More good information on the disaster that is the Detroit bailout. It's plain to see for anyone that wants to take notice, the bailout is just for making more problems for the taxpayer and will not help the auto companies solve their problems.
The insanity of this whole thing is for us, the citizens and taxpayers, believing our Federal government has our best interests at heart.
The Heritage Foundation brings light to the dark corners of our congressmen and women that want to socialize the auto industry and eventually deconstruct our entire economy.
Keep the faith
December 12, 2008
By Nathaniel Ward
Auto bailout back from the dead
Yesterday, the Senate rejected a plan to spend $14 billion of taxpayer money to bail out the struggling Big Three automakers
The House passed the legislation, brokered by the Bush administration, on Wednesday.But even though lawmakers refused to act on the legislation, taxpayer money could still be used to prop up the Detroit companies, which dug themselves into a financial hole.
The Bush administration today announced plans to give money from the $700 billion financial rescue fund, known as TARP, to the Big Three.
"Such action would be wrong legally, wrong economically, and counterproductive to turning around these troubled businesses," Heritage Foundation legal scholar Andrew Grossman writes. "And by opening the door to such open-ended use of taxpayer money for virtually unlimited uses, a unilateral decision to employ TARP funds would jeopardize George W. Bush's legacy as a friend of the taxpayer."
Conn Carroll explains why bankruptcy is a viable option for the Big Three:
Bankruptcy Does Not Mean Death: The auto nationalization cheerleaders keep claiming bankruptcy proceedings for the Big Three automakers would cause a loss of 3.3 million jobs. This is a completely fictional number that assumes all three automakers would go bankrupt simultaneously and that all three companies would then immediately cease all operations entirely. Both assumptions are completely false. Read more.
Bankruptcy Is Designed to Resolve Complex Problems: GM and Chrysler are not suffering from a short-term liquidity problem. They are suffering from a long-term structural problem that includes uncompetitive labor costs, a bloated dealership network and a short-term credit crisis.
All three of these issues are best addressed through bankruptcy. Read more.
Bankruptcy Pulls Politics Out of the Process: In exchange for a $15 billion down payment and the promise of more bailout money in a few months, the auto companies must agree to report to a "car czar" and have their long-term business plans approved by Congress.
Do we really trust people like Sen. Chris Dodd (D-CT) and Reps. Jesse Jackson Jr. (D-IL) and Charlie Rangel (D-NY) to put the economic viability of the auto companies ahead of their own short-term political interests?
In another post on Heritage's blog, the Foundry, Heritage expert Nick Lorris explains that a bailout distorts market operation. "Good business decisions are rewarded with profits and bad business decisions are punished with losses. Good business decisions create jobs while bad business decisions lose them. And now the government wants to provide taxpayer money to reward the bad business decisions made by Detroit."
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