Our government has been in a generous mood lately. Economic stimulus checks should have helped the sagging economy over the summer, correct? Maybe not. A government takeover of Fannie Mae and Freddie Mac should stabilize the housing market, right? Not so much. Throw $700 billion at the financial sector and hope that solves the problem? I’m not holding my breath.
    Somehow, U.S. automakers have managed to crash this party too. Largely unheralded during the fight over the financial bailout, Congress voted to fund $25 billion in guaranteed loans for the U.S. auto industry. In exchange for their free money, Ford, General Motors and Chrysler are required to raise their average fuel economy standards to 35 miles per gallon.
    Actually, it’s not surprising that lobbyists for the automakers were able to push through billions of dollars of relief with little resistance from Congress. A quick look at the electoral map shows that Michigan, Indiana and Ohio account for 48 votes in the Electoral College. In each of these states, the presidential race is within five percentage points, according to a Gallup poll. These states also account for a large percentage of the automobiles produced within the U.S.
    Thus, we see a prime example of how electoral politics affects public policy. Neither party or presidential candidate wants to risk losing these three states. And so we see McCain, the nominee for the party of fiscal responsibility and free markets, calling in the Detroit News for “any reasonable proposal that moves the industry to a more stable and prosperous future.”
    But this plan does nothing to move these companies into the future. In fact, it only ensures that they will stay in the past longer. The Big Three Automakers’ current predicament is their own fault. They invested heavily in SUVs and trucks during the 1990s and made large profits. When rising energy costs raised the demand for fuel efficiency, they did not adapt and Toyota, Honda and others filled the gap. Why should taxpayers pay for the bad business practices of Ford, GM and Chrysler?
    The main argument for bailing out the financial sector is that it would have a major, lasting impact on our economy if those banks failed. The same cannot be said for the auto industry. Already, Americans buy more cars from foreign companies than domestic. Foreign automakers would simply pick up the slack in sales from the American companies.  They would also be more likely to open factories here, employing workers displaced from the Big Three.
    Finally, bailing out the automakers sets a dangerous precedent for government intervention. If we are going to prop up both investment banks and the auto industry, where do we draw the line? Are no businesses allowed to fail? If Pepsi gets into financial trouble do we bail them out too? For that matter, what about you and me? We’ve all got credit card or student loan debt. Let’s have the government bail us out as well.
    Next year, when these government loans have failed to correct the flailing auto industry, their lobbyists will return to Washington, begging for more. Several legislators have already told the Detroit News that they intend to ask for $25 billion more next year. Hopefully, the absence of election-year populism and a year of perspective will allow lawmakers to see that government intervention is not the way to fix the auto industry.


Tim Hadachek is a junior in political science. Please send comments to opinion@spub.ksu.edu.
   

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