Should the tax payers bail out the auto companies?

Here’s the issue as we see it: security or prosperity? Not so fast; prosperity gives future security while security means planning for prosperity. Let me explain. Almost everyone can understand how millions of jobs come from businesses that receive revenue directly or indirectly from the auto industry. Most people understand that there are millions of people who either work for the manufacturers, supply product to them, provide a service to either them or their employees. The industry affects many from advertising to mom and pop diners and deli’sserving lunches to employees of those companies. That said, almost everyone can also understand how having people in Washington give money, which is not theirs to begin with, to the auto industry means taking future money out of their own pocket. Many people don’t think it is appropriate to have others tell them that they have to repay a debt for a problem that they feel others created.

Don’t feel bad if you have difficulty placing 100% of you thoughts truly on one side of the issue or the other. If you can truly make that call that quickly, than you are probably a person who would also walk off of a cliff to prove yourself right. The issue is too profound and complex to be able to make a competent decision that quickly. This is because of the distance of the ramifications. A loan means fighting free market forces and the potential lost of future advancements that are achieved by creative survival/destruction. This could mean the lost of future productivity gains due to the reduction of cometitive forces. No loan means millions of people potentially out of work. This could cause a huge economic contraction, reducing the country’s ability to provide its citizens the standard of living so many have grown accustom too. It most likely would also create a national security issue. Like it our not, our democracy is protected by our ability to manufacture the defense that prevents it from being taken away.

Complex? Surely is. If it wasn’t, then the financial crisis would have been solved before we the people ever acknowledge it.

It is our opinion that the powers-to-be have been attempting engineer a way to allow for a slow and soft adjustment to the creative forces of free markets while trying to fuel short term GDP growth to sustain tax revenue and maintain the standard of living of the middle class. This slow adjustment would minimize the pain population felt while allowing the nation to remain competitive and prosper from productivity and technological advances.

The truth is that nobody knows the correct answer to the question of whether to lend public funds to private corporations. Mathematically, it can compute to the same result regardless of the answer chosen. The true results depend on the actions taken in the future, and maybe not the actions taken at this particular point in time. Economic strain today may mean adjustments for long term prosperity. Economic relief today may mean long term strains on prosperity. And the lack of relief today may mean long term consequences. Regardless of the decision made, only our desire to work towards a better tomorrow after the decision will make the true difference of our tomorrow.

Nick,
I couldn't agree with you more. The only thing I would add is in many meaningful and substantive ways, the crisis we are facing today is very similar to the problems which were overcome during the Great Depression. The reality is that the New Deal did not totally solve the Depression, it was World War II, a gigantic socialistic endeavor. World War II hugely increased the federal deficit, nationalized businesses and factories, centrally planned economic activity through rationing, destroyed the gender barrier in employment with non-discriminatory jobs programs building tanks and planes as Rosie the Riveter, made an enormous investment in human capital through the G.I. Bill and to pay for it, raised taxes on corporations and the wealthy to astronomically levels of 80% or 90%. All justified by the urgent need to win the War.

The most interesting quirk of the hyper-government spending of World War II was the reality that most of what was manufactured was wasted, because it was quickly destroyed in the war. This is analogous to taking a car straight from the factory immediately to the junkyard, because war machines serve very little real economic purpose, as ensuring freedom is not a part of the real economy, though necessary to ensure the real economy. Maybe instead of a $25 billion dollar loan, the government should just buy $25 billion dollars worth of American cars and blow them up, that will lower inventory, and might raise demand and get some factories moving again.

Now don't get me wrong, I am not advocating all the measures of which I just describe, I only use them as illustrations of how in an extreme crisis like World War II, extreme measures were taken which turned out to pull the country out of depression and on to the greatest era of economic prosperity in the history of the world. But as you stated, it would have mainly been because of the decisions which were made after the War which secured and expanded our economic prosperity. My point is simply that even wasteful government deficit spending, as long as it is targeted towards investment in the long term economic prosperity, as wartime factories can be transformed into peacetime factories, expanding education programs increases human capital, infrastructure projects have long term value and stirring patriotism as a means of guiding economic activity to ease modernization of the economy, all will pay dividends toward long-term prosperity.

No one can know the future. Are we on a the verge of a breakthrough on the energy technology front which will transform the economy much as assembly-line manufacturing transformed the economy after World War II? Are we on the verge of a calamitous world event like a WMD attack or climate change or something completely unforeseen which could have devastating effects on the real economy throwing off the best laid plans? Of course, but World War II gives us our bearings and an understanding that if we are determined to do whatever necessary to ensure we make it through this crisis, the more likely we will make it through this crisis.

And that lesson today means the old golden calves of unfettered markets, self-regulation, privatization, complex financial and accounting instruments, and cheap labor are exposed and the old taboos of socialism, government intervention, fair trade, progressive taxation and the common good are back and here to stay. We've learned that just like there are no atheist in foxholes, there are no anti-government, deregulating, free marketeers in financial crises and we all have the responsibility when the market fails, so we should have a say and a stake in the market when it succeeds, and that's through taxes and regulation.
The Cancerian