Well it is that time again; time for the Federal Government to fly in on the proverbial sled and deliver toys to the good children of America. And by toys, I mean millions of dollars. And by good children, I mean bankrupt corporations.
The question is do we really need to go down this road again? Is it the job of the Federal Government to bail out the Big Three Automakers? In answering this question, consider the following points:
- What are the opportunity costs of NOT bailing out the automakers?
- What message are we sending to other businesses by going through with the bailout?
- Does this represent a fundamental change in our economic system?
- Why should or shouldn't the government bail out the automakers?
Some links to help in your investigation:
http://www.nytimes.com/2008/11/20/business/20auto.html?_r=1&ref=automobiles
http://www.foxnews.com/story/0,2933,455286,00.html
http://www.forbes.com/opinions/2008/11/19/gm-economy-autos-oped-cx_bm_1119mcgarvie.html
http://www.reuters.com/article/GCA-autos/idUSTRE4AJ7YZ20081120
http://www.google.com/hostednews/ap/article/ALeqM5g9_YzIcykt_QqWPWLuCciw2ugCQQD94IHS9G0
49 comments:
The government is in a difficult situation. They have already decided to spend over 700 billion dollars to bailout greedy wall street CEO’s and they have supported bad economic policies by supporting a group of men who gambled and lost. Now these huge car companies want some of the money too. On one hand I don’t think we can just forget about the thousands of hard, blue collar workers that will lose their job if these car companies go down but where do we draw the line. The automakers where given the chance to receive the money they need but they didn’t even know what they where going to do with the money. Now they have until December 2nd to decide what they will do with their money. Honestly they should be ashamed of themselves, they want billions of American tax dollars and they don’t even know what they are going to do with it. I am all for supporting the worker but I just don’t know if this is the way to go. If we bailout the automakers we will continue a trend of just giving out billions of dollars to companies of failed policy. The reason the automakers are going down is because they have inferior goods to foreign nations. Toyota and Nissan and Honda have spent the time to make fuel efficient cars that last. If we support this bail out, who will be next, who will be the next company looking for a handout. In a way we have lost a large part of our capitalistic system through these bailouts. I propose a solution. Instead of bailing out inferior car companies that should try and figure out their own problems lets invest in something that will give jobs to people who are laid off, lets stimulate growth through construction, and lets give rid of our dependence of foreign oil and dirty fuels. It is time for the green revolution. Instead of calling this a liberal, tree hugger idea lets call it an idea that WILL help the environment that we love and WILL help stimulate growth and jobs and hopefully help us to rise up from this recession.
It is completely necessary to bail out these three auto makers because if we don’t then most of our auto industry will become completely reliant upon foreign own and produced companies. We need to solidify and restructure our own economy and we can’t do that by relying on foreign imports. If we were to not bail out the three companies we would further screw up the auto world and the economy in general because we will in turn sink farther into debt to foreign countries such as China and Japan who are the main producers of these automobiles. While this action is necessary in order to save America’s auto industry, it is sending a bad message out to other companies, and not just car ones. With the initial bailout of companies like Freddie Mac and Fannie May corporate executives probably thought that it was a one time thing and that the government would not be able to provide for other companies in a similar way. The message that the government would be sending to other large American companies is that they have nothing to worry about because if they get into financial trouble the government will simply bail them out and they can restart on a fresh page in the bank book. If this bail out goes through it will show how our government is now completely involved in our economy and its functions. For periods of time government has had to intervene in order to stabilize the American economy but never by bailouts with billions of dollars. The fundamental basis of our capitalist economy was that government wouldn’t be involved in the economy at all but as everyone can see this is no longer the case. The government should bail out these companies because we need to be able to make our own advances in new fuel technology and more fuel efficient cars. If three of our biggest auto companies go bankrupt or are forced to liquidize their assets these advances will never be possible. Another factor that makes it necessary to bail these companies out is how many employees there are of these three companies. If all three were to crumble, thousands of people would be out of jobs and thousands of others would feel a severe ripple effect. If all of these people were to loose jobs our economy would suffer even more because they would no longer have any money to buy anything and thus they would not be able to help America climb out of the debt it is already in.
The opportunity cost of not bailing out the automakers may be catastrophic. Although the auto industry may be seriously crippled if the Big Three are not bailed out, it is a chance we have to take. The United States is already in serious debt, there is no way that America can afford to increase spending by a few billion in the state that it is in. The economy is a cycle and will always have its highs and lows. There is no point in bailing out an industry that will come back eventually; it's just useless spending to try to make car companies more prosperous. After what has gone on with the frivolous spending of the bailout money given to banks, there is no reason to think the automakers won't take advantage of the extra money as well. Even if the Big Three were to go out of business, there would be other companies with more innovative technology to take their place. It would turn into "survival of the fittest," which is what American consumers want. The automakers would try to turn out the best cars for the money so the new companies can grow and expand. The message sent to other businesses is their importance in the economy. The banks had to be bailed out because they are essential and directly related to the economy. The auto industry is not nearly as important as the banking industry to our economy and should not have priority at the present time.
What are the opportunity costs of NOT bailing out the automakers?
What message are we sending to other businesses by going through with the bailout?
Does this represent a fundamental change in our econonic system?
Why should or shouldn't the government bail out the automakers?
The opportunity cost of not bailing out the auto industry is possibly having the Big Three go bankrupt. While many people think this is a major negative, many big airline companies have gone under without a major effect on the economy. Having the Big Three going bankrupt could be a positive; it would be a reality check that could help them get their act together and be able to effectively combat imported vehicles.
We are sending a very bad message to other companies by bailing out the Big Three. Basically, we are telling other corporations that if they run into financial difficulties, they can just plead to the government for a bailout package to avoid going bankrupt. This would cause unnecessary financial strain on the government and drain the budget.
The bailout represents a major change because it shows foreign goods are beginning to take a dominating lead over American goods. It also shows a major degree of corruption and incompetence within the executive boards of these major companies, as their poor and selfish business decisions have led to the crisis that they are facing.
By no means, should the government bail out the American auto industry. The poor decisions of the executives do not warrant this. It is a waste of federal funds and at the moment, we have more pressing issues to deal with; say DECREASING the massive federal debt? Anyway, we knew foreign competition was growing stronger and that they had started building fuel-efficient cars, and we already knew that crude oil is a finite resource. These facts prove that the executives were greedy, and were only out to make a profit, instead of improving their technology and the quality/fuel-efficiency of their cars. It is ignorant for these companies to say this crisis was unexpected. It was so blatantly obvious that something like this would occur in the near future, and there were so many preemptive measures that could have been taken. It is incredibly arrogant of the Big Three to ask the government for the bail out. It implies that the economy won’t be able to function without them. But really, America DOES NOT need the Big Three. They have been wasting domestic resources on products that our people do not want. If there is a superior good, what should keep us from buying it? We have a free market; a capitalistic society. If a company is not meeting the market standard, and the American people do not want to buy that company’s product, so be it! The company goes under! Why should it be the government’s problem? The company made the bad decisions, they lose! These companies need to file to Chapter 11 bankruptcy and do some hard restructuring work, instead of seeking federal aid as a remedy to their lack of judgment.
@ Mike S.
If they file for Chapter 11 Bankruptcy, they will not have to liquidize their assets or get rid of workers, and they will be able to do the restructuring work that they desperately need. A check for 25 billion isn’t the answer; fixing the framework and management of these companies is.
