Mickey Kaus thinks there’s no way that the Big Three get a second bailout in a few months — “I still don’t see the Democrats coming across with a second huge tranche of cash.”
I’m not so sure. I think the automakers and the UAW have successfully convinced enough lawmakers that their bankrupcy is an economic doomsday scenario that must be avoided at all costs. (Probably that urban legend that 1 in 10 jobs in this country is tied to the auto industry.)
Clearly, President Bush feared the pain of seeing the automakers collapse on his watch more than he feared the pain of allocating $17 billion or so out of the TARP funds. Do you think the Obama administration will be more willing to endure that pain?
Bush justified the expenditure by saying, “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.” Maybe within the next three months, the U.S. discovers cold fusion and the newest version of the iPod, but barring something that dramatic, we will probably still be in a financial crisis and a recession when the Big Three finish burning through the $17 billion. And we’ll still be dealing with lingering effects of crisis and recession three months, six months, and maybe nine months after that. There will never be a good time to “allow the U.S. auto industry to collapse.”
And even if the economy isn’t still in deep recession, U.S. automakers will still be facing a tough sales environment. Even Toyota thinks it will sell 790,000 fewer cars in North America next year than it did this year; why should G.M., Chrysler, or Ford expect better fortunes?
The Obama administration will – most likely — look at whatever restructuring effort the Big Three have made and wag their finger at their slow progress, but declare that due to the economic circumstances, allowing the automakers to collapse is “not an option,” and then open the checkbook again. Lather, rinse, repeat. The successful reform of the auto industry will always remain six months over the horizon.
The numbers being tossed around for the Obama stimulus package are $750 billion to $1 trillion. In the spring, we’ll hear the argument, “when that kind of money is being spent on economic stimulus, it’s foolish not to ‘loan’ the automakers another $100 billion (or whatever amount is being requested) in order to avoid an economic catastrophe for the heart of American industry, blah blah blah.”
The automakers have, in fact, done what is necessary to survive by finding an alternative revenue stream: the American taxpayer.