Ben Buchwalter


An Auto Bailout? The Government Must Protect
November 15, 2008, 2:32 pm
Filed under: Congress, Economy | Tags: ,

About a month after a bailout that did not do much good, the American government is considering bailing out another essential sector of the American economy: the Detroit-based automobile industry. It seems like everyone opposes the auto bailout. Many progressives see the industry’s failure as a referendum on their unflinching alliance with gas guzzling SUVs and refusal to convert to more environmentally conscious vehicles like the automobile industries of Japan, China, and South Korea. Conservatives are weary of more government intervention in an already heavy regulatory year and an assault to fiscal conservatism.

The auto bailout makes me uncomfortable for a variety of reasons. First, as mentioned above, the failures of American automobile companies are largely their fault. Second, the continuing stream of government bailouts raises larger questions of which industries are valuable enough to protect. And are we truly a capitalist society if we ditch the dogma when times get tough? Aren’t we supposed to let the market correct itself?

This is the problem with rigid economic ideologies. In an ideal capitalist state, we would let the failing companies declare bankruptcy so that they would either be forced to improve operations or allow a better company to fill their place.

But a government cannot work that way. A government must protect its people, and that means ensuring that banks are operational and can continue to give loans, and that a country’s largest industries can continue to employ their workers.

Jonathan Cohn of The New Republic
has written on the many reasons that the U.S. government should bail out the automobile industries. His most persuasive argument comes at the end. By bailing out the auto companies, the U.S. government would be in an ideal position to enforce conditions that would make the companies more efficient, both economically and environmentally.

Those conditions would include limits on executive compensation, as in the Wall Street rescue, but also more specific requirements designed to push the Big Three toward greater innovation and fuel efficiency. 

I think that as much as it pains us to admit it, Cohn is correct: we must bail out the automobile industry. Letting it fail would be too devastating in this economy.

But the larger issue here concerns the ideology that drives the American economy. The bailouts of the past few months – suggested by a Republican President – have made a mockery of fiscal conservatives and should usher in an era of more responsible governance.

A country’s economy is only as good as its reaction to a crisis. And the current meltdown has proven that fiscal conservatism is not adequate. We need big government to prevent big problems. I’d trade slightly limited short-term growth for consistent long-term growth any day.

In the past few months, I have come to equate the economy of the past eight years to an overgrown lawn. Yes, all of the weeds are growing very well but who is going to mow the lawn and pull the weeds when it gets out of hand?

I’ll be interested to see if small government conservatives forget this period of absolutely necessary government intervention when the economy gets good again. My guess is that their ideology has made conservatives short-sighted enough to forget the lesson and refocus on their creed.

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1 Comment so far
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In the case of the auto-makers’ bailout, it’s a relief to have a national issue that is so straightforward: American cars tend to break down and fall apart therefore people are not buying them. If GM and Ford don’t want to go out of business, they should start making decent cars. To bail them out would be to reward their terrible manufacturing standards.

Comment by Patrick Roberts




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