AFSCME 3357-HOF'S BLOG

From the "Mo Money" File
Detroit 3 Seeking $50 Billion in Federal Loan Guarantees



Sometime after Labor Day, officials from Chrysler, Ford and GM are likely to head to Washington and make their case for $50 billion (more or less, probably more) in federal loan guarantees. The gist of the pitch is that the loan guarantees are necessary to retool for higher MPG goals necessary to fulfill the country's energy policy and to meet CAFE standards. Last year's energy bill included provision for guaranteed loans of up to $25 billion, but Congress never funded that portion of the bill. (I bet the oil companies' tax breaks went through though.)

While capitalist theory would suggest that bailouts are a bad thing. The government, (including the Bush administration)has not been dogmatic in opposing bailouts and subsidies to other industries. The ongoing banking industry bailout is costing much more than what the automakers are seeking. There is no question that if (let's say) General Motors went bankrupt and shut down, the economic fallout would devastate many communities just as thoroughly as Hurricane Katrina devasted New Orleans.

George W. Bush is expected to be inclined not to support the auto industry loan guarantees. The overall tone of his administration right now is to do nothing about anything to keep from doing anything stupid. (Well, that's not exactly true, they did take steps to gut the Endangered Species Act.)

When it comes to equity, you'd think that General Motors would have some chips to call in with the Bush family. When George Herbert Walker Bush was a naval aviator, his plane was hit by enemy fire. The sturdiness of his TBM Avenger let him keep control long enough to bail out. The TBM Avenger was built by General Motors' Eastern Aircraft division. In fact all of the (then) Big-3 provided many of the plants that made up the Arsenal of Democracy that supported the United States and allies during the 20th century. A further erosion in our industrial base couldn't be good for national defense. On 9/11/2001, a few goons hijacked a few airplanes and ran them into a few buildings. It was a tragedy to be sure, with more than 5,000 Americans killed; but the United States and even countries a fraction of our size have shrugged off worse disasters and continued with their economies intact and continued to set their own national agendas. Nine eleven sent GWB first into a stupor and then into a panic. All of a sudden, addressing this handful of terrorists became the prime and overriding domestic and foreign policy issue. His lack of composure and lack of confidence threatened to send the econom into a spiral. General Motors, to its credit, came up with a timely "Keep America Rolling" advertising campain and incentive plan that provided a tangible boost not only to the cash flow of the economy, but also to the national spirit. George Bush, you don't just owe GM one, you owe them two.

It would be nice if GM, Ford and Chrysler had run their businesses well enough to not need government assistance, but they didn't, and they do need assistance. There's no question that these companies have provided and provide strength to the economy disproportionate to the market value of the enterprises; and for that reason alone, it makes sense to carefully invest public money into maintaining our industrial base. If I've learned anything from being a parent, there are times you have shake your head, curse under your breath and write out the check anyway. This is one of those times.