Steep Bills on Capitol Hill

By Rob Michael
2.19.2009 at 4:45 PM

If you thought you might catch a break from on the financial talk in Washington, you are sadly mistaken. GM and Chrysler are back on Capitol Hill asking for more money. The auto giants that are commonly considered "too big to fail" were instructed to return by the Bush administration to present their plans for survival in the auto market. Although we might have hoped otherwise, the plans are accompanied by requests for some pretty big checks. Is your patience running thin yet? Maybe it should be.

The debate here is not a simple one, but the answer is rather clear. These "bankrupt" auto companies need to be allowed to actually go bankrupt. It seems that despite our country being founded on ideas of freedom, like democracy and capitalism, we have allowed our democratically elected officials to ignore the role of markets. Socialism is at the door and our doormen are not even questioning its presence.

By dragging the companies through the recession we are doing the closest thing to throwing our money away. They have proven their capability to fail, but the response is to keep them around in hard times because we think that now they have a better chance to succeed. The government has either forgotten how the market works, or is using this opportunity to grab more power. My pessimistic side seems to favor the latter.

It is true that the auto industry is having a difficult time for reasons outside of management. Gone unseen to the majority of the public is the pressure created by unions. By refusing to allow GM to lower its overhead cost, the unions are much of the reason American cars cost so much more to produce. Due to the all of the benefits secured by the United Auto Workers, GM reports its worker costs at $69 per hour. This is a result of health care, pensions, and wages. In contrast, Toyota employees receive the equivalent of $53 per hour. Even before the recession hit, American companies seem to be at a bit of a disadvantage.

Regardless of what problems may be aiding in failure, the call for more billions is still unacceptable. GM is asking for another $13.4 billion and Chrysler for $4 billion. Reasons are rooted in the too big to fail mentality, but a lot of the numbers on the scene are sneaky (as usual). GM estimates that job loss could be between 1.5 million and 3 million workers. The low end of this spectrum is actually only if one company's failure results in the other companies' failures along with the loss of dealerships and other outlets. For some reason, this is given as the low end. On the higher side, the prediction is rooted in the notion that GM failing will cause all auto work in America to disappear. This means that foreign companies with factories in the U.S. are also goners. I think its a little ridiculous to believe that Americans will simply choose to live out their lives without automobiles from now on, but if I was fighting for my life I might make some outrageous claims too.

The truth is that the government is letting the people down here in a big way. When conservatives lack fiscal conservatism and liberals are given leeway to spend even more liberally, it is the people who get the short end of the stick. It might be a good idea to stop and think about where this money comes from. The government does not have an independent revenue system. Any money it spends will somehow fall on us, the people. Letting all of this slip by only means future generations will foot the bill.

Rob Michael is a member of the Rutgers Libertarians. He is an SAS sophomore majoring in Psychology.