EDITORIAL: Pay now or pay later

Editorial Board

If you thought the financial crisis was bad, this is worse: Both Republicans and Democrats in Congress are screaming unanimously for an unadulterated government subsidy for the American auto industry. GM and Ford say that they are bleeding cash so badly that it simply cannot wait until after Barack Obama is sworn into office to receive their handouts.

These companies, along with Congress, are setting a dangerous precedent for American industry. According to the U.S. government, any company that is deemed too big to fail is automatically exempt from making prudent and competitive business decisions, or at least this is the message they are sending.

One in 10 jobs in America is tied to the auto industry. Hundreds of thousands of jobs in Detroit and worldwide are on the line should these bailouts not be implemented. The U.S. government will pay out billions in unemployment should these companies go under and will probably suffer an even greater credit crunch.

But consider this: The Toyota Prius was released for sale worldwide in 2001. Chevrolet is releasing its first retail electric-powered sedan in 2011. For the past 10 years, both GM and Ford have completely ignored auto and environmental trends, marketing Hummers and SUVs to Americans, while Toyota and Honda whiz past in both sales and consumer confidence. Global market research firm JD Power and Associates has even stated, “The global (auto) market in 2009 may experience an outright collapse.” These companies may have done well for America in the 1950s but are a drain on the system now because of their outdated and irrelevant business strategy. For their efforts