@ Chris DiB
I agree with most of what he said. He made a good point by making a comparison with the bank bailout. As much as I disagree with that bailout, investment banking is a huge share of the economy, and if that sector fails, the economy’s framework is crippled. The auto industry isn’t as important as the people or their respective CEO’s think it is. We can move on without the Big Three.
1.The opportunity cost of NOT bailing out the automaker isn’t necessarily a high one. Yes, these companies may file for bankruptcy (chapter 11) but that doesn’t mean they will go away forever. The market will rebound in the future.
2.If we go through the bailout, I think more big companies will feel that when in doubt, they can go to the government for money. Pretty much, any company struggling will just look for government aid instead of actually having theier business reconstruct its infrastructure and make some real changes to their strategies.
3.This bailout represents a fundamental change to our economy because it shows how greedy corporate America has gotten, as the CEO go cry to the government even though they own a private jet.
4.In the big picture, I agree with Mike W, in terms that we should not bailout the company. However I have different facts to support my reasoning. The government should not bailout the big 3 because they haven’t officially gone under yet. I believe they are just looking for an easier way out of things, trying to avoid any struggles. However, I feel that the CEO’s should start using their own money that they have selfishly received from the company to start improving that company. They need to change their business plan, its obvious that their infrastructure is not working and $25 billion wont change a concept that isn’t succeeding. In essence, this $25 billion will just delay their eventual failure. Let’s look at the grand scheme of things, at first yes the companies will be hurt, they will need to downsize and layoff some people. Even if they file chapter 11, that will last for 7years but they can still function as a business. So people may initially lose their jobs, but soon enough the market will rebound to open up again. There is no rapid solution to this problem; there will be no such thing as a quick and easy answer. Tossing money at a problem will not solve it. They need to take a step back, look at their business and reconstruct it to implement different strategies to improve and rebuild the business. That doesn’t require $25 billion from the government. To fix this problem it is only going to take good business management and TIME!
What are the opportunity costs of NOT bailing out the automakers?
The opportunity cost of bailing out these companies are what seem to make this a debatable issue, the fact is that increasing our defecit in the US government is just not an option. We should let the big 3 fall and drown like we should have done wiht the other companies that we bailed out. We granted a very large sum to the banks that were suffering and we're not doing much better than we were before. So the opportunity cost of bailing them out is very high and we have many other venues for these people to spend multi billion dollar grants to other industries and not just a failing car company regardless of how large the comapny is.
What message are we sending to other businesses by going through with the bailout?
The message we are sending is a poor one, we are sending the message that no matter what happens with your business we are going to swoop in and help you out like we have in the past and we are promoting the idea that a successful business isn't the ideal goal in an upcoming entrepeneur. Just becasue the unemployment rate will go up, it's all cyclical and in time innovations will increase and more jobs will be created.
Does this represent a fundamental change in our economic system?
This does represent a fundamental change in our economic system because we are changing the principles this country was built on and that isn't where we want our country to be at. By granting money to the 3 car companies we are rewarding there bad behavior. If they cant run a successful business, they dont move on. Where does it end? Do we bail out our corner deli? Do we bail out a mom and pop store because they ran out of customers?
Why should or shouldn't the government bail out the automakers?
The government should not bail out the automakers because its cyclical, if they go down someone will rise up and take their place and those people out of work will then have jobs again. We can't lose sight of our principles because some people are suffering we cant sacrifice the needs of the many for the needs of the few it has and always should be the other way around.
I agree whole-heartedly with Tom K's statments in resposne to the second question where the other businesses will feel the government will be there to help them in times of trouble. We are passing around the idea that the real world is soon going to be puppies and hugs and not about what business started out and should always continue to be. When you grow up and leave your parents you are supposed to be on your own and work for yourself with a bailout the government is saying you'll always live at home.
1) If we do not Bail out the auto industry then we may lose valuable contributers to our GDP. without these companies there will be a loss of jobs and a decrease in national production and output.
2)This bailout will result in a loss of ambition and a larger reliance of businesses on the government. companies will make risk decisions without thinking things through because they will feel that they have a safety fallback net, the government.
3) by bailing out these companies would be a step away from capitalism and a step closer to socialism. in america we have been surrviving on the mentality of let the free market fix itself. it has worked in the past.
This is a very tough situation that there is no easy solution too. There are negatives and positives to bailing out the "Big Three" auto companies of Detroit and there are consequences to not bailing them out as you lose a major industry based out of a city that relies on those companies for a steady job and income. Even if we do have them declare Bankruptcy under Chapter 11 and they do restructure, pensions and health care benfitswill certainly be lost in the process as well as jobs in the hundreds of thousands leaving people out of work and are left in structural unemployment. If we do bail them out with 25 billion dollars, we can only hope that they use it to produce more fuel efficient cars that use alternative energy sources which the consumers in the market demand. I doubt that the CEOs will use all of the money responsibly the fear that they go out of business may spur them on to use the money responsibly to get their company going again. The opportunity that comes with not bailing them out leads to new auto companies innovating and growing to be apart of the mainstream and then hire new people who lose their jobs at the "Big Three" to be apart of the new energy economy that President-Elect Obama has proposed. If we do go through with the bailout, it indicates that the government can fix everything for them and that they shouldn't be held accountable for their actions. It is also a warning that if you do not use your company's money wisely then you will have to face the consequences. The federal government won't always be around to give companies loans so that they can pay off their debt that they accumulated over the years. It can represent a fundamental change in our economy if the bailout does not happen, the Big Three go under and new auto companies, foreign and domestic could take their place offering fuel efficient cars that Americans want right now. There will certainly be an increase in the unemployment rate since hundreds of thousands of people will be looking for a job and be officially unemployed. It is important that the government measures each option before deciding whether to bail out these three major auto companies. The major factoring deciding should be the consideration for those millions of workers who will lose their jobs if bankruptcy occurs.
The opportunity costs of not bailing out the automakers are that the investors of the respective companies lose confidence in their investments and that the many employees once associated with the three automakers would be out of jobs. Also, the bankruptcies of any of the auto companies would have a large effect on the car industry and a devastating effect on the economy. By going through with the bailout, they are unfortunately letting other companies believe that the government is capable of giving the same assistance to them in similar situations, while in reality the companies shouldn’t even let themselves fall as low as needing a bailout. This does represent a fundamental change in our economic system since the government is not usually held responsible for supporting large companies with solely a government check. However, it must be considered that our economy is not necessarily in a great condition at this time and that these companies need help now more than ever. I feel that although there are many negative aspects to bailing out the “Big Three” auto companies, it needs to be done in order to save such a large amount of employees AND retirees. The UAW, or the United Automobile Workers, is a union consisting of over a million members. Approximately a half million of these members are retired and receiving pensions. If these three huge companies aren’t bailed out, this large sector of laborers will be in extremely difficult situations. However, I do realize that this sets a precedent for the government to give aid to ALL companies, so along with giving money to these companies I feel that the companies should also be reformed and reconstructed into environment-friendly manufacturers in the process.
