What is the case for bailing out US Auto Makers?

[AU_domer]

First and foremost, the government is attempting to save jobs at Ford, Chrysler, and GM.

But the notion that jobs will be saved is based on an economic fallacy.

Henry Hazlitt wrote a book called "Economics in One Lesson". The premise of the book is that you see the same economic fallacy repeated over and over in political discourse. The fallacy is only looking at the direct economic effect of government action and failing to look at the indirect effects.

In this case, politicians and interest groups want to spend billions of dollars to save failing auto companies. In spending billions of dollars, the government may indeed save jobs at those companies and the suppliers of those companies.

But where does the money come from? Do politicians in Washington have a magic wand which they wave to create wealth? Is there a money fairy they can call upon when times are tough and companies need bailing out?

In order to give billions of dollars to one group of people, the government must take billions of dollars from another group of people. The government does not create wealth, it can only take wealth from others. Alternately, the government can print money which effectively takes the same money from everyone through that sneaky tax known as inflation. Any "jobs saved" in the auto industry will be offset by jobs that would have been created in other industries, had consumers been able to spend the money where they desire rather than on products which they clearly do not desire (in this case, American automobiles). Every job saved at GM is offset by a job lost at a bank, or a liquor store, or a small business, or any one of a million places elsewhere.

The net effect is that, at best, there are no jobs "saved" it is only break even. But in doing so, you have shafted the American people in several ways:
1. You take money from consumers and force them to spend it in ways they do not wish. This creates animosity and political unrest.
2. You have mis-allocated capital to an inefficient business whose products consumers do not desire. This hurts the economy.
3. You must run all tax receipts through the inefficient hands of the government. After the tax receipts are run through this filter, the amount of money received by the auto makers will certainly be less than $1 for every $1 collected.
4. Finally, you continue this dangerous precedent of propping up failing business because they have enough clout in Washington to bend a politician's ear.

Ultimately, this bill will serve the purposes of the politicians. It is easy for them to point to a worker at GM and say "Hey, you should re-elect me because I passed this great bill which saved this guy's job".

It is not so easy is to point to the guy whose job was never created. His job was never created because consumers never got a chance to spend money where they saw fit. He is the nameless, faceless unemployed guy.

And politicians won't get any credit by helping that guy.

[Just Win]

no biggie au. barry is simply going to print more currency and hand it out to gm and ford. also, look for barry to pick up the tab for gm, ford, and all Americans health care.

[NCVol]

You're funny.

It's Henry (aka Hank) Paulson and George W. handing out these checks. You'll have to wait a while before you can pin this round of socialism for the richest among us on Obama. 

It was also Hank who granted a $140 billion tax break so the big banks can get even bigger, no votes, no discussion, just a unilateral decision by Treasury that the big boys needed a little help in gobbling up all their smaller competitors.  Heck, Wells Fargo got enough to pay for its acquisition of Wachovia - a freebie on us.   It's the least we could do for the banks for taking $700 Billion of our money! 

I did get a chuckle out of the IRS Notice which simply announced this change.  In so many words, it said, "This is the law now, and can be relied upon until it changes" - as in this shiate is SOOO illegal!  So don't count on this being permanent, get off your asses and go buy some dang banks!!! 

[Just Win]

You're funny.

It's Henry (aka Hank) Paulson and George W. handing out these checks. You'll have to wait a while before you can pin this round of socialism for the richest among us on Obama. 

It was also Hank who granted a $140 billion tax break so the big banks can get even bigger, no votes, no discussion, just a unilateral decision by Treasury that the big boys needed a little help in gobbling up all their smaller competitors.  Heck, Wells Fargo got enough to pay for its acquisition of Wachovia - a freebie on us.   It's the least we could do for the banks for taking $700 Billion of our money! 

