For those who think American politics will be all rainbows and unicorns after Bush leaves, President-elect Barack Obama just sent a reminder that the Democrats have ridiculous constituencies to please, too. Although Congress passed $25 billion in favorable loans to Detroit's Big Three auto manufacturers in September, they're already begging for more. Today, Obama asked Bush to sign another $25 billion in loans before he leaves office.
Although some argue that these loans can give Ford, GM, and Chrysler capital needed to create cleaner cars, the question is why Honda, Toyota, and upstarts like Tesla Motors don't need similar favors. If we agree to live in a capitalist system, we have to agree to let failing companies fail. Period.
Note to the Democrats: If you are looking for a good policy that might save Detroit, think about fixing the health care system. Part of the problem is that the Big Three pay thousands more per car in health care and retirement costs than foreign companies. Then everybody wins.
Tuesday, November 11, 2008
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Um, ditto. I was seriously about to write a post called "So why exactly should we be bailing out GM?"
This is so perfectly indicative of the dangers of an economic framework that systematically rewards vertical & horizontal integration. We get behemoths like General Motors in almost every industry, unaccountable and sluggishly non-innovative bureaucratic nightmares. Their calling card, rather than being the best at what they do, is to use their lobbying and market power to squeeze as much money out of society as possible to the personal gain of their executives. Reap massive profits and distribute unfathomably lavish pay packages in good times, but mooch off the taxpayer dime (preferably a trillion of them) and don't change a thing when things aren't so great. Like AIG is proving as we speak, the company then uses taxpayer money to act exactly as it had before, thus learning precisely nothing.
Let's sum it up in layman's terms. Private rewards, public risk. Sounds like pure kleptocracy to me.
Here's an alternative...wouldn't it be cheaper in the short, medium AND long run, to let self-destructing companies like GM fail, as they should in any economic system reasonably resembling capitalism? Then, since we're worried about the economic fallout of a giant company's collapse, we directly help the people who will be harmed in the process. I haven't taken cost-benefit analysis yet, but I have a hard time believing that rewarding GM's bad behavior is worth the money. If GM goes under, maybe innovative American startup car companies could take over their market share and we could all be driving the car of the future in a decade.
Seriously, check out the "car of the future" link. It's awesome.
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