In response to Alex D.:
While I do agree that the economy will eventually come back around and these people will find new jobs, I feel that present times should be considered as well. Employees that lose their jobs will mainly (but not definitely) be structurally unemployed. They will need a new set of skills to work in some other places, which will require additional schooling and education. Most of these people (especially those who are retired) don’t have the money or time to acquire a new set of skills.
the oppurtunity cost of not bailing out the companies is that many americans (over 3 million) would lose there jobs and any finanicail security they have and that is a very big deal in a time of economic downturn. also due to the fact these are american companies if they went under there would be huge ramifications in teh united states economy we would lose one of our only ways of making money within the united states and losing the companies would shatter whats left of our economy. By going through with the bailout, they are unfortunately letting other companies believe that the government is capable of giving the same assistance to them in similar situations. This shows a lot more government control in the economy which i dont really agree with but in a time of such economic turmoil i feel that it would be worse to let the buisnesses fall. i also feel liek shange should be initiated for the companies that will recive the balout to help them become more eco friendly and more popular.
i agree with mikeS becuase if we dont save the companies than we will become relient on other nations and that wouldn't be good in a time of such economic hardship. the debt that the united states is already in would continue to rse because wed have no source of revenue from the auto industry which is a big part of our economy and i feel that everyhting would jsut fall to pieces
Woo love economics<3
i feel that in consequnces of not bailing out the auto industries would be far worse then spending 25 billion dollars to keep them afloat. if they were to go under not only would millions or laborers become unemployed, but our economy would suffer greatly as well. we would become more dependent on foreign nations for automobiles and other goods and services and would fall deper into debt. by keepign the companies alive we save about 3 million jobs and continue to allow the businesses to help bring in revenue into our economy. I feel that if we do go through with the bailout definite changs and reforms would have to take place in the auto companies to insure that that won't fall victim to the spiriling economy. the message this is sending to other companies is that theyhave no need to worry because even if they start to fail the goverentment would be there to pick them up and thats a false sence of security they shouldn't have. the government shouldn't have so much control over the economy if we are a supposedly a capitalist economy ,but the ramifications of not bailing out these auto companies would be so great it take a while for our economy to fix itself. This does represent a fundamental change in our economic system since the government is not usually held responsible for supporting large companies. however, we must condsider the state of our economy. these companies need to be helped if there is anyhope of coming of of this recession anytime soon.
i agree with Julianne that there are many negitive aspects to this and it send a wrong message but in desperate times liek these the governemtn has to do what it think is right to help stabilize the economy and to also keep millions of workers employed and there familyies fed. the bailout has to happen and reform with in the industry needs to take place as soon as possible.
I’m going to agree with Julianne C and Mike S on this topic; I share the belief with them that it is necessary for the bailout to take place because preventing what would be if we do not bail out the auto industry outweighs the negatives that could come out of going through with the bailout.
By not bailing out the automakers, there is a strong possibility that GM, Ford, and Chrysler will all go bankrupt. If this happens, the enormous workforce they have may all lose their jobs as well, and that won't help the unemployment rate nor the cyclical recession we are in. It would also drastically decrease gross national product.
If the government does proceed with this bailout plan, it would send out a bad message. It says to the companies of America that they can do whatever they want with their money because if things don’t work out, they don’t have to worry because the government will come to the rescue.
This represents a fundamental change in our economic system in that the laissez-faire capitalism that we have come to expect in this country is fading away more and more with all these government bailout talks during this period of recession.
The government needs to bail out the automakers, but there has to be restrictions. I don’t think that the money should go to the CEO’s, because as we saw with AIG, CEO’s cannot always be trusted with money. This bailout is not a $25 billion bonus for guiding their companies into failure; it is money that has to be used in order to get out of a hole, and they need to understand that before we go and give them this money. They need this money to get back on their feet by developing new cars to combat the foreign auto companies who obviously have superior products. This bailout is needed in order to keep the auto industry able to contribute to our GDP and GNP and to save a couple of million workers from going unemployed.
Tyler A
The oppurtunity cost of not bailing out the big three automakers can be preety bad yet i think the government should still not bailout theses companies. The one downside of not bailing out these companies is tens of thousands of jobs will be lost. But a lot of the workers will be losing their jobs anyway. In my opinion we should not bailout the companies to help to break up the unions. And if wedo bail them out we are setting a bad example to other companies making them believe that they could fall back on the government. I think the government should sort of let our economy start anew. I mean we dont exactly need theses companies either, when im driving around i see much much more toyoatas and hondas, than gmc and ford. But ford and GMC will come back anyway, so there is no need to bail them out. Obviously this represent economic change because anything our economy is currently in a historical change and i agree with Alex D completely on the fact that our economy was built on the basis of a lazziez faire economy meaning no government intervention.
@ Mike S
You couldn't be more wrong. Why is it a problem if those automakers go out of business? If they go out of business, and all we have to rely on is foreign automakers, new companies will come up. These companies will be in direct competition with the foreign goods and will have to turn out cars with greater technology than we have in the cars right now in order to be successful. This competition is what our economy is all about. In essence, capitalism is competition: competition for turning out the best products at the best prices so the consumer will buy your product. If the Big Three go down, companies with better cars will come up. The Big Three should not have to rely on American taxpayer money in order to be successful. They should have thought about the problems with their cars beforehand when they were raping American pockets for money for cars just not worth it.
In response to Alex D:
This is simply more than just a cyclical downturn in the economy, It is a deep recession in our economy that hasn't been seen since the Great Depression. It will take an economic stimulus package and new ways of thinking and innovation in order for the economy to improve over time. I seriously doubt that all companies will look at the government helping out the "Big Three" as setting a precedent where they should then help out all struggling companies. The "Big Three" automakers in America have been around since the beginning of automobile production in the early 1900's. It is those CEOs of the Big Three who should be blamed for letting this occur and they must be held responsible and not be given a blank check. It is important that we not increase the unemployment rate when three million more workers are found jobless if these companies go under. Hopefully, the 25 billion will be used to pay off loans and be put into making more cars that are fueled by alternative energy sources. This will lead a boom for the Big Three and they will be back on their feet again and increase employment for their companies. That is if they use the money responsibly as the government is asking them too rather than use it on private jets and multi-million dollar bonuses.
First, I believe that the government should just give a big handout to the “Big Three” and write a $25 billion check with no stings attached. Losing our auto companies would be disastrous to our economy and would hit the average person hard also. Let’s start with the fact that all of the auto companies employ many thousands of Americans, many with few skills for other jobs. If Ford, Chrysler, or GM totally failed then the people who work for these companies and the people who supply the materials that the auto industry uses would be without work. In America we should be creating and keeping jobs but if these corporations fail than those same people will be lining up for welfare when they could be working. The increased number of people on welfare roles will put an enormous strain upon the taxpayers and it would be horrible for the auto workers and their families. I believe that these are reasons enough to consider a sophisticated money injection. Before any money is even considered to be given to the automakers I think the management of each auto company should come up with a plan of their own and then congress should carefully dissect it until an exact amount of money is come up with to help out the American auto industry. A plan would have to include provisions for building environmentally friendly vehicles, decreasing the production of vehicles such as SUVs and trucks, and a timeline or roadmap that would show how each company would move towards a greener and more efficient future that could compete with the foreign auto companies. Some may say that if we inject money into the auto industry then we will end up giving money to many different industries as they will all be begging congress for a handout. I believe that this is a non-issue because if you take the airline industry for example which has been mentioned you will see that they do not have as far reaching effects to the economy as the auto industry does. What I mean by this is the airline industry is not as capital intensive as the auto industry is. This means that the airline industry does not recruit the amount of resources that the auto industry does as they are not producing anything but only providing a service. I don’t think this is a fundamental change in the way our government works but rather a 21st century approach to the problems that our nation faces today. Gone are the days when the federal government just let the market do whatever it wanted to do, times have changed and the market cannot be left to their own devices, that is exactly how we got into this mess.
