Now We're Bailing Out the Auto Companies? Who's Next?
A few years ago, if General Motors and Chrysler tried to merge, the bureaucrats at either the Justice Department or Federal Trade Commission almost surely would have interfered and prevented the marriage from taking pace. Today, the federal government is looking for ways to subsidize a merger of the two auto giants, perhaps by tapping into the $700 billion Congress approved to bail out the highfliers on Wall Street.
But this is just part of the story. Earlier this year, the auto companies put their lobbying muscle and campaign contributions to work and got the politicians in Washington to approve a $25 billion "loan" from taxpayers. Now the auto companies are looking to stick their snouts further in the trough by transforming their financing subsidiaries into bank holding companies so they can get more unearned money.
Unfortunately, very few people are asking whether it is a good idea to let politicians and bureaucrats intervene in private markets, and this is the fundamental issue -- regardless of whether they are trying to hurt companies or help companies. The absence of any adult leadership, combined with the precedent created by the Wall Street bailout, seems to have triggered a feeding frenzy in Washington. The auto industry is first in line, but it may just be a matter of time before every poorly-managed and uncompetitive industry looks to line its pockets at the expense of taxpayers.
Bailouts and subsidies are bad policy. Government intervention invariably is a recipe for inefficiency and slower growth. Yet bad policy often is good politics (at least in the short term). Politicians thus have an unerring instinct to make bad decisions, and their efforts to subsidize the auto industry are a classic example. For instance: