Congress Finally Does Something Right

on Friday, November 21, 2008

...well, sort of. But if you can believe it, I actually agree with Nancy Pelosi for once:

Congressional efforts to rescue Detroit's auto makers collapsed Thursday, with lawmakers saying the industry lacked credible plans to return to profitability.

The decision came after two days in which leaders of three of America's largest corporations pleaded for a taxpayer-financed rescue from lawmakers in front of a national television audience. The spurning of their pleas leaves in question the future of companies that have been synonymous with American industry for decades and together employ 239,000 people in the U.S.

Democrats in Congress offered only a glimmer of hope, saying they would reconsider a rescue if General Motors Corp., Ford Motor Co. and Chrysler LLC submit convincing turnaround plans by Dec. 2.

"Until they show us the plan, we cannot show them the money," said Speaker Nancy Pelosi, the California Democrat.
Don't get too excited about a fiscally conservative turnaround from our friend Pelosi, though, as the same article later states that Congress is still planning to make a $10 billion check written out to "cash" for Detroit in the weeks to come...

These guys just don't seem to get it, do they? They roll up on Washington tarmacs in their private, executive jets and then walk into a congressional session with absoultely no business plan whatsoever - and then they have the nerve to ask Congress for $25 billion of our tax money.

Amazing, isn't it?

The underlying problem here is that Detroit wants to use these bailout funds to pursue the very same business model that got them into this mess in the first place! Unless Detroit gets serious about making some drastic changes, the only thing a bailout will do is push the inevitable bankruptcy back another 6-12 months. Mitt Romney sums it up nicely in this op-ed piece for the New York Times:

If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
...and that's coming from the mouth of a guy who was born in Detroit and whose father was even the president of American Motors.

Look, if the government really wanted to help, they have plenty of options at their disposal - none of which that would cost $10 billion. For starters, it's time to cancel some of the union contracts that are pulling Detroit into the water with them as they drown. Second, Washington needs to ease up on the CAFE standards. Does anybody besides Washington find it wise to burden an already struggling industry with further, more expensive environmental standards that they can't afford?

It's time we demand that Washington says "enough" to these endless bailouts. According to Forbes magazine, the cost of the original $700 billion bailout is now up to $5 trillion! Think about that for a second... 5. Trillion. Dollars. And yet this bailout, that was supposed to solve the whole economic crisis mind you, hasn't done jack for the market. Did you see the Dow Jones or S&P 500 yesterday? The S&P is at an 11-year low. But wait, Washington, you told us that this bailout was going to fix the market.

I've never supported any part of this bailout. It's not working, everybody wants a piece, and we can't even afford it in the first place. It's not like Washington has $5 trillion in some drawer somewhere that they can pull out and use for this. They're printing it! In fact, they're printing it faster than your local neighborhood burger joint can print McNapkins. But if if you guys in Congress are so set on printing it anyway, then give it to the American people! My back of the envelope math says that $5 trillion evenly distributed to the American public amounts to almost $17,000 per person - every man, woman, child, and infant. Does anybody here not think that if Washington gave a household of 4 a check for $68,000 - and then did the same for every household in America - that it wouldn't supercharge the economy?

But instead, Washington would rather give that money to the very same people that misappropriated it in the first place. Brilliant, Congress.