Stop the Bailout Conga Line No Business is 'Too Big to Fail'

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Just what I
was afraid of: Obama and the new more liberal congress aren’t close
to being inaugurated yet and already they want to take more money
from working- and middle-class people to bail out those who don’t
deserve it.

GM, Ford, and
Chrysler had a huge headstart — for decades it had virtually no
competition. The playing field was unlevel, in their favor. Yet,
quite quickly after the Japanese and Koreans started to make cars,
the union-strangled U.S. car industry could not compete on the most
important standard of all: reliability.

Year after
year, Consumer Reports makes clear that American-made cars
break down more often than Asian-built ones — no one ever accuses
the Japanese of producing Monday-morning cars.

Even if the
United Autoworkers Union drives the auto industry to its knees,
the union apparently will continue to insist on lifetime job security
and mammoth retirement packages despite the workers producing cars
that break down more than the competition’s.

Of course,
U.S. auto executives share in the blame. Their lust for short-term
profits fueled their building ever more high-profit-margin big cars
and SUVs, figuring the materialistic American buyer would stay indifferent
to economy and environmentalism. Meanwhile Asian car makers, especially
Toyota, recognized that the world is changing.

And now, the
Democrats (with some Republican support) wants to reward the U.S.
auto industry’s bad behavior by propping it up with a massive bailout
using our money.

It’s fundamental
that if you want to improve behavior, you reward good behavior and
punish bad. The Democrats know that: they’re always arguing that
raising taxes on gasoline and on tobacco will reduce their use.
Yet now, they want to reward the U.S. auto industry for its bad
behavior.

If we hadn’t
bailed out Chrysler 20 years ago, the auto industry would have felt
forced to improve. But the industry knowing that the U.S. government
would probably never allow the industry to fail encouraged the automakers
to feel complacent about continuing their inferior practices.

Another auto
industry bailout will only encourage further bad behavior and more
inferior cars that can’t compete with the Japanese or Koreans. And
just imagine what will happen when the newest carmakers on the block,
the Chinese, get their act together.

There’s a hidden
cost of bailouts: demotivating the small good guy. If entrepreneurs
and small companies see that when a big company screws up, the government
views it as “Too Big to Fail,” and bails out it, it sends a dispiriting
message to the little guy: No matter how good you’ll be, the government
won’t let you compete. No formula would better strip the U.S. of
its historic advantage: the power to innovate.

If we prop
up the bad with good people’s tax money, it will yield only a short-term
feel-good. In the long run, we will become a bad country.

Yet Obama and
others are contemplating ever more bailouts. We’ve already bailed
out the financial industry with uncertain results, are bailing out
insurance giant AIG (who congaed all the way to Vegas for a $350,000
celebration blowout,) will soon bailout the automakers, and rushing
up next for the free money are the airlines, home builders, mortgagees,
and people who ran up too much credit card debt.

Other short-sighted
industry “leaders” are failing too.

  • Levitz
    Furniture sells an important product, but they insisted on huge
    showrooms and overpriced low-quality, poorly styled furniture.
    They’re in Chapter 7 (liquidation) bankruptcy. Meanwhile Sweden-based
    IKEA is doing just fine. Should you and I bail Levitz out?
  • How about
    the nose-diving Circuit City, Best Buy, and Macy’s, which a while
    back got Chapter 11 bankruptcy protection?
  • What about
    the liberals’ darling company Whole Foods who refused to stop
    its noble but unrealistic business practices even though that
    forced it to charge absurdly high prices that few shoppers would
    pay. So its stock price has plummeted from 72 to 9, while Germany-based
    Trader Joe’s has people lining up to buy. Should you and I bail
    out Whole Foods?

Under the current
“Too Big to Fail” mindset, the dole line will continue to grow until
the taxpayers have been stripped of nearly all their money or there
is a tax revolt.

I believe the
auto and other struggling industries should be left to fix themselves
or die.

What about
laid-off workers? I’d encourage the private sector to create terrific
online training programs. The entrepreneurial among them would be
trained on how to start a successful, ethical, and important small
business. The not-entrepreneurial would be trained in such sustainable
fields as health care, biotech, education, global business, and
law enforcement.

I believe that’s
a surer road to a sturdy long-term economy than the ever-lengthening,
Obama-led bailout conga line.

November
13, 2008

Dr.
Nemko [send him mail] is
a career counselor in Oakland, CA and host of Work with Marty Nemko
on KALW-FM (NPR, San Francisco.) 500+ of his previously published
articles and columns are on MartyNemko.com.

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