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I Am Skooter
So here's us, on the raggedy edge.
I crossed many states just to stand here now, my face all hot with tears / I crossed city, and valley, desert, and stream, to bring my body here
— Woody Guthrie, Remember the Mountain Bed
November 12, 2008
Rock, Meet Hard Place

Having participated, if not led, the nationalization of the financial services industry, it’s interesting to see what will happen with the automotive one.

Democrats Seek Help for Automakers
By DAVID M. HERSZENHORN and CARL HULSE
Published: November 11, 2008
WASHINGTON — Democratic Congressional leaders said Tuesday that they were ready to push emergency legislation to aid the imperiled auto industry when lawmakers return to Washington next week for the first time after the election, setting the stage for one last showdown with President Bush.

It’s a tough choice, to be sure. The automotive industry is a massive part of North America’s economic well being. It employs tens of thousands of people, with the associated multiplier effect of those dollars in local communities. It is the heart of many communities, and devastates them when hard times hit and plants close.

So what to do?

The Democratic house leader is advocating for a bailout:

Mr. Reid and Ms. Pelosi have urged the Bush administration to help the major automakers, especially General Motors, which is fast depleting its cash reserves and seems to be hurtling toward bankruptcy. G.M. shares, pummeled for weeks, fell an additional 13 percent on Tuesday to $2.92, its lowest point since 1943. G.M. on Monday warned shareholders that it might not be able to continue as a “going concern.”

But I personally find it hard to see that as a good option. The fall of the North American automotive industry has been a long time coming: more of a gentle slide than a sudden thud. Bailing out General Motors at this point would certainly be good for votes (blue collar, union sponsored votes no less) but it would be bad for the long term health of the economy.

Capitalism thrives on risk: the same risk that creates the potential for failure also creates the potential for wealth. Bailing out General Motors sends a message that risk only applies to the small: get big enough, and the government will effectively eliminate your financial risk.

Many would argue that GM is too big too allow to fail. The simply fact is, if you’re too big too fail you’re just too big. The government has anti-trust powers, and they probably should have been used a long time ago in the automotive industry. Unfortunately, the automotive industry successfully lobbied against it.

I personal fall, I think, on the side of letting GM fall. It will lead to a stronger economy over the long run. If there’s room for an American automotive manufacturer, one will rise again.

Posted by skooter at 3:48 AM This entry is filed under America, Politics.
This entry is tagged: Cars, Economics

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