In December, which was only two months ago, the government decided to bailout the auto industry, providing billions of dollars to both GM and Chrysler. Since then, the auto industry has been unsuccessful in doing an about face with their business practices. They have been unsuccessful in negotiating with the stubborn and powerful United Auto Workers (UAW). This means that instead of cutting the hourly cost per employee, the automakers will be forced to cut tens of thousands of jobs. Latest projections show GM ready to cut 47,000 jobs.
The current stock price of GM is hovering around two dollars per share. That translates to a market value of around 7 billion dollars. The company has already received more than this amount from the government and is now requesting an additional 9.1 billion minimum. Do politicians not realize they are investing more money into this company than it is even worth? Seriously, you can put as many band-aids on a corpse as you want, but it isn't coming back to life. We must let them fail. We must allow the laissez-faire system to work. When an individual citizen becomes engulfed in bills and can no longer handle what they believed they could financially, they file for bankruptcy. If you and I can be forced to go through the pain and burden of bankruptcy then so to should these top companies. In 2002, Kmart filed for chapter 11 and they were able to turn themselves around and are still in existence in 2009.
We have to stop allowing politicians and lobbyists to scare us with words such as meltdown and financial doom. Large companies such as Kmart have filed for bankruptcy before and have lived to sell again. The UAW continues to use scare tactics in order to push for another bailout and thus keep from having to negotiate too extensively with the automakers. They are relying on the idea that President Obama will not allow these companies to fail and will instead continue to pour massive amounts of cash into them. As long as they anticipate an unrelenting flow of money from the treasury, they will continue their demand for ungodly hourly earnings.
In order to rectify this situation, Obama and our congressional leaders will need to bite the bullet and allow for these companies to fail. They will need to take the hard stand against the unions and teach them the lesson that working for less is better than no job or income at all. Unfortunately, Obama and many democratic leaders favor unions and will not allow these companies to fall. The threat of a another major corporate failure may be a terrifying thought for those in charge of the well being of the United States, but by continuing to bailout these corporations, they are only weakening our capitalist system. The same system that made our country and economy so powerful.
Open Thread
1 day ago
I agree that the bailouts are getting outlandish and sinking the billions of dollars into a company once is debatable, but the original agreement was for the company to prove that it is profitable. To get bailout money and say you need more than what you're company is worth to continue operating, the government needs to say it's time to file bankruptcy and let the economy scab over. In studying economics I have learned that there is a time for government intervention but there are also times for the economy to fix itself.
ReplyDeleteI seen a cartoon last week, which pictured a old man (big business) getting bailout money, and a child (The younger generation of tax payers) saying "she is paying for."
ReplyDeleteThe last 16 years I kept hearing we could not leave government debt for the coming generations. All talk, politicians just blow smoke up our @#@$%$@. I hope the younger generations becomes the squeaky wheel.
I'm sure that there are grand and complex theories of how letting giant businesses fail will only further damage the economy, but I agree with your viewpoint that we may need to just let them die. What's going to be worse? Forcing them to work things out for themselves, even if that means that the business dies and some other company that ISN'T blowing their chance will scoop up the market share? Or keeping a self-important company, that used to make endless amounts of profit and destabilized itself before lowering those profits, alive at the cost of infinite amounts of non-existant taxpayer dollars? We are already too far in debt. People, the treasury, businesses, we are all in debt. If you can't swing it for yourself, oh well. Nobody REALLY has the money to lend you.
ReplyDeletei am on the same side as you are on this issue. i like when you said that all the bandages in the world wont bring the corpse back to life, and you were so right at the same time. someone else wrote about the bailout but took the opposing position and my comment for that blogg basically said wat you said in your blogg. we need pure competition without gov. regualtions. we arent goin to stop askin for help until the gov has its hands in everything we do (which isn far away).
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