The Big Three Bailout: One Bad Idea After Another

Now that the Senate has shot down the first $15 billion auto bailout package, members of Congress are busy pitching new ideas all over the place in the hopes of selling a more palatable plan to America than just throwing money at the problem. After seeing the banks take our money and run, Congress thinks it has wised up to the foolishness of freely handing out money to people who have a decidedly poor record of fiscal wisdom. So despite willfully blinding itself to that economic reality, Congress now labors under the delusion that it has figured out its own idiocy.

Not wanting to get burned twice, these geniuses in Congress believe that the best way to protect the federal purse-strings is to tell the Big Three how they ought to structure their companies as a condition of receiving our tax dollars. While some of the ideas being floated around may sound like good policies, as a general matter, they are giving me a tremendously bitter taste. I have grave misgivings with the idea of the federal government lending money to these companies under any circumstances whatsoever.

I’m no fan of the UAW’s extortionate and pork-laden contracts, and I do not endorse the idea of freely giving handouts. But this currently trending notion toward providing management advice is a dangerous idea for a number of reasons, and those reasons can be condensed into four main objections.

First, if Congress does not trust these companies with cash, it needs to ask itself why. In other words, if the management of these companies does not know already how to operate their concerns without huge losses, then is it really wise for Congress to help these companies spend themselves out of this current crisis under any condition? Further, to make any loan conditions meaningful, what is the recourse? When all the money is gone and the companies go under—despite all the conditions—how does Congress exact its pound of flesh? Oh, there is no real recourse, is there? We are simply putting brain-dead companies on life-support.

Second, by placing conditions on how these companies will operate, Congress is injecting itself into the micromanagement of these nominally private enterprises, which brings us one step closer to the nationalization of private industry. It is one thing to tell all companies that they must provide healthcare and a minimum wage. It is another thing to tell specific companies exactly how and what to provide as compensation and benefits, how much to compensate their executives, and how to structure their retirement packages. For the sake of our economy, I would not want the Big Three to fail. But socialism is a price I am unwilling to pay even in—or rather, especially in—this climate. We cannot delude ourselves that a move in this direction will be “temporary” or “extraordinary.” Once the precedent is set, we have taken a large step toward that destination. It cannot be undone, and the next step, or the next time, will be all that much easier and less painful. Desperation and disaster are precisely the circumstances under which the leftists have justified a move toward socialism.

Third, regarding the conditions imposed: whom, exactly, does Congress think it is kidding? Sure, we can agree that reducing labor costs is one, or even the most, significant problem that needs to be addressed by these companies in order to bring them back to life, but to assume that this will somehow cure all the ills that are ailing these companies is naïve beyond measure. Call me crazy, but I daresay not a single Congressmember has the faintest idea how to run an efficient multi-billion-dollar operation, let alone one that is intended to make a profit, and it is nothing short of ludicrous for these jokers to solemnly nod at one another and pat each other’s backs under the misconception that meeting a shopping list of conditions is going to somehow fix what has become broken. These companies are in serious trouble from the ground up. To my mind, it is far from reassuring that these charlatans in Congress have suddenly gotten the idea that it might be fun to play CEO and act like they understand what must be done. Armchair quarterbacking can be fun; it is quite another thing to be put on the field. Congressmembers won’t be the ones that get sacked when reality comes charging; we will.

Which brings me to the fourth item. Any bailout will simply compound the real problem, because it will allow Congress to get yet another pass. When will Congress—or better yet, the American public—finally confront Congress’ significant share of culpability for the failure of the Big Three? For years, Congress and its partners in crime—the behemoth Frankensteinian federal agencies they created—have sought to regulate every aspect of these companies’ operations. Every single one of those regulations was calculated to make it more costly for any company in America to manufacture anything; consequently, they add a significant federal markup to the costs of American products that places them beyond the ability to compete.

For years, American industry has seen jobs go overseas, because it is simply too expensive to manufacture in the U.S. compared to other countries. We have become a net importer, rather than an exporter, because we cannot compete with the low labor and overhead costs of foreign companies. The wealth that could have been created by our own workforce has disappeared; much of our economy is service-based (or, worse, vapor-based, as we found with fog-backed securities). Fewer and fewer companies in America are utilizing our vast resources of raw materials and adding value to them through human labor. Indeed, we do not even produce the raw materials we are capable of producing, since Congress has worked relentlessly to shut down our access to our own cheap oil, cheap minerals, cheap lumber, and cheap textile resources. America is not producing wealth, it is squelching or squandering it: thanks largely to government policy. Lots of Americans think regulations are benign, but when the Small Business Administration tells you that 19 cents of every dollar spent by small businesses is on regulatory compliance, and that larger businesses spend $5,000 per employee on regulatory compliance, you had better be prepared for the consequences. Yet these same Americans still want to be able to buy everything at Wal-Mart prices.

Here’s an idea. Why doesn’t Congress actually do something that it has the power to do, if not the guts: instead of just handing out more of the cash we taxpayers have busted our asses earning, pass legislation that will protect the Big Three, and create a regulatory environment that would both enable them and force them to fix themselves. Better yet, exempt the Big Three from some of the nonsense legislation that has handcuffed them, and allow them the opportunity to bootstrap themselves out of this problem . . . or sink in the attempt.

For decades now, the modus operandi of the United States government has been to try to solve problems not by actually solving them, but running around them: instead of taking measures that would actually educate or train minorities, they gave us affirmative action; instead of providing a tax structure that allows mothers the choice or opportunity to stay at home to raise their own children, they funneled all the federal benefits into daycare programs; instead of encouraging through favorable legislation a steady supply of housing to keep pace with demand, they encouraged sub-prime loans on overpriced property. The results of these policies have been both predictable and disastrous. Now, with the Big Three, we are going to get another dose of this same brand of foolishness: “Let’s not actually confront the source of the problem, let’s just kludge up a band-aid out of greenbacks and spit.”

So here we are again, letting Congress “solve” a problem without actually solving it. Until Congress finds the courage to make some difficult and necessary choices because that is the right thing to do, instead of pandering to noisy, open-handed, know-nothing lobbyists and special interest groups by avoiding problems, putting them off until tomorrow, or covering the symptoms with billion-dollar cortisone injections, we’re heading for disaster.

I don’t know how many ways I can say it: the problem with the Big Three is not that the free market has failed them, it is that they have not operated within the free market. So long as workers are able to dictate the value of labor without reference to what the market can support, so long as Congress creates an economic environment that handicaps the ability of American companies to manufacture goods that can be sold competitively throughout the world’s markets, the problems confronted by the Big Three will simply be exacerbated, and replicate themselves throughout our economy.

It is dismaying, to say the least, that many so-called conservatives are demanding accountability milestones as a condition of a federal bailout, as though this is a panacea for the problems confronted by the Big Three. They need to revisit a few economic truths about how businesses ought to operate, and display the courage of their convictions—if only for the sake of holding their heads up when the future consequences of this present desperation comes crashing in on America.

There is a saying that the road to hell is paved with good intentions. Add to that spinelessness, ignorance, and hubris, and you have defined the path staked out by Congress to America’s future.

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