I don't like rewarding the dumb and greedy policies of the big auto companies - for example, churning out huge numbers of gas-guzzling SUVs, when it was clear Americans were wisely getting tired of them - but, as many people have noted, letting the big three auto companies go under would put millions of Americans out of work, with destructive ripple effects all through the economy.
I thus think our government has no choice but to lend the auto companies the billions they need to stay in business, but with the following strings, to make sure the bailout helps those who deserve the help (the American people) and not those who don't (present management).
1. Fire the top management, with no golden parachutes.
2. Their replacements should make at most 1/10 of the current top exec salaries (which are in the multi-millions of dollars).
3. Lower the price of new autos to consumers, by at least 20-percent.
4. Provide tax credits for purchase of all new autos, which would offset state sales taxes. (Or, if all the states are willing to play ball, do away with the state sales taxes on autos, period.)
4. Insist on manufacture of more hybrids, and get them out to consumers more quickly.
I'm sure there could be other strings, and the ones above could be more effectively formulated. But you get the picture: Give the loans to the auto companies, but make sure the American people, not the execs who got us into this mess, truly benefit.
4 comments:
Stop the bailouts - central economic planning does not work! We had partial central economic planning prior to the crisis and that caused our current troubles, so more of it won't work.
Another bailout - this time of the car companies - makes no sense whatsoever. I predict, however, that once again the politicians will give in to the lobbyists and push it through.
Supposedly we needed the $700 billion dollar bailout of these worthless assets or the sky would fall, but then the treasury decided to use it for something else.
The market is demanding the liquidation of debt and letting prices fall. House prices need to fall so people who have saved and who qualify can buy them. To keep them artificially high is price fixing - that's what socialism is all about.
Here we have created this problem by price fixing with the interest rates, and now we are price fixing the assets to try and maintain an unviable system.
There are tough times ahead. I recommend watching the videos of Peter Schiff - he predicted this whole crisis years ago in his book and in TV interviews. They laughed and laughed as he predicted the housing bubble, but now they realize all of his predictions are coming true.
Watch this (a video compilation of peter in 2006-2007):
http://www.youtube.com/watch?v=2I0QN-FYkpw
And this (peter's predictions of the coming collapse of the dollar in today's CNBC interview):
http://www.youtube.com/watch?v=pGHODRNJqRo
I don't know enough about industrial economics to know if we should follow Mitt Romney's advice and let the automakers face bankruptcy and reorganization -- like any other company that's mismanaged and hits hard times -- or if we should bail them out.
Another alternative is to take the bailout billions and invest them in public transportation projects instead. Wouldn't it create thousands of high paying engineering and construction jobs to make high-speed rail links between San Diego, LA, San Francisco and Sacramento?
What about a real high-speed network linking Boston to New York and DC, instead of the semi-fast Acela tracks that have never performed well?
Why not invest a few billion into, say, Chicago's elevated train system? Or to making a high speed connection between JFK and Grand Central?
-- Zachary
I'm definitely in favor of big investments in real high-speed rail in America.
As for bankruptcy helping the auto companies get their acts together: no one in his or her right mind would buy a car from a bankrupt auto co - it's hard enough to get a warranty honored in any case - so, if the auto cos go into bankruptcy, they'll be completely dead within a year ... and all the terrible ripple effects will be felt throughout our economy.
Letting the "big 3" go under is the best thing for the US economy and for the auto industry. Setting aside the unconstitutionality of these bailouts, we should let these companies fail because we need a new competitive automobile market. If they go bankrupt, all of the plans and equipment are still going to be there, they are just going to go under new management. These companies need to get out of these labor contracts, pension obligations, healthcare expenditures - we need an efficient, vibrant automobile industry and we will get one if these companies are allowed to fail.
With regard to this whole idea that the government should "invest" in new projects to create jobs, what money are they going to use to pay for it? The government doesn't invest - it just shifts from one group to another - usually stealing from the most productive workers and companies to subsidize the least productive ones.
Read the classic - economics in one lesson by Henry Hazlitt.
Online Text:
http://jim.com/econ/contents.html
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