1. The opportunity costs of NOT bailing out the auto industry are not that significant. Perhaps these companies will file for bankruptcy in the future, but it's not the government's job to fix this. The big 3 still have foreign markets where they sell cars that we don't allow to be sold over here. They won't lose everything and will make a rebound along with the economy; regardless of how long it takes.
2. If we were to go through with the bailout then all the other big business would think that no matter what risks they take they'll get money if they are struggling. These businesses can't have the thoughts that they will just be saved no matter what goes wrong because it's not our job to fix all of them. The bailouts of the banks was considered a necessary evil because a lot more appeared to be at steak. The government is in tremendous debt so who is going to bail then out? the message sent would be that everything is fine when it really isn't and if these bailouts occur then we'll only be worse off each and every time.
3. This does represent a fundamental change in our economic system because it is showing our weakness and the wrong attempts at fixing it. The foreign market is unfortunately owning ours because their countries didn't get into this situation. Businesses rise and fall, it's all about opportunity. This country was built by hard working people such as Henry Ford who innovated and brought dreams to life. These people weren't corporate jerks who irresponsibly live and fly private jets when there is no money to keep them in flight. Sure, this could make us weaker in the car market, but it's their own fault and they should have to suffer the consequences. The effects on us as consumers won't be nearly as bad as people are saying.
4. The government should not bail out the big 3 because it would only make a bigger mess for us to clean up. It's not right that these companies should receive money for struggling and screwing up. Any other company in America could now ask for a bailout and the government would look foolish for not giving it to them. We would just be showing that you can act like idiots and have no consequences. Plus, we may even get better deals from the foreign markets along with the fact that these guys in our country really gave back to help us improve, right? NO, they didn't do anything.
If the automakers are not bailed out companies (such as General Motors) may have to consider liquidating their assets. If they are not bailed out and must declare bankruptcy, over three million jobs that are related to the auto industry could be lost. It could form a sort of “chaos.”
By going through with the bailout we would be showing other companies that it is ok to run themselves in bankruptcy, because the government will get them out of it. This is a very dangerous message to be sending out because it would force the government into deeper debt.
Many argue that the whole reason we are in this predicament is because the current administration was too laid back in regulating business. Therefore, bailing out the automobile industry would represent a fundamental change from the past few years, but not from other democrat led times in our nation.
The government should bailout the automakers because it is their responsibility to take care of their citizens. It would be extremely pathetic and embarrassing if over three million people lost their jobs and health insurance right before the holiday season.
In response to Chris D.:
I disagree, in that I believe the automobile industry is very important to our economy since it employs millions of Americans and our intake of oil also relies heavily on it. Stabilizing the auto industry will greatly affect the United State’s economy.
I agree with Alex D. and Tom K. They state that the bailout isn't necessary and would be a foolish idea to go along with. They don't deserve this money and will irresponsibly act with it. A bad example will also be set and it will be a big mistake digging us deeper into debt.
I disagree with Ben. He argues that this is the worst we've been since the Great Depression in regards to a recession which might be an accurate statement. He does believe that the bailout is a good idea which I disagree with. The word hopefully is used to describe what they should do with their money. By saying you hope they'll spend it on increasing their companies state is a great reason in itself to not give them the money. Look at AIG's big dumb corporate jerks. Perhaps the big 3 can have a big get together at a spa and then go hunting as well. Also this would be a silly time to invest in alternative fuel energies considering that once you figure out how to build them with the 25 million you just received you'll be unable to produce them. Also, this will not create a boom in the big 3 because they won't be able to get much done with this money, and besides that they have to responsibly execute every step otherwise it will be a complete failure.
I forgot, how are they going to pay off their debt, invest in new technologies, market, and produce affordable cars to the American public? Especially with only 25 million dollars.
What are the opportunity costs of not bailing out the automakers? The obvious opportunity cost on the economy would obviously be the downfall of three major automotive companies, which would in turn cause many workers at these companies to lose their jobs, thus putting a strain on the economy. However, the cost of these three auto companies going under may not be as large as the cost of actually bailing them out.
What message are we sending to other business by going through with the bailout? The dependence of business on savior from the government in times of financial hardship will certainly increase. It will set a precedent that when a business starts to go under, it can rely on the federal government to bail them out. If the businesses need to make changes in order to stay afloat, let them do that, but the government should not guarantee them security that if they begin to slip, money will be thrown at them to save themselves.
Does this represent a fundamental change in our economic system? It definitely does, because not only does it show three major American auto businesses going under, it also shows many Americans who have these jobs will lose them. This shows to the world the rise of imported foreign goods replacing domestic ones. This is happening because these domestic businesses cannot give people the kind of goods they need for this economy,especially in the case of these car companies. People then look to other companies that better fit their needs. Should it be the responsibility of the government to help the big three auto makers for their bad decisions in this strained economy? The government should not bail out these auto companies, first of all because of the message that would send, which was discussed earlier, about how other businesses would get it in their head that the government will intervene when a business goes under. Granted, the big three automotive companies are a big part of the economy, but it should not be the governments responsibility to bail them out. Secondly, there is no guarantee that a bailout would even save these companies. Sure, it would save them now, temporarily, but what about in the future? Do they think that the problems that caused the big three to go under will magically disappear? Unless they have a solid plan of fixing their business and putting the money to actual use, bailing them out will be like putting a band aid on an already out of control wound. It will stop the bleeding for now, but it won't help in the long run.
I agree fully with what Chris DiB said. We ARE already in large debt, larger than we can pay off. It would be useless to bailout these auto companies, because like Chris said, similar but better establishments will reappear eventually, thus balancing out the economic strain. I also agree with his point as to the use of the bailout money. There is no certainty it will or can be used to save these companies, and without a clear plan, this money will essentially be wasted.
If the government does not bail out the auto companies, yes there is a great possibility they will go bankrupt. But at this point, bankruptcy may be their best chance for long term survival. If the government just simply writes a 25 billion dollar check to these companies, all that would happen is that the companies will be in same place they are now just sometime in the near future. So what does that fix? It’s just prolonging the inevitable future. The best way to go with this is to let the companies file for bankruptcy, and theoretically start over. By going bankrupt they can rid themselves of their massive debt. With the debt they currently have they cannot innovate, or do anything to stay technologically advanced. Also by going bankrupt they can renegotiate contracts, and no longer overpay workers which contributes to their lack of competitiveness. Bankruptcy will cause them to make changes to the company, and in the long run, give them a chance to survive. By giving a huge handout to these companies, it sends a terrible message to ALL other companies. Essentially what that is telling the other companies, is that they should keep riding there business how it is, and if it doesn’t work out, we can just give money to them. This amount of pressure cannot be put on the government, and will also cause a lot of government spending. This is an major change to our economy because government has a lot more influence in the economy than the past, and also because the CEO’s of business in America have become selfish and greedy. They are the ones who have made bad decisions too put us in this current crisis, and now they want help from the government. The government should not bail out the Big Three because it will do nothing to benefit these companies. All it will do is save them for a period of time. But who cares, eventually they will be in the same position as they are now, so what did that 25 billion dollar bailout do? Nothing, it will just prolong the bankruptcy of these companies. Which is why they should file for Chapter 11 now, and start to rebuild their companies. Bankruptcy will give them a chance to make it in the long run, the bailout plan will give them a chance to survive for a little longer, then fall back to where they are now. We no longer need these companies. If people do not want to buy their products, that is too bad for them. That is the whole point of our economy. It is a competitive market where each business has to battle to get there products sold, and the government should not be there to help anyone. If the products are sold, they are successful, if not, they are unsuccessful and that’s the end of it. The government really has no business in helping that company.
