The risk assumed in enacting the $700 billion bailout was the creation of a precedent that would encourage the federal government to bailout other industries in the future. Manifestation of this is the bailout Democrats in Congress and the President-Elect – at least at one point – support and are trying to pass.
The legislation is a bad idea, for its sole accomplishment will be to lengthen the long, agonizing death Detroit is slouching towards on its current path. Through coercing excessive and unaffordable compensation packages from the big three automakers, the unions are responsible for this death march, strangling the companies with onerous labor costs that render them uncompetitive with other companies with less overhead. Throwing millions of borrowed dollars at the Detroit three will not alter this, just temporarily delay the inevitable.
This is the outrage. That we should incur further debt to effectively subsidize a failing business model – when doing so won’t actually fix the companies and resolve the circumstances which have brought them to this point – is a gross abuse of the public trust. It is a waste of money that we don’t have.
What the Detroit big three need is bankruptcy and a concurrent fundamental reorganization of their structures. The proposed bailout will only stave off this reckoning for a little while, bailing out some water without fixing the gaping hole in the bottom of the boat.
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