Nerve Endings Firing Away

It is raining bailouts and after the $700 billion largesse for the financial industry almost every industry is knocking on the Capitol doors asking for a similar handout. Turn on the TV and you seen countless arguments for or against the bailout for the auto companies or as they are/were popularly know, the Big 3 – GM, Ford, and Chrysler. Honestly, it should be 2.25 or even less because honestly Chrysler is not in the same league. There are sound reasons for rejecting this blatant beg and allowing the industry to declare bankruptcy but then again, it is the context that matters. We are in one of the worst economic downturns so much so that another shock to the system will send the Dow plunging and unemployment and inflation sky high. It is indeed a difficult choice.

Although it makes perfect economic sense to let Detroit go bankrupt allowing it to restructure, the reality is that the 2-3 million job loss, pensions wipe out, and consequential effects on other ancillary industries and indicators. If the rest of the economy was strong and rising, I would be dead against the bailout. Now I’m merely conflicted. Theoretically I approve of rejecting the bailout but I don’t believe that bankruptcy is going to rescue Detroit; restructuring or otherwise. So it all comes down to biting the bullet and learning to deal with not only the economic avalanche but also the political fallout.

Don’t be swayed by the arguments on TV because if you look beyond the faces and their arguments, their motivations are completely different from what they state. All the supporters of the bailout are from the Michigan delegation e.g. Senator Levin who offers economic reasons and doomsday predictions in the wake of a bailout rejection. On the other hand, those against the bailout citing lessons from the free market are from non-Midwest states such as Senator Shelby whose state Alabama is home to ‘foreign’ car assembly plants. It is all politics yet no one seems to admit it. For once, I would like to see a non-Michigan Congressional member support the bailout and a Michigan member speak against it. I’m sure you’ll be hard pressed to find such a member. This election stripped Michigan of its swing state status and the Democrats would like to keep it that way and the only way they can is by refusing to acknowledge a dying industry.

Pandering to the constituents is the elephant in the room and no one on TV even talks about it. All the economics and free market lessons from the politicians are bunkum because if the car industry was in Birmingham (Alabama), you would see roles reversed. Politicians, I can understand but what stops the TV pundits from confronting this obvious truth? Let us not pretend that loyalty to an economic ideology dictates our actions because if that were true, we wouldn’t have seen any bailouts. As Carville would say it, it is the politics, stupid.