Another day another bailout by our government. After facing fierce opposition from regular people, our federal government decided to bail out banks, now the latest effort is to save the auto industry. The argument being that so many people work for the auto industry that it would have a devasting impact on our economy. This raises a couple of issues that needs to be addressed by Rep. Larsen and other Washington DC legislatures.

So what is the strategy for who we bail out and who we don’t. I kind of bought the logic with banks that if they go under it will stymie credit to businesses and they will be hit hard. The logic was at least there that it was a little bit different from everything else and the linkages were such that it could have a big impact (I still disagreed with the process that piled pork in the bill to get it passed and I am not convinced the failure of a few large banks would impact the many smaller banks that are just fine). The auto industry’s big argument seems to fall flat for a number of reasons. First you have the issue of fairness and justice. How would you feel if you were one of the millions of people that worked for smaller companies or industries that were threaten by layoffs or bankruptcy. The auto industry gets bailed out, but your industry or company does not. The reality is a lot of people are going to lose their jobs and right now it appears the government is picking and choosing which ones based on some obscure criteria (campaign donations, union influence, etc). The second issue is you have a number of industries going through major changes. The auto industry is one, media is another where the fundamentals are changing and the businesses either need to make radical changes or die. It happens all of the time, many of the main frame computer companies are gone and now replaced by other companies like Microsoft and Intel. We did not bail out those companies even though they employed a lot of people. I used to work for Chrysler back in the early 90’s and I know their issues and how they work. They needed serious help back then and so far the economy over the last 20 years has allowed them to keep going depsite fundamental flaws in their operating models. The bailout only prolongs the agony and will make it more expensive and more painful. Third, Rep. Larsen and others state that bankruptcy would be death for the auto industry. Most of the long-term service issues can be done by other deals or local repair shops with parts coming from existing suppliers, the only real issue you have is warranty and that can be dealt with. People understand the situation and will continue to buy cars. It is highly unlike that any of the automakers will go away and everyone understands that restructuring will take time and needs to take place. It will only happen under bankruptcy and once they are facing greater pressures than they are now.

Right now it appears that Rep. Larsen and others in Washington are making this up as they go along. No real definition of what is important and taking it on a case by case basis. We already know that state and local governments are going to ask for help. The media is going bankrupt as well and likely will be arguing that we cannot live without newspapers. It becomes a slippery slope that was started with the banking industry and now we see it picking up steam. A vast majority of the people did not agree with the bank bailout and a vast majority do not agree with the auto bailout. This leads one to wonder whether our government officals are just smarter than most of us and have a better grasp of the issues that allows them to make more intelligent decisions than we can, or if something else is driving it. I highly doubt it is their vast intelligence that leads them to a different conclusions than most citizens, so why do they keep going against the public will. I guess you can aruge that it is just a loan and will get paid back to taxpayers, but if it were that good of a loan why wouldn't the private markets make the loan. The answer is they will not do that anymore because they know the government will do it for them so let them take the risk.

As I argued a while back, recessions and unemployment are not the end of the world. It was only a short time ago that I was getting up at 3am to deliver the Bellingham Herald to help make ends meet. I gained perspective and having gone through the crisis I am much better off. Let the chips fall where they may and focus the money and effort on the backside by helping those that lose their jobs to cover basic expenditures like food and housing and help them retrain for other jobs. Right now I have my fingers crossed the the Senate Republicans bring some sanity to the discussions, but based on past experience I do not hold out much hope.