You know, after spending $700 billion to help the American economy not sink into Depression 2.0 … $25 billion for the Big Three is like the change you find under the couch:
With Congress preoccupied with the massive, $700 billion bailout plan for the financial industry, General Motors, Ford, and Chrysler have finally secured Part One of their own federal rescue plan. A bill set to be passed by Congress and signed by President Bush as early as this weekend—separate from the controversial Wall Street bailout plan—includes $25 billion in loans for the beleaguered Detroit automakers and several of their suppliers. “It seemed like a lot when we first started pushing this,” says Democratic Sen. Debbie Stabenow of Michigan, one of the bill’s sponsors. “Suddenly, it seems so small.”
But please don’t call it a “bailout”—Detroit is too proud for that. Exact details will come later, but the loans would probably amount to at least $5 billion for each of the Detroit 3, plus smaller amounts for suppliers. That would allow them to borrow money at interest rates as low as 4 percent—a steep discount compared with the double-digit rates they’re paying now. Over several years, the automakers could save hundreds of millions in financing costs. Plus, they’ll have five years before they have to start repaying the loans.
Now, I’m from Michigan and my parents are retired autoworkers, so I know how the economy of my home state lives and dies on “horseless carriage.” But this seems silly because the Big Three have done such a craptacular job at making cars that people want. They spent the last decade making bigger and bigger SUVs and when gas got expensive, they were caught with their pants down. Also, the government has given them money before and they wasted it back then too.
I agree with Megan McArdle:
Shame on the Bush administration for considering this. And shame on Debbie Stabenow, though I know she’s just pulling as much pork as possible for her constituents.
Yes, I favor intervention when it looks like there’s a risk of a really severe recession. But there is no such rationale here, not even arguably. It’s pure pork, with a soupcon of economic nationalism thrown in. If the Big Three can’t make autos people want to buy, then they should liquidate and open up the market to those who can.