WASHINGTON (AP) — Detroit’s Big Three automakers pleaded with a reluctant Congress Tuesday for a $25 billion lifeline to save the once-proud titans of U.S. industry, pointedly warning of a national economic catastrophe should they collapse.
Millions of layoffs would follow their demise, they said, as damaging effects rippled across an already-faltering economy.
But Paulson and many in the US apparat are opposed to this:
Treasury Secretary Henry Paulson told Congress on Tuesday that the administration remains firmly opposed to dipping into the government’s $700 billion financial bailout fund for a $25 billion rescue package for Detroit’s Big Three automakers, no matter how badly they need the help.
“There are other ways” to help them, Paulson told the House Financial Services Committee as the bailout bill clung to life support on Capitol Hill.
This just continues to highlight the sore condition of the US economy and its participants, and the dangerous precedent set by the government in its bailout of the financial firms, further increasing government intervention on market conditions. Meanwhile, the level of money being printed to fund all these bailouts could disenfranchise the US taxpayers first by burning tax money to pay for greed, and by debasing the US dollar causing inflation.
Stagflation is a likelihood as the US economy contracts while prices continue to rise.
On the other hand, a bailout by the government will be a temporary relief to consumers by saving jobs, in the long-run this now creates a moral hazard by letting the errant automakers get away with their mismanagement.
A history lesson: Chrysler was bailed out years ago, and that act was criticized at the time, but evidently that bailout planted the seeds of the present troubles. Seems like deja vu: (emphasis mine)
It was designed to prevent the nation’s No. 3 automaker (1978 sales: $13.6 billion) from sliding into a bankruptcy that could have put many thousands out of work and sent a shudder through U.S. financial markets.
In his first public act at the Treasury, Miller spelled out the ideological ground rules of federal aid and warned other troubled companies against expecting similar help. Such assistance, he said, “is neither desirable nor appropriate, being contrary to the principle of free enterprise.” But Chrysler was an unusual exception, he added, in which the Administration “recognizes that there is a public interest in sustaining [its] jobs and maintaining a strong and competitive national automotive industry.”
Contrary to the principle of free enterprise? You better believe it. Only this time, it seems there are too many unusual exceptions.