Bailout?

The big question facing lawmakers next week will be whether or not to bail out the "Big Three" Automakers. GM, Chrysler and Ford are responsible for several thousand jobs in the northern Midwest, as well as millions more that depend on the auto maker's being in business. Right now, their CEO's are in front of Congress asking for nearly $40 billion in loans simply to stay afloat. To evaluate whether or not it is a good idea we need to look at the pros and con's of either granting the bailout money or letting the automakers file for bankruptcy. ( I am aware there are other options, but I don't feel like writing that much, so I will limit myself to the two most likely to happen.)

Option 1: Bailout. Congress grants the money to the automakers. They pay off some debt and continue operating for at least the next six months. The problem is that there is no guarantee that in six months the economy will be any better, or that the big three won't need even more money. Are we willing to socialize the automotive industry? Because that is likely what it's going to come down to. Other possible outcomes include millions of people keeping their jobs and providing for their families. The automakers could probably keep their heads above water, and retool their factories to build smaller more fuel-efficient cars, once the economy has bounced back. In a perfect world this would be the case, but as I said before there are no guarantees. Before I decide if this is a good idea, let's look at option 2.

Option 2: Bankruptcy. Congress denies the automakers their bailout money and effectively tells them that it is their own fault for sticking to outdated business plans for far too long. Advantages include the re-working of those pesky union contracts that cost the businesses billions of dollars a year. Those contracts were negotiated during strong economic times so they are probably outdated anyways. Also, the automakers could shed their debts and then invest in re-tooling their plants to make more competitive cars for the 21st century. The obvious disadvantage to this is that possibly millions of people would lose their jobs. According to economists this kind of shift in the focus of a national economy is a necessary occurrence, but tell that to "Joe the car builder" (sorry I had to) who now can't afford his house, health-care, car, gas, or basically anything. Oh, and also, he sure as hell won't be able to find another job in this kind of climate, so he will just have to wait out the impending shift, of which I spoke earlier. Another point that not many have looked at, is that it probably isn't in the public interest for the government to bail out the "Big three" while providing no assistance to Honda and Toyota, who provide thousands of direct jobs and millions of indirect ones to many of the same areas. Why should we spend our tax dollars to bailout major corporations who stuck to an irresponsible business plan?

To solve this problem we must look at the proposed bailout through the lens of the current crisis we are in. The economy is tanking. As of today, unemployment is at 6.7%, which is the highest it has been since the recession of the early 90's. More jobs were shed last month than had been shed since 1974 amid crisis of the Arab oil embargo. Would consumer confidence continue to exist if we saw the backbone of American industry file for bankruptcy? Sadly, I think not. Recessions are fueled by fear as much as anything else and I think that this would serve only to make things much worse. (It should be noted that since I am from an area where many of these jobs would be lost, I am a bit biased).

In lieu of all of the facts and possible scenarios that urge me to do otherwise, I begrudgingly call on Congress to bail out the "Big Three". Normally I wouldn't support such action, mainly for the reason that I don't consider myself to be a socialist, but we are in a crisis and therefore a response that is indicative of such crisis is required. Let us hope that such a show of strength by our elected representatives will raise consumer confidence and help us out of this mess.