I agree with what Mike W. and Chris Dib. said. We can move on without the Big Three. There are other companies that can battle with foreign companies. Our capitalistic society runs on competition, and the Big Three have lost, so they should not be bailed out.
To everyone who said they should be bailed out, you are so wrong. I don’t see how you can support bailing them out even if you say you are sending a bad message out to all other companies. By bailing out these companies, it will just put pressure on the government because other companies are going to want to be bailed out too. Also, if you give them this money, what you think they will do with this money is a lot different then what they will do with it. Bailing out companies in the past has done nothing but provide CEO’s a big spa party.
I believe that the bailout for these automakers should pass. These companies are researching to produce fuel efficient cars to help settle the fuel crisis. If these companies go under because the bailout does not pass then we will be dependent on foreign automakers. The fall of these companies would also mean many Americans would be out of a job. We have to make sure that other companies know that we are bailing these companies out because they are important to sustain us in hard times. We can't have all companies think that we are going to bail all of them out when they are in trouble. This bailout does show a fundamental change in our economy for we are having to help bailout these once multi-million dollar companies.
I believe that the bailout plan should pass. These companies are researching fuel efficient cars to help with the fuel crisis. If these companies go under because the bailout doesn't pass we will lose this research. Many Americans will also lose their jobs and we will become more dependent of foreign automakers. We must let other companies know that we are only bailing these companies out because we need them to help us during these tough times. I believe that these bailouts are changing the economy because we now have to bailout these multi-million dollar companies.
There is no clear solution to the problem we currently have. But the best option may be to force the automakers to file Chapter 11, and help them through the restructuring process, without throwing money at them. Bailing out the companies won't necessarily help because what happens when they run out of the money we lent them? A bail out is only a temporary fix, and may not last long enough for the auto-makers to have a strong hold in an improving economy. We may run into this same problem a few months down the road, and we would have to provide them with more money. By forcing them to file Chapter 11, they will have to restructure and use better business practices. It will also send out the message that we will help out anyone who is struggling, and that you do not need to run a profitable business, as long as we'll help you make your payments. Though, we may be risking a lot of jobs by not bailing out these companies, we risk more by enabling the poor practices of the executives of these companies. Even with the jobs lost, unemployment would only raise by about two percent, while our GDP would barely be affected. It may sound harsh, but we need to help these companies survive in the long run through restructuring; not help them hover above bankruptcy for a few months.
In response to the statements made by Ben W., you had said that if the auto makers eventually go out of business, many people would be structurally unemployed. But that isn't necessarily true. The bulk of the unemployed workers would be prepared to take other jobs in our economy. Factory workers can work at any factory, they do not need to get re-educated to work in other factories, as these jobs are made to be learned very quickly. Management and office level workers would still have qualifications to work at a similar in other companies. Salesmen at dealerships would likewise be able to find jobs in similar positions, whether it be in a foreign dealership or switching industries, again with no extra education required, except the specifics about the specific company which would need to be learned regardless of what job you previously held. Dealership mechanics may have the most trouble switching jobs as they would need to learn how to work with a different brand of car, but this is not something they would need to go back to school for and would need be a major problem. By allowing the auto makers to fail, we allow for more workers to take jobs with properly run companies, allowing both parties to flourish.
In response to Chris D:
Chapter 11 bankruptcy for these three companies is certainly another option and it has worked to keep the Airlines afloat a couple of years ago but it is important to keep in mind that the economy is obviously not the same as it was then. Banks will not be able to lend out money to the "Big Three" so they can pay off this debt that they have accumulated over the years. Right now, there is a credit freeze which will prevent them from having the money they need to restructure and be competitive again. Declaring bankruptcy would also mean many thousands of people laying off because the "Big Three" would have to downsize their labor force by the thousands, cut pensions and health care benefits and they would have to certainly shut down most of their factories in the Midwest. We can not afford this right now. We need to make sure that the CEOs do not get the money to use themselves but allocate it to the owners of factories and their workers so they can have the money to pursue new technology that will make them competitive in the market. It is important that we don't keep bailing out all of these companies but it is not fair to the majority of the workers in these auto companies who have worked hard all of these years only to be laid off without anything to fall back on. They will be stuck in a state of structural unemployment and will need more education and skill retooling in order to get a new job which may not be affordable for them. It's important that they learn new skills but in a company that they have been around for most of their lives.
If we didn’t help out the automakers there would be millions of hardworking Americans without jobs. I agree with Tom K, not just the CEO’s of the companies will be out of jobs, but people who work in the factories and the people who sell cars in the dealerships will be unemployed. With the economy the way it is, many companies are already laying off workers and it is getting very difficult to get a job because companies can’t afford to pay all of their employees. So if millions of people are now unemployed, it will just make things worse because so many more Americans will be without jobs and will not be able to afford anything. It will be like a domino affect, in a way. It’s a tough situation to be in because either way, something may be bad. If they go through with the bailout they are sending a message to other companies that they have nothing to worry about because the government will be there to save them. The government can’t keep giving out billions of dollars to companies because they may not learn then. It’s like if you always let a child get away with doing something bad, they won’t learn and won’t correct their bad behaviors. The automakers need to learn their lesson, but if all these people lose their job it won’t be good either. The automakers should make a plan to improve their cars so they can make more money since the people want more eco friendly cars so they won’t be in the same position they are now. I think they should give them the money only if they make a plan that will allow them to make eco friendly cars.
In response to Stephen R.:
I totally disagree with the notion that the federal government should wait until the auto companies are bankrupt. I am not saying that the government should just write them a blank check but rather congress should give them money towards restructuring. Basically what I am saying is the government should use the auto companies as a vehicle (no pun intended) for making cars that are cleaner and more efficient. Unless we want to lose a major sector of our economy to the foreign auto makers then we should help the American auto makers to "retool". This means giving them the funds necessary and working with them to create the green cars of the future. Why should we wait until the auto maker's morale is gone when they go bankrupt, we cannot just have a totally free market, I'm sorry if you don't believe in a market where the government has more control but welcome to the 21st century. I believe that Stephen R.'s approach is counter productive and will get neither the country nor the auto makers anywhere.
ben, a bailout will only prolong the process. Giving them 25 billion dollars will just give them money right now. They will end up in the same position in the near future. It's not a permanent fix. The only way to fix the problem is for the companies to file for Chapter 11 and then they can rebuild.
By not bailing out automakers the opportunity cost could be very high. It is estimated that one in twelve American jobs are affiliated with the automobile industry. By allowing them to go under, the government is putting many Americans out of work causing even more controversy. It would cause people to question their investments and possibly lower the morale of the country.
By bailing out the Big Three we are giving the impression to businesses in similar situations the idea that the government will do the same for them. Unfortunately it is impossible for the government to do this for all struggling companies.
This represents a fundamental change in our economic system because it shows how dependant corporate America has become on the government. It has become the governments responsibility to save big companies like the Big Three from going under.
