Auto-Destruct: Does Freedom Matter?

by Sheldon Richman | The Big Three automakers got a cold reception in Congress this week when they asked for a bailout loan of $25 billion. But I wouldn’t count them out just yet. After appropriating over $700 billion to bail out the financial industry — with nothing to show for it but an ominous precedent and a scary accretion of power in the U.S. Treasury — members of Congress may be a little reluctant to hand out more money to demonstrably failing — even de facto bankrupt — companies.

Yet I have a hunch Congress will get over its reluctance, maybe as early as next month. Things just seem to work that way in Washington. Remember the first bailout bill?

Instead of getting a new $25 billion “bridge loan” as requested, the companies will probably have to be content with just a quicker dispersal of a $25 billion loan already approved or a smaller short-term handout — if the they can come up with an acceptable plan showing the way to “viability,” an attribute that is very much in the eye of beholder. That $25 billion already approved was supposed to be used to develop high-tech fuel-efficient vehicles. But General Motors, Ford, and Chrysler have a higher priority than new products: immediate cash simply to keep operating. GM and Ford say they could run out of money by year’s end.

Even if Congress passes a compromise bill in December and President Bush signs it, that won’t be the last of the matter. The companies will need more help next year, and President-elect Obama will have a sympathetic ear.

None of this should be happening, of course. There should have been no initial $25 billion in loans for new products. If the products Detroit wants to build show that much promise, let the companies find private investors to throw in with them. ? Does the computer or mobile-phone industries need taxpayer help in rolling out new products? Why must the taxpayers be compelled to kick in money for new cars?>>>>Read the Full Article