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Is Obama Ready to go Against His Supporters on an Auto Bailout?

According to a poll earlier this month, 61 percent of Americans oppose an auto bailout, 70 percent believe that a bailout would be unfair to taxpayers and another majority of those surveyed did not believe that the bailout would help the economy. Only 15 percent believe that bankruptcy in the auto industry would immediately affect them. Considering the wide majority by which President-Elect Obama won the popular vote, a significant number of those polled had to have voted for him.

That means that if Obama were to put the full force of his administration behind an auto bailout in January, he would be going against a significant number of his supporters, not to mention the 52-35 Senate vote. The bailout in the Senate may have failed because of the Republicans, but the American people seem to be against the Democrats on this issue.

If Obama were to enact economic policies that he considers necessary against the inclination of many who voted for him he may face backlash in the early days of his presidency. I know that among the young voters I know, most of whom voted for Obama, I’ve yet to meet one who supports giving money to the automakers.

Why should they? As the government digs itself deeper and deeper into debt, it’s the young voters who will have to cough up the dough. It’s no wonder everyone is hesitant about handing out billions more dollars, in the short time since the first $350 billion in rescue funds were allocated in October, the Treasury has spent $335 billion, leaving a mere $15 billion left. The proposed auto bailout was $14 billion. The amount is barely enough for Treasury Secretary Henry Paulson Jr. to pay up, should Bush follow through with his apparent change of heart on using Troubled Assets Relief Program to help the auto industry.

Paulson is likely wary of using the funds for automakers, It doesn’t look like the other half of the money will be coming down the pike any time soon. Already, Sen. Christopher J. Dodd (D-Conn.) and a number of his fellow congressmen have said that they would likely oppose signing off on the second $350 billion, leaving most to speculate that the Treasury won’t see a dollar more until Obama has been sworn in.

President-elect Obama needs to take a step back and consider what’s going to happen to his man of the people image when he goes against his own voters and members of his party. Detroit is not worth the trouble.

The Big Three (GM, Chrysler and Ford) don’t innovate, can’t do good business, and work against their customers. In fact, they sometimes work against innovation and their customers.

GM alone is losing 4.4 billion each month and the rest of the automakers are not far behind. Throwing money on the fire isn’t going to help them. Either they are going to shrink down, restructure, and come out as completely different companies or they are going to fail. To innovate their business they need incentive, and if they go down, they shouldn’t take the taxpayers with them. Giving them more money would just allow them to prolong the pain.

Most commentators seem to be looking at this issue in black and white, as if a failure to pour taxpayer cash into Detroit would mean every auto worker would loose their job and end up on the public dole forever. Talk about fear-mongering… Do we really expect that 2,201,955 people would just throw their arms in the air and give up?

Yes, if we don’t bailout auto industry now it will be hard on the economy, but it would only be worse later on. On the other hand, if The Big Three go down in flames, as they claim they will without public subsidization, it creates precisely the type of environment in which competition and innovation thrives.

If a big hole were to open up in a field that has been locked in by a small number of large companies for years, some of those out-of-job workers will start thinking about going into business for themselves. These businesses will be smaller, with less fat, more agile, and better able to innovate. As a result we will end up with a competitive field that is friendly to exactly the type of green technology Obama supports and better for consumers.

To quote Senate Minority Leader Mitch McConnell (R-Ky.): “We simply cannot ask the American taxpayer to subsidize failure.”

Originally posted on UPI’s The Voice of Young Voters Presidential Transition Forum.

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2 Comments

  1. The whole point of economic cycles it could be argued is that when the cycle turns down the fat gets trimmed and inefficient and uncompetetive businesses go to the wall. This then leaves room for efficient business to grow as the growth cycle resumes.
    In the case of the US auto industry there is no doubt that the big players had become complacent and were producing inefficient and unreliable cars in comparison to their competitors. Featherbedding these companies will only prolong the agony.

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  2. Very interesting article, as are some of your other posts. I have bookmarked your great site for future visits.

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