Saturday, December 06, 2008

Voting for Auto Bail-Out will require Political Courage

The Democrats in Congress who are going to vote next week to bail out the Big 3 American automakers are probably going to pay a political price for doing so. The polls and word on the street make it clear that most of the public hates the idea of bailing out well-paid union workers and fat-cat corporate executives.

But economists warn that in the current financial climate bankruptcy for any one of the Big 3 automakers would most likely not lead to reorganization, restructuring or new ownership, but in liquidation, which would cause a cascade of closures among part supplies and associated industries which would in turn force the other 2 automakers out of business. Economists are talking about a difference in 10% unemployment if the American automakers are kept in business or a Great Depression level 25% unemployment if they disappear.

Once Congress decides to do something, such as bailing out Detroit, there is no way to know for sure what would have happened if they had not acted. People opposed to the bail-out, probably a majority of the voters, will look at the 10% unemployment and say that after giving away all this money we still have lost a lot of jobs. They will feel that their tax dollars were given away for nothing. There will be no way to prove that it would have been much worse if the auto makers had gone into bankruptcy.

It will be interesting to see which politicians in Congress put the good of the country ahead of their own reelection chances and vote for the bail-out next week. Does anyone have any guesses about the relative percentages of Democrats and Republicans who will show political courage? My guess is that despite their rhetoric, there are very few Republican left in Congress who actually put country first. I predict that those voting for the bail-out will be over-whelming Democrats.

2 comments:

Daniel said...

Republicans give a totally free gift of billions of dollars to white collar Wall Street even though they acted criminally. But fight against any money to blue collar workers and claim for justification their failure of leadership. Auto executives who did not cut into their profits to push a reluctant public into more fuel efficient types of cars did not fail in any way comparable to the dishonest and immoral behavior of financial "advisers" who very intentionally cheated people out of their savings.

Daniel

Anonymous said...

I agree with Daniel, but at the same time I dislike very much the attitude of the executives. I hope the Congress will ensure there are tough concessions made by the auto company execs, that they will make some huge sacrifices and that a sizable amount of profits goes directly to development of alternatively powered vehicles. I hope CAFE standards will be upped rigorously as part of the legislation.