On the Contrary

Well should we are shouldn’t we?  Lets sample some opinions.  Our fun loving Republicans are against it:

“Just giving them $25 billion doesn’t change anything,” Sen. Jon Kyl of Arizona, the Senate’s second-ranking Republican, said on Fox News Sunday. “It just puts off for six months or so the day of reckoning.”

Sen. Richard Shelby of Alabama, the senior Republican on the Senate banking committee, called the plan “a road to nowhere.” He called the “Big Three” — Detroit’s three major automakers — “a dinosaur,” and said on NBC’s Meet the Press that they are “not building the right products. … They don’t innovate.”  He also called it, “unnecessary and economically harmful” and a “gross misuse of American taxpayers’ hard-earned money.”

Of course you should note that Senator Shelby has in his home state Honda, Toyota and Mercedes-Benz, foreign-owned companies that would not be eligible for bailout funds.  But if it is good money after bad what’s the point?  Some Republicans and the American Enterprise Institute say it would be better to let them go into bankruptcy and then be forced to reorganize.

The other side of this argument goes something like this:

SEN. CARL LEVIN (D-MI):  “Well, this is a national problem, first of all, without any question.  We’ve got at least three million jobs dependent upon this industry surviving.  We’ve got–this is a Main Street problem.  We’ve got 10,000 or more dealers.  They, they cover the country in every town of this country.  The auto industry touches millions and millions of lives.  One out of 10 jobs in this country are auto related.  Twenty percent of our retail sales are auto related or automobiles.  So this is a national problem.”

MR. TOM FRIEDMAN:  “You know, Carl Levin, what did he say?  He said, “You know, just give us this $25 billion and, and we’ll be OK.” Tom, if I thought with $25 billion we could save this industry, I’d be for it, OK?  But I see no plan right now, no reason to suggest that these people who have driven this industry into a complete ditch have a plan to get it out in the long term and not come back to a six, three months from now, for another $25 billion.  Show me that plan.”

And so there is truth on either side.  It is interesting that the Republicans are not that concerned about the domino effect of putting so many people out of work and maybe really driving us into a depression.  President Elect Obama weighed in on Sunday on 60 Minutes with:

“So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all the stakeholders coming together with a plan what does a sustainable U.S. auto industry look like? So that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere. And that’s, I think, what you haven’t yet seen.”

On the issue of bankruptcy being a better solution, he said:

“Well, you know, under normal circumstances that might be the case in the sense that you’d go to a restructuring like the airlines had to do in some cases. And then they come out and they’re still a viable operation. And they’re operating even during the course of bankruptcy. In this situation, you could see the spigot completely shut off so that it would not potentially permit GM to get back on its feet.”  (He means there is no available credit to fund a reorganization because the markets have dried up).

Isn’t nice to know that we finally will have a President who isn’t reactionary and has his head squarely planted on his shoulders?  For my part, we will have to bail them out, but only with either a realistic “plan” or a “bridge”.  This is the last of the major manufacturing we have left in America and we will need it down the road.  If they go down, the impact to our economy could be catastrophic and do we really want to take that chance?  What I think is coloring everyone’s vision right now is the need to punish those who have squandered our economic might, and in this case that would be auto executives and the politicians that protected them for years.  But this is not the time to be looking for scapegoats.  It is time for solutions.

On the issue of bankruptcy and the comparison to United Airlines that went into bankruptcy and came out a better company that the Republicans like to quote (better company at least from the bottom line perspective as opposed to customer comfort).  There are two things that make this non-analogous:  First as noted by our President-Elect, there is no money out there for them to borrow to restructure while the creditors are held at bay.  Second, they make cars.  If people suspect that they could go out of business, why would buy one of their cars that may not have service or easily to obtain parts down the road?  Buying an automobile is really a long term commitment and putting that commitment at risk could just end their business.

One last thought:  Republicans are willing to let the market place play out through bankruptcy with the possibility of millions of jobs being lost and pushing us into a real depression.  Democrats want tough love, but want to be more proactive in these perilous times.  We have let the market place run free and it has gotten us into major trouble.  Maybe a little direction is not a bad thing if it works.