The government should bailout these companies because it could be far too detrimental to the country’s economy if they don’t. even thought it shouldn’t be the governments responsibility to save these companies from going under I believe that desperate times call for desperate measures and in these economic hardships it is necessary for the government to step in.
The situation that has been presented to the U.S. government leaves them with an extremely tough decision to make. If the government does not bail out the automakers, they run the risk of the U.S. economy undergoing what could turn out to be a complete collapse. However, if the government does in fact give the Big Three the $25 billion bailout that they are requesting, they will be abandoning the “capitalistic” fundamentals upon which our society is based. In my opinion, I believe that the government should not bailout the auto industry. Although there will be a large number of jobs lost if the Big Three go bankrupt, I still believe that the best route is for the automakers to declare for Chapter 11 bankruptcy. In doing this, the companies will be forced to restructure and will have to rebuild without depending completely on the money given to them by the government. In addition, the government will be able to monitor the progress of the automakers and assist them as they go through their period of reform. If the government just hands the automakers the money, it doesn’t guarantee that they will use the money to adopt new production techniques and/or to create more fuel efficient cars. In allowing them to declare bankruptcy, the government can only hope that the Big Three will try to emulate the transition of the foreign companies towards more environmentally friendly options.
I agree with Chris D’s comments in that I believe that a $25 billion bailout would do nothing more than delay the inevitable. The auto industry is obviously in a great deal of trouble, and “rewarding” them with money to help them get out of debt will not solve the problem. The problem lies in the foundations of the company, and the only way that this problem will be addressed is if the company declares bankruptcy. If they are given money, they will be allowed to continue to survive with their poor economic plans and so will not fix their mistakes. If the Big Three wants to compete with the foreign automakers, their only option is to declare bankruptcy so that they can rebuild and essentially start over.
1-The opportunity costs are the possible loss of over three million jobs in the auto industry, an increase in the amounts of foreclosures, and also the stability of the economy. If people lose their jobs there will be less spending being made on consumer goods and the further we will go into a recession.
2-The message being sent is that the government is picking and choosing which businesses to save. The “fairness issue” will come up as in “Is it fair to bail out certain companies, but not all of them?”
3-Yes, this does represent a fundamental change in our economic system. Our economy has change to one that takes care of the people. It has become capitalism with a face. By making sure our workers don’t lose their jobs we are also helping the economy too because they won’t be afraid to spend any money on products and services helping the money flow.
4-The government should bail out the automakers because our economy cannot risk taking any more hits. Even if the three million jobs that could be lost is an overestimate, the 240,000 jobs at stake are still important to the people and our economy. If we want consumer spending to go on we can’t let the possibly loss of three million of even 240,000 jobs.
Now that I have answered all the questions, I have had a change of heart. I have to say I totally agree with Tom Kill! The possible jobs we could lose from the disappearance of the three automakers can get jobs on projects to help the environment. It is killing two birds with one stone, solving the unemployment of many auto workers and helping out the environment. This leaves me to question do we really want both the economy and our environment to go bust?
1. The opportunity cost of not bailing out the auto companies is a loss of jobs, less output, less production, and a drop in our GDP. Failing to prolong our cycle will make for immediate harder times, as oppose to letting the medicine we deliver provide quick, temporary relief, while slowly sickening and ruining the system in the long run.
2. Generally, the message we are sending is that if you’re a larger company and you make uninformed decisions, act greedily, and practice your trade inadequately, you will be saved and reimbursed by the government. Of course no company will want to go under regardless, but this newfound security for the worst-case-scenario will ratify doubts and encourage incompetence. Ambitions will dwindle and that healthy fear will diminish.
3. This does represent a fundamental change in our economy. Yet another bailout shows that America is not a free market, but instead a system of pick-and-choose regulation. The government gets to decide which companies are dire to the system and has the power to reach over the invisible rules of economics and revive them. You know when you cheat on a test, and your teacher tells you you’re only cheating yourself? That’s what our government is doing to our economy.
4. I believe there should not have been a bailout. Taxpayer money shouldn’t go to the production of faulty machinery under an inadequate business mold. Also, such a bailout would increase the standards of the Corporate Average Fuel Economy, causing smaller, non-union auto companies in the US to be pushed out from the market and also seek government rescue. But most importantly, I think this continued breaking of the silent laws of economics is bad for a country that’s telling itself it’s a free market. I believe in mixed economies above all else, but we can’t take from both columns without adjusting the system more thoroughly as well as the public’s perception of said system. By doing this, we are turning our economy into a Frankenstein horse. Let me explain: our once fruitful stallion of an economy has long since been beaten into the nearly-dead horse it is today. Our government, instead of focusing and committing to either a) totaling reforming the system, or b) letting the system run its course, instead tried to revive the sickly horse with a quick fix – let’s call it a cheap elixir and a belly-rub. We are trying to prop our dead horse upward, and have it act as though it were still living: thus, the Frankenstein horse that is the American economy.
Response: I agree with Ben W., whoever that is, and believe he has risen a good point and a tragic consequence that can easily go unnoticed, and has gone unnoticed by many of us bloggers, myself included. The absence of a bailout would mean many people would be put without work, which in my mind is a deciding factor in whether or not this thing should have gone through. It’s easy to put such a major element in the back of one’s mind when tossing around such heavy economic philosophies as these, but I guess that doesn’t make it any less real.
Hey Mr. Karmin, these blogs are funnnn
I believe that the government should help out the auto companies. If they spent over 700 billion dollars for the bailout plan, they should be able to spare 25 billion more for the auto companies. Or at take some money out from the bailout plan to help the auto companies. By not bailiong these companies many people will lose thier jobs and will cause customer spending to decrease. GM is also has many different brands of cars with some from different countires. Not helping out GM is also gonna be bad for everyone around the world that works for GM. People will lose jobs and we won't have an american car industry anymore.
Petah. K forgot my pass
What are the opportunity costs of NOT bailing out the automakers? In all honesty, not bailing out the automakers would be devastating on our economy. It would mean that people would lose money (in stocks) and would lose jobs. Despite all of the massive oppurtunity costs, consequences and negatives of NOT bailing out, it still wouldnt be the best route in the long term.
What message are we sending to other businesses by going through with the bailout? We are sending a terrible message saying its ok to fail because the U.S. government has your back and its willing to sacrifice its own credit for the sake of some failed business and it's incompetant CEO's and leaders. It also says that if you want your business to rely on the government then your gonna have to let the government intervene and possible control the "free" market.
Does this represent a fundamental change in our economic system? Absolutley it is. It is in essence giving the government an invitation to establish a foothold in the free market. This is a giant step towards a socialistic economy.
Why should or shouldn't the government bail out the automakers? I think despite what the benefits or consequences may be, we should rarely attempt to bailout any corportation. The 700 billion dollars that the government has already used to bailout companies is far too much. Our government is already in far too much debt. Not to mention this is giving the government an invitation to get involved with the free market and its an invitation to establish a socialist economy. But I also believe that the automakers may be the one and only exception due to the fact that foreign automakers are getting a significant foothold in the American auto market. We may need to bail out our own home grown auto industries so they can try to again dominate the American auto market with U.S. made goods. If the automakers can manage to do this, than this may be one case where a bailout is necessary and beneficial to our free market economy.
alex, by not bailing out the automakers specifically, there are more consequences than you may realize. The "someone" who will rise up in the auto industry are the foreign automakers who are already dominating our auto market. By letting our own homegrown outmakers collapse, we are leaving ourselves vulnerable to the will of foreign automakers. No longer will you be able to go out and buy a Ford or Chevrolet, you will be stuck buying Toyota, Kia and Daewoo. NOBODY WANTS A DAEWOO!!!. Our economy would take a major hit by ignorantly sacrificing our spot as players in the international auto market. I'm not saying we should be bailing out everyone. That would be socialist. Instead we should monitor who we bailout (only those who we cant or shouldnt risk letting collapse like automakers). Banks who are led by incompetant corrupt businessmen should have to fall flat on their faces because there are other banks that can replace them. The U.S. would then remain in the auto market and hopefully improve the number of U.S. made automobiles that are sold in the United States (and hopefully the world) vs foreign made. We cant risk having only foreign made cars driving on our roads.
