Sunday, November 16, 2008

Cars, Politics and the US Economy

To listen to the soundbites on radio or TV, this whole Detroit bail-out thing seems pretty straightforward. As I have heard it explained, it comes down to some things everyone (a relative term, to be sure) agrees on and some things that no one (again, relative) agrees about.

Agreed: The US car companies have, through a variety of sins, set themselves up in recent decades for a serious day of reckoning.

Disagreed: The current mess (version 25 billion or thereabouts) is more about the unforeseeable credit crisis than it is about car companies not seeking to get better, make fuel-efficient cars, etc.

Agreed: ANY taxpayer money that might, possibly, someday be loaned to US car makers must come with major strings attached.

Disagreed: Bailout money now is throwing good money after bad ... or not. Or put more bluntly, the bailout is a case of beer for the alcoholic - "It might be fun for a day, but it don't solve the problem" vs. this is a viable "Bridge to somewhere".

Agreed: $700 billion just isn't what it used to be. [major sigh]

Disagreed: A far better approach (the Real American, free market approach) says that when bad companies fail, they can and should seek bankruptcy protection via Chapter 11. OR, unlike airlines which provide a service that the pubic has demonstrated a willingness to continue buying despite numerous bankruptcies, the public's likelihood to buy a car from a bankrupt company - risking the unavailability of future service or parts is something approximating Zero. (In other words, Chapter 11 today leads inevitably to Chapter 7 next year and that means liquidation of assets - ugly.)

So here we are. Again. I know that, for now, we need to figure out what to do with this stalwart, if prodigal, domestic industry. But, my god - is not the real problem here that by relaxing regulation in general and approvals for mergers and acquisitions in general, we have created a country dominated by businesses that are "too big to fail"? For all the talk about the importance of small business when it's time to campaign, the 16 years (1995-2007) in which Republicans ruled the Congress seems to have been good for big business at the time, but not even good for big business now. And for the rest of us? Well, thank god those days are over, at least for a while.

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