Hence Obama’s promise that any money for automakers comes with an auto czar “who would have the authority to push for reforms.” With liberals in power in Washington, bureaucrats will be able to decide what kind of car you drive, how much you should pay for your house, and what medical procedures you can and can not have. What’s the difference between us and China again?
Not much when you consider the level of intervention and obvious interference that portends (and auto czar?!).
Three big city mayors asked the federal government Friday to use a portion of the $700 billion financial bailout to assist struggling cities.
They sought help with the pension costs, infrastructure investment and cash-flow problems stemming from the global financial crisis.
The mayors _ Michael Nutter of Philadelphia, Shirley Franklin of Atlanta and Phil Gordon of Phoenix _ made their request in a letter to Treasury Secretary Henry Paulson.
The three mayors proposed providing loans to help cities pay pension costs. They also want $50 billion in loans for investment in infrastructure, and additional one-year loans to cities unable to borrow cash because of the tight credit markets.
A trillion dollars to a financial industry that knew what it was getting into, rewards itself with high salaries, proceeds to sit on their bailout money instead of getting credit moving again, takes business retreats with the money, its unclear if the money will be paid back, and gets shielded by Paulsen about just exactly where the money is going. This is bad.
The auto industry is looking for 1/20th to 1/40th of that bailout, not new money, has implimented reforms, where the money goes will be obvious, and if they survive will pay that money back. As bad as the financial bailout is, this must not happen.
If we were talking new money, I’d say you’d have a philosophical point. But even if the 30 year old cliches where all true, they are no slimier or more irresponsible the financial industry.
I’ve heard no reason why the financial industry is more deserving to keep sitting on their money than the auto industry is to get some of it.
I’ll vote out any representative or senator who supports financial subsidies for an industry that pays people 3 times what I make, with benefits I can’t even grasp, just to make a product few people would buy (except for charity cases).
The US steel industry makes more steel today than it did in 1980, and this wouldn’t be the case if we had to pay astronomical costs for a product. Let’s use that as a way to make the US auto industry as strong as it was in the 60’s.