Archive for November 20th, 2008

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Brainstorming Alternatives To A Bailout

November 20, 2008

OK, I’ve been holding off on commenting on this for about a week now, as I’ve taken the time to absorb all the arguments from the pundits, pols, and players.  I probably should have posted something up right away, because as a blogger who is in real life employed in the auto industry (and at a GM dealership specifically), the outcome would certainly be something that directly impacts my life (which is not really the case with the debate over Iraq, gay marriage, or the myriad of other things that get debated over the pages of memeorandum).  I’ll state right up front that macroeconomics isn’t exactly my strong suit, but here goes anyway…

The paradigms of the debate, from what I’ve seen, fall into two main categories.  On the one side, you have those who approach the bailout question from the perspective of capitalistic purity and the role of the federal government, and that the whole thing should be endorsed or opposed strictly on principle.  On the other, you have those who chose to ignore all that (intentionally or not), and instead go back and forth over whether a bailout will actually help the situation or hurt it.  For the time being, I’m going to work within the realm of the latter camp.

Also, after a week of seeing this play out on the web, TV, and on the showroom floor, the one thing that strikes me as frustrating about the debate itself is this sort of dichotomy where you have choice A) give the “big 3” billions of dollars, presumably on loan, and B) do nothing, let the giants fend for themselves and/or let them go bankrupt.  

Is there a choice C?  Or, for that matter, a D), E) or F)?   We’ll get to that in a second, but perhaps I should offer a few thoughts on the debate over A) and B) first….

The problem with throwing money at the problem, as I’ve seen argued, is that it does nothing to address the issue at its core.  2003-pontiac-aztekIn short, the Big 3 would still employ the same incompetent management, struggle under the constraints of the same rules of unions, CAFE standards, health-care and pension costs, and ultimately churn out a lot of the same inferior vehicles (at a loss, to boot).    Funneling in more money just delays the inevitable, unless we’re prepared to do what would certainly be untenable, i.e. keep bailing them out indefinitely.  But proponents of the action would argue that the U.S. auto industry is a “special case”, and the adherence to the principles of free market capitalism can be discarded in the interests of the greater good.  We’d presumably do it, and hope for the best.

Of course, that alternative of doing nothing to help, rolling the dice, and letting the free market and bankruptcy legislation do its thing scares the heck out of a lot of people (including myself).  The fear of a disastrous ripple effect through the rest of an economy that is already on life support is what pushed the prospect of a federal bailout into mainstream debate in the first place, and even if people opine on the scope of the repercussions, one might be confident in saying that “bad” would be an understatement.

Given these two choices, one might assume that someone like myself would vote in favor in the interests of my own preservation, and welcome the handout.  But I can’t say that I do, and I say that after looking at the situation from both of the aforementioned paradigms.   So, I feel obliged to come full circle here and wonder aloud if there is an option C), and what that might be.  Specifically, I’m interested in ways Washington can intervene that addresses the dynamics of the underlying problems, but isn’t simply a blank check. 

This is where I kick off the Chamber brainstorm, with the intention of adding to the thread as ideas come to me (or anyone else).  I’ll start it with two words:

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