Down the Road to Socialism
Congress and the White House are racing toward a deal on a $15 billion bridge loan to the “Big Three” automakers: General Motors, Chrysler and Ford. Talk about a lemon.
The “Auto Industry Financing and Restructuring Act” would effectively reward three failing companies with billions of your dollars and further nationalize private enterprise. Taxpayers should be outraged at the prospect of yet another unpopular bailout — one that will undermine America’s free enterprise system.
Rep. Barney Frank (D-Mass.), one of the most vociferous supporters of the auto bailout, was overheard at the White House Monday night bragging that “we’ll get the $15 billion done” and that the cost isn’t a problem, because “it’ll come out of the existing money now, but we’ll replace it next year.” In other words, this $15 billion in new spending comes atop the $25 billion already loaned to Detroit to produce new technologies earlier this year.
Compared to the $700 billion dumped into the so-called Troubled Assets Relief Program, $15 billion seems like a drop in the bucket, but it show that big-spending pols have no intention of tackling the $10.6 trillion federal debt the federal government owes. If the big three can’t pay off these loans, you, the taxpayer, will be on the hook for another poor decision by politicians in Washington, D.C.
Money aside, this legislation furthers the march toward a managed economy. Sen. Richard Shelby (R-Ala.), a staunch opponent of bailout fever, expressed his overriding concern with the government’s credo that some businesses are too big to fail. Last week at a Senate hearing on the bailout, he declared that “the strength of the American economic system is that it allows us to take risks.” Risk means that businesses need to be allowed to fail, or America will slip into a system where big companies will enjoy privatized gains and socialized failure.
One of the findings in the bill states that the $15 billion and the new government control will stimulate “manufacturing and sales of automobiles produced by automobile manufacturers in the United States.” The legislation creates a sort of “car czar” to implement the findings. This new government bureaucrat would oversee the use of the loans and facilitate the “restructuring to achieve long-term financial viability of the domestic automobile manufacturing industry.” The federal government would receive an ownership stake in these three companies and limits on executive pay will be implemented. In short, a government bureaucrat will be empowered to oversee the restructuring of GM, Chrysler and Ford.
Environmentalists are already salivating at the opportunity to force Detroit to make more environmentally friendly cars. They will try and exploit this situation to have the Car Czar order green technology, even if the demand for small plug-in cars is lower than the demand ordered by D.C. bureaucrats.
“I want to see the precise production plans and timetables for the hybridization of all your cars and trucks within 36 months,” writes Thomas Friedman of The New York Times. “I want every bailed-out car company to move to hybrid electric drive trains, because nothing would both improve mileage and emissions more — and also stimulate a whole new 21st-century, job-creating industry: batteries.”
If “batteries” and “hybridization of all your cars and trucks” would make Detroit competitive, don’t you think the highly educated managers of GM, Chrysler and Ford would have already transitioned to Al Gore’s dream of a Prius in every American garage? As a proud owner of an American-made, gas-guzzling Jeep Liberty, I would argue that not all Americans want to drive a tiny, battery-powered mini-car, especially now that gasoline prices have dropped.
Markets make better decisions than politically motivated government officials.
One of my colleagues at The Heritage Foundation, Andrew Grossman, argues that the auto industry can address plummeting sales and market share, high labor costs, aging fleets and a shortage on innovative new cars only by declaring bankruptcy. “The bankruptcy process is designed to address exactly the kind of challenge that the automakers now face: realizing the full value of assets and organizations that have been mismanaged and kept from reaching their potential,” he notes. Bankruptcy would certainly be tough, but it’s a much better option for the Big Three than a government nationalization and bailout.
President Bush bailed out Bear Stearns, AIG, Fannie Mae, Freddie Mac and Citigroup. He pledged $700 billion to stabilize financial markets. Now he appears to be caving into bailout pressure for the Big Three. Somebody needs to put the brakes on these bailouts right now or American capitalism will suffer a fiery crash.
“Government is not the solution to our problem, government is the problem,” as President Reagan so wisely put it. Unfortunately, it looks as if we’re going to have to learn that lesson all over again.