Auto-Bailout

For the second day in a row I write on the automakers' bailout being pushed in Congress. The New York Times frames the current debate between the Democratic Congress, on the one hand, and the Bush Administration and Congressional Republicans, on the other hand, not as whether the bailout should occur but what the source of bailout funds will be. The Democrats want to use a portion of the $700 billion financial industry bailout to fund the "rescue" package while, according to the NYT, the Rebublicans want to use a $25 billion fund already set up for the automakers to help them meet energy efficiency standards.

Assuming that the New York Times accurately described the debate (not a given), I am concerned that we have apparently decided to bypass the debate whether a bailout is correct in the first place. Any kind of bailout of these automakers merely ratifies bad business practices by their business leadership and their unions. It encourages them to remain inefficient and lets the unions continue to enjoy their anti-competitive compensation and benefits packages. Plus, why should we as taxpayers be asked to fund the bloated union contracts and pensions?

Finally, where does it stop? At least the financial sector bailout could kind of be justified as remedying a systemic problem - the freezing of the credit markets for the economy as a whole. Bailing out a particular industry opens up dozens of other industries to potential government intervention.