On what tom said: i agree that the government is giving away money to companies that dont really deserve it. They really have no idea what to do with it and bailing them out may just be a waste. Didn't Mr. Karmin tell us that after one of the large mortgage companies got bailed out the executives took a very expensive location? Wasteful spending is what got us into this mess and the government needs to somehow teach businesses that cannot be tolerated anymore. Our country simply cannot afford it.
Bailouts must stop beyond this point, period. President Bush and Treasury Secretary Henry Paulson have been very hesitant to provide aid in the form of a bailout, even though money was eventually provided to troubled companies in the financial industry. They and many other conservatives and moderates have hoped that this would be the last and only bailout necessary, but they were wrong. This is the endless chain of our “bailout future” that former Governor, Presidential candidate and businessman Mitt Romney spoke about would happen. Now the auto industry is next in line for the bailout money. It initially appears that the government providing this form of “rescue” would help people, but in the long run our economy will falter.
Romney has stated that providing these government bailouts is not the way to solve any type of long term problems. It's simply just throwing money at companies hoping that the spending will do its “magic.” It's time for people to wake up and realize just by throwing a sum of money at anything will not solve any problem. All this does is just prolong the problem, in this case, the money is only keeping alive the trouble in the troubled company. There obviously is something wrong with a company's operation if it is not able to sustain a profit far from its intended positive value. Chapter 11 bankruptcy is the method of choice for bailing out the automakers. Chapter 11 bankruptcy will cut labor out for a short while, but however REORGANIZE the company to keep it alive and restructured well for future functioning. Keeping with Ben W’s statement that we will lose health care benefits and pensions, we need either the help of a financial company for the mean time to take on these responsibilities (in secondary hopes to stimulate the financial industry) or a temporary government entity lasting only a few months up for charter renewal (to keep with our fundamentals of our economy) to maintain these benefits and pensions. This is another way we may be able to save the employees and retirees that Julianne C also has stated need to be saved; however, she states that a bailout in necessary for this. I will state long-term affects later- you’ll see that there are major problems as well as a response for Brittany’s post. Even Jason S sees that the Big Three will go bankrupt if not for a bailout- but it is this plan that once again incorporates both aid and restructuring responsibility. It should also be at the creation of this entity an agreement with the auto industry (restructure by then) that once this “temporary entity” expires they take on these same benefits to their worth. A complete ignore as part of a laissez-faire plan illustrated by Chris DiB would be a terrible way to think of the workers affected. This is a complete ignorance of the working man who is the foundation of the economy. Of course laying around waiting for something you set for yourself to be a cycle (the economy) is not true “magic” either. Surely maybe if some of us wait around like this with this cycle, we can expect our economy back to normal after Zimbabwe’s economy is better than ours… (mighty long time). This ignorance is also shown through Mike W’s post along with Tyler A’s post where he makes surely polarizing statements that we don’t need the Big Three, but doesn’t seem to follow through with it, except for only on point that they waste our resources on things people do not want. This goes back to competition, we need this American competition to stimulate these companies to create actually impressive quality goods that people DO WANT. Although I agree with Alex D that these COMPANIES should not be bailed out, he fails to distinguish between the auto company and the auto industry. So these three companies don’t move on- you mean the entire auto industry- but aren’t we American? We are the United States sending out our American companies into the international market for competition with foreign companies. Once again making the same true but not acceptable excuse that the economy is “cyclical.” It is not that nothing should be done by Americans to help this American industry stand strong, but this cycle argument is not the best one helping the previous people so far.
This illustrated plan agrees with Tom K’s plan of restructuring. That would be really interesting to see the CEOs have their own money being used for restructuring. That would be the ultimate example of reorganization. However, he has failed to propose any intermediate plan helping to facilitate the rebounding of the market he has stated.
For instance, GM, Chrysler, and Ford spend a huge amount on labor than compared to its successful competitors. Mark Perry reports that “total compensation for these three companies is $73.20. That’s a 52 percent differential from Toyota’s (Detroit South) $48 compensation (wages + health and retirement benefits).” RIGHT HERE IS ONE OF THE PROBLEMS! The management at these three companies obviously need to solve this problem (cut unnecessary labor costs) out along with their credit problems out first. This needs to be done on their own, as nothing productive for the future will happen in the long run as proven with the UK government bailout of the now non-existent British Leland Motors. Matt M however has kept us affirming that a socialist economy is what we should keep ourselves at- that this bailout is indeed necessary. Rather, not a socialist economy but one that tosses money at the corporation and will sustain these troubled companies- or merely jus the trouble.
Chairman of the House Financial Service Committee Barney Frank made the statement that if you are not for the bailout, then you are against the blue collar worker, because that's who a bailout would hurt he argues. This is absolutely the opposite for the future of our American economy. The management of the auto industry's plans or itself needs to be revamped in order to keep this long pioneer American industry alive. There are many American workers in the industry who do not want to see the collapse of the industry itself in the long run; otherwise their skills would be completely obsolete in the future. Not only does a bailout prolong a problem by keeping tax payers paying more money or the government in debt from obtaining that money from foreign countries, but if by the slightest chance it gives a false hope of success, the auto industry will still disappear. This is because the money and direction is all resulting from the same source, the government, taking out the very fundamentals of competition of our free market economy. In response to Mike S, a bailout will equally cause a problem with foreign competition indirectly with borrowing money from them. It is a matter of this non-bailout plan that keeps competition at home alive, as well as competitive American industries on an international scale. With a bailout plan as Mike describes, we surely have American auto industries… that is troubled auto industries with no competitive edge that we are sending out their in the global market ready to compete. In response to Matt K’s post, it is time to show some help (not necessarily in governmental bailouts, but in federal bankruptcy courts) but strictness with our economy should be shown to, too other companies to make sure that our formerly working economy has not lost its fundamentals.
A bailout to any other industry than financial services would definitely take away the core ideal of our free market (as almost all of the previous posters have suggested it will appear that our government can do anything for us and is our “heavenly rescuer” we can believe in.) Other industries that would fall to negative profits and excessive debts to creditors would look to the government for help, just placing burdens on tax payers or the government itself. Many industries would think to get the same help others are getting. However, the reason why it is acceptable for the financial industry to get help during this time is that creditors will be major participants in taking our economy out of this mess as Jim Kuhnhenn of the Associated Press states. Niko K has stated that even the auto industry should be bailed out- but where do you draw the line? The financial industry is the key participant for this plan without giving the federal government too much control as you have casted yourself in a paradox of problems. They’re the only ones who should be bailed out as they have roles in this Chapter 11 plan as stated above. The idea of a Chapter 11 REORGANIZATION as a fix for the economy seems to be one of the better long term bipartisan ways of treating the economy as we see no absolute cure for it.