I did get a chuckle out of the IRS Notice which simply announced this change.  In so many words, it said, "This is the law now, and can be relied upon until it changes" - as in this shiate is SOOO illegal!  So don't count on this being permanent, get off your asses and go buy some dang banks!!! 

paulson is schumer's and nancy's boy via robert rubin. he does not take a leak unless he firsts consults with the dnc first.
paulson was the mole for barry during all the bailout mess pre election negotiation. old hank is owed much from barry and
rhambo for the surreptitious info feed. you need to look into that goldman sachs and warren buffet democrat $$$ connection
and get back with the board.  btw, how about that warren buffet corporate welfare deal with goldman involving the premium
stock? was that a scam of beauty or what? kudos to the scamers on the left. perfectly executed.

that amex bank trick scam is a nice touch as well. you can bet (Warning! conjecture on my part) old warren, goldman, hank, and the demlib
chorines all have a piece of that action. like taking candy from a baby. amex s going to owe barry and crew SO much.

if i did not know any better i would guess it was the 1930's and fdr had just appointed old joe kennedy over the sec with gloria swanson was in a hotel room
nearby on the side for an afternoon treat.
 

[MRM]

If the Big 3 go under, it will cripple our economy worse than it is now. Not only will those jobs be lost, but think of all the companies that make aftermarket parts, accessories, etc. for cars. Sure they can, and probably already do, make them for imports. But think if you're Fram and all of a sudden you can't make oil and air filters for American cars except for the older ones.

[AU_domer]

Did you read anything I wrote?

If the Big 3 go under, it will cripple our economy worse than it is now. Not only will those jobs be lost, but think of all the companies that make aftermarket parts, accessories, etc. for cars. Sure they can, and probably already do, make them for imports. But think if you're Fram and all of a sudden you can't make oil and air filters for American cars except for the older ones.

[Shimmy]

You can take that economics book and throw it out the window.  The socialists are in control now and they have their own version of what works (even though history and logic is against them).

[Jeremy Roenick]

Bail 'em out, but the Unions have to go.

That's the deal boys, take it or leave it.  That's what I'd tell them.

[AU_domer]

Why?

Bail 'em out

[Just Win]

Bail 'em out, but the Unions have to go.

That's the deal boys, take it or leave it.  That's what I'd tell them.

great point. bail out with the following stipulations

1. the tax payer Will Not pickup the bill for the union retirement contracts agreed to back in the 70s and 80s made by ceos such as such as lee ioacoca

2.  all auto unions must be disbanded at once and are not allowed to reform in the auto industry. the reason the domestic auto makers are in the shape they are in
is due to government regulations and their unions. why do you think gm spun off saturn?

3. the government agrees to cancel all liberal wack job cafa standards placed on domestic auto makers

[NCVol]

You can take that economics book and throw it out the window.  The socialists are in control now and they have their own version of what works (even though history and logic is against them).

The corporate socialists have BEEN in control for nearly 8 years.  What works is shifting wealth to the top fraction of a per cent, which has been a fabulous success, and is now continuing.  Bush should find plenty of grateful friends to pay his speaking fees.  I liked this honest series of quotes from Bush when asked what's after President:

"I'll give some speeches, to replenish the ol' coffers," says Mr Bush, who is already estimated to be worth $20m. "I don't know what my dad gets - it's more than 50-75 [thousand dollars a speech], and "Clinton's making a lot of money".

JR, I agree the unions need to take their medicine like the rest of us.  It's impossible to justify their wage and benefit packages when the companies they're working for are failing.  

I only wish the public (and lemmings like JW) had the same feelings towards Wall Street.  Last I heard the recipients of the bailout money were planning on paying out $70 BILLION in BONUSES at the end of this year.  Bonuses, on top of more than $100 billion in bonuses LAST YEAR, for running their companies into a canyon, obliterating whatever equity existed, and sending them with hats in hand to U.S. taxpayers.  THAT is what we should be outraged about.  At least for the union guys, the people above them told them what cars to make and how to make them.  

[Jeremy Roenick]

Domer,

Just Win got to it before I could.

The US Auto industry is very important to our economy, in multiple ways.  I could live with banks gobbling up other banks and some closing, but the auto industry in America is different.  The US Auto industry creates millions of jobs in sattelite companies and suppliers.  If GM, Ford etc went the way of the dinosaur, it would have a HUGE affect on jobs nation wide.

Keep 'em.  Slap them on the wrist. Disband the unions and get the US auto makers on the same footing as the foreign manufacturers.