-- Posted Friday, 5 December 2008 | Digg This Article
| Source: GoldSeek.com
By James West
www.MidasLetter.com
Friday, December 5, 2008
Two weeks ago, the heads of General Motors, Ford and Chrysler arrived in Washington in private jets to petition congress for a $25 billion bailout package, and were promptly rebuffed by skeptical senators.
Yesterday, they arrived again, but this time in hybrid cars. The price tag for the bailout, though, had risen by $14 billion to $34 billion. I imagine that in two more weeks, they’ll show up on bicycles and ask for as much as $125 billion, which is the amount that Moody’s economist Mark Zandi predicted they would need to survive.
Meanwhile, other industries are gripped by an economically enforced downsizing that seems to picking up yet more steam. No talk of bailouts for retail, transportation, mining, tourism, semiconductor, consumer electronics manufacturers, or any other major sector in decline has been heard. Why?
The dominant argument for bailing out automotive has been, thus far, the fact that it’s a bastion in the U.S. economy, and if allowed to collapse, will take the rest of the economy down with it. The rest of the economy, if one adopts a sufficiently distant viewpoint, is an entangled mass of self-immolating industries bloated to overcapacity by years of excessively cheap credit.
A period of economic contraction is clearly the natural response, and so watching the efforts of the increasingly mislabeled financial leadership would by hysterical were it not quite so painful.
But today the hearings will continue, and one has to wonder if the ears upon which these pleas from the heads of North America’s auto industry will fall will remain unsympathetic. One could only hope that the sixty-one per cent of Americans who expressed opposition to any bailout for the automotive industry will carry sufficient clout to prevail.
At any rate, congress winds up for the Christmas break next week, and the logistics of hammering out a deal by then seems unlikely, considering the complexity, scale and scope that such an agreement would theoretically entail. As is oft repeated by congressmen themselves, the process on Capitol Hill is not renowned for speed.
If the companies cannot obtain the relief sought, then most likely G.M will file for bankruptcy within the month, we are told. That will create first the opportunity to reorganize under court protection, which would give them the opportunity to raise money through the sale of assets, trim jobs and thoroughly embrace the idea of a crash diet.
Sure, jobs are going to be lost, and that is the only valid argument for a bailout in many of the Democratic minds arguing in support of a bailout. But if those jobs are preserved through an injection of cash as opposed to a requirement for threatened workers’ skills, the question has to be asked – What will change before that cash is spent to return the worker’s presently redundant job into a viable one?
If there is no future for a certain percentage of the bloated payrolls of automakers, then isn’t it a case of sooner rather than later for those who will need to find employment in a different line of work? Why not just finance tuitions and living expenses directly for Americans affected by job cuts? At least that way, we wouldn’t be trying to resuscitate a terminally ill patient at great taxpayer expense. This current economic contraction could be used as a period of retraining that would result in a stronger, more competitive work force.
There is some talk of diverting funds from the $25 billion loan package approved as part of a 2007 energy bill that was intended to facilitate the transition to greener technologies in U.S.-made automobiles. Certainly the opportunity is in front of congress to force that transformation as part of the conditions under which such access might be granted. But to squander that money on life support for the Big 3 would be tragic.
Finally, we need to consider the implications for American Democracy in resorting habitually to bailouts when our privately capitalized industries, paying dividends to shareholders for years, expect to be subsidized in supreme socialist fashion when mismanagement and economic cycles cause profitability to wane.
It is disingenuous and an affront to the American people when Bush decries further regulation and oversight of industry as too much interference with free markets, and then dispatches billions in rescue dollars to select corporations because they are “too big to fail”.
The only thing at this point that appears too big to fail is the disconnect between responsible financial leadership and the ham-fisted shotgun thinking permeating our present global “leadership”.
Help us expose the pattern of fraud and duplicity by visiting www.CrimeoftheCenturyMovie.com
-- Posted Friday, 5 December 2008 | Digg This Article | Source: GoldSeek.com
