Does anyone else have that feeling of deja vu? Wasnít it only a couple of months ago that we were talking bailouts and recovery plans? Actually, it wasnít even two months ago when we were all debating the wisdom of a $700 billion Wall Street ďstabilization plan.Ē
Next in line for a government handout are the U.S.ís big three auto makers: Ford, Chrysler and GM.
They make a fairly good case. The proposed $25 billion ďrescueĒ would safeguard an industry that accounts for around 4 percent of the U.S.ís GDP (Gross Domestic Product). A collapse of this industry could mean the loss of nearly 3 million American jobs and create a domino effect, putting industry suppliers out of business as well.
Iíve heard that it would actually cost the U.S. government around $60 billion in lost tax revenue, Social Security and payouts in unemployment and federal assistance in the first year alone. Maybe $150 billion in lost taxes by the end of three years.
When you look at these numbers, $25 billion seems like a bargain to maintain economic stability and all of those jobs. So, why then is this such a controversial issue?
First of all, weíve heard this ďitís an investment, not a bailoutĒ tune before. Itís starting to get old. Where will it end? If we keep handing out money to subsidize these businesses, large or small, that are failing to stay afloat in the competitive market, who will be the next to approach Congress with their hand out?
In my mind, I picture a federal bailout version of the Golden Arches. Instead of the number of patrons served, I see the billions of tax dollars expended.
There is also strong sentiment that these industrial giants should not be rewarded for their corporate inefficiencies. The U.S. has a tendency to be highly critical of other countries who do subsidize their industries.
American auto makers are largely behind the curve on fuel efficiency and green technology. Yes, itís there, but still only represents a fraction of what is coming off the assembly line. There are even highly salacious rumors that suggest the auto making industry has helped suppress technical innovation in alternative fuels.
And while I understand the role of unions and collective bargaining in safeguarding workers rights, the figures that float around are hard to swallow sometimes.
Iíve heard industry advocates claim unions are working with the auto makers, taking pay and benefit cuts to help them stay solvent. In 2007, they apparently agreed to cut the starting pay rate for new employees in half. Ummm. I donít know about you, but my salary wouldnít survive a 50 percent pay cut. It makes you wonder.
These high labor costs certainly inflate the cost of the vehicle when it hits the retail lots. I would imagine that with the current economic climate and credit crunch, less of those new cars are flying off the lot. Hence, I assume, the need for the bailout.
Execs from Ford, GM and Chrysler traveled to Washington on Wednesday, ready to grovel and beg at the feet of our federal legislators. They might have made their case better if they hadnít just disembarked from three private jets. Did they miss the whole AIG corporate retreat fiasco?
One Democratic Representative from New York compared the move to showing up at a soup kitchen in formal wear. So much for demonstrating financial need.
This will be a hard decision for our elected officials. Theyíll be feeling pressure from constituents on both sides of this issue. And over their heads will be looming the worry that, if they donít approve the bail out measures, the economic impact of losing millions of jobs could tumble the country into certain depression.
Therein lies the rub. Itís not the question of whether the Big 3 deserve the money, but rather what will happen to the country if they donít.