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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