I agree with the plans Patrick reiterated on reorganizing companies. Not only do labor costs seem high, but there are huge salaries paid to these administrative staff who do not operate to full efficiency, even more ironic as all three taking their own separate private jets to D.C. to negotiate a bailout deal. This idea of reorganization does seem to work for the long term, but Patrick does not say how we can safely ensure people of their jobs in the short term.
This seems to be a puzzling problem as Forbes reports that three million jobs in the U.S. economy will be lost if the company has to liquidate all its assets while laying off its workers. Forbes also suggests lowering pay of laborers- maybe even more the administration who do not seem to be operating efficiently with the status of their business as evidence. This needs to happen quickly though if we want to make sure jobs will not be permanently lost to non-American companies. A mixture of both governmental bailout (more possibly an incentive to reorganize as Patrick points out) should be taken. However, the government should impose strict punishments for those companies in the auto industry who do not reorganize and use money wastefully as a sign to other industries that they may not get bailout money easily. This would keep our capitalist economy. This will not have companies waiting anxiously for themselves to be bailed out by the government as Mitt Romney pointed out that possible problem.
1. What are the opportunity costs of NOT bailing out the automakers?
The opportunity costs of not bailing out the automakers is a loss in jobs, lower supply of automobiles due to the failures of these corporations, lower wages, employee cuts, and overall, a GDP decline. However, according to Forbes.com, as much as it seems like that these corporations are a 'big deal,' they really aren't. For example, if the government doesn't bail out GM, then that's only a .04% reduction in the national GDP. If GM isn't such a big player in the US economy, should we bail it out? I think not. The opportunity cost of is too small.
2. What message are we sending to other businesses by going through with the bailout?
The message the government will be sending out to other corporations is just that if any business is on the verge of failing, the government is there to support it. This isn't the message we should be giving out because it may instigate more bad decisions by future corporations who will take the chance to risk their business since, in the end, there is the government to "back" them up.
3. Does this represent a fundamental change in our economic system?
Yes, it seems like we're becoming more Socialist than Capitalist. But this isn't a bad thing on its own anyway. Dire circumstances required the government to act quickly and support the failed corporations in times of need. Now that the crisis has settled a bit, we can stop taking responsibility over the other failed corporations. They should learn on their own.
4. Why should or shouldn't the government bail out the automakers?
As said before, according to Forbes.com, the big three automobile makers of America aren't a big factor in the national economy as compared to foreign companies like Toyota, Honda, Hyundai, etc. The government shouldn't bail out these corporations because it is sending the wrong message to other businesses, it is putting us further in debt, and we shouldn't take responsibility over the wrong decisions of others, especially since these corporations don't seem to matter anymore. So in the end, we should stop bailing out more corporations- it isn't needed any longer.
I also have to agree with Patrick in this case because he's right when he says, "It's time for people to wake up and realize just by throwing a sum of money at anything will not solve any problem." Money isn't always the solution to everything. In fact, the businesses should have not made unwise decisions for the sake of money. What they thought led their business higher and higher financially only brought them down harder. Now, they have to pay for their actions, not the government or more importantly, the average people.
@ Tyler A
I disagree how you think GM and the other 2 companies will come back. I don't think that will happen for a while and if the governemnt can spend ridiculous amounts of money on AIG then why not on auto companies? Also i think the government should have done something long before this happened and not help out now after all the damage was done.
I believe that not by not bailing out the automakers, part of out economic system will be disrupted. If we dont bail these automakers out then people will be out of jobs and it will cause hurt morale in our country. By not bailing out the automakers, the economic problems will snowball with more and more unemployment. People will also begin to lose confidence in the automakers in general and the last thing we need is another hit to our economic confidence. However, if we bail out these automakers we are sending a message of forgiveness for corruption and greed. To be bankrupt should be the last of the extremes and if companies are just bailed out when this happens the country is in serious economic trouble (even more so then now). Continuing these bailouts will lead to a nasty trend that will be hard to break. This definitely is a change to the economic system and not a positive change. The biggest cost of the economic crisis (if we ever escape) would be a change like this in our economic system. To much governmental reliance will lead to a corrupt economy. We should not bail out the automakers. Yes, it will cost some jobs and morale, but we can not wait hand and foot on these companies and expect it to turn out positive. To bail out these companies would be a change in the basis of the economy that we stand for.
I agree with Mike W as we should not be bailing out these automakers for their stupid mistakes. Bailing them out will lead to a variety of different issues that we are not prepared to handle right now. I also agree that there can be other ways of supplying this country with what we need that does not involve the big three. Obviously we do not want these companies to go bankrupt but there are options that can be had that we can turn to before putting our money into the big three.
I disagree with chris dib because we cant assume that similar and better aestablishments will reappear eventually but if they do would they reappear in time to fix all of the problems caused by the big 3 going under? i dont think it is worth sacraficing all of those jobs and risking even more severe economic hardships.
in response to matt, and ben. The consequences of bailing out the Big Three are far worse than if we do. Just because no one wants a Daewoo or a Toyota Prius, that is capitalism. Look around on your way to school tomorrow and count how many Fords and Chevy's you see. I pull up to the parking lot and to my left and right i see a honda, infiniti, bmw, mercedes, nissan, subaru etc. The bottom line is foreign cars are more affordable to the American counterparts, that is the society we should drift towards and not the latter where we become socialists. Just because some people lose their jobs doesnt mean the government should play superman and save the struggling business, thats life. Live, Learn, and move on. 9 out of 10 business fail, but does that mean Obama or Bush is going to come to Smithtown and bail out the deli on Terry Rd. Or Circuit city just because they are struggling and failing no, we let them suffer and that is the way the cookie crumbles. Regardless of the economic impact of a small business failing it is the same principle that the government cant swoop in and rescue that cat out of the tree because it is our favorite cat.
KIM O Says:
1. If the auto companies are not bailed out they could go under resulting huge job loses, 100,000 in GM alone, and then ontop of that there would be all the dealership and supplier employees who would loose their jobs, amounting to millions of jobs lost. Due to the large scale layoffs and unemployment the country would have to pay more taxes for unemployment insurance, which would put a squeeze on taxpayers money going to schools and social security. Also the unemployed would not be spending money as freely and the business cycle would take even more of a downturn with 3 million consumers suddenly out of the picture.
2. Although the bailout is necessary to prevent even more of an economic downturn, it send a bad message to american businesses. It reinforces the concept that no matter what the company does, whether it be bad business ethics, poor management, environmentally unfriendly products, ect, that the company can turn to the government for help. It gives all businesses the reinsurance that the responsibility doesn't end up on them, but on the government.
3. This bailout is showing the general trend of the american government becoming increasingly more involved in the economic systems. we have always been a economic system based on "kill or be killed" and now this is showing how laizze faire economics in america is slowly ending and we are becoming a more hands on and will continue to get hands on as more bailouts are requested and people look to the government in these hard times.
4. The government should bailout the companies even though i hate the idea of big business not being punished for their errors and instead being rewarded with billions of dollars and a redo. but my spite for the few shouldn't leave the people who didn't do anything wrong to suffer. The entire country will feel the increasing unemployment rates and economic failures if they are not bailed out. It wouldn't be beneficial to anyone and would only prove a point. The government shouldn't make an example out of the automakers because it hurts too many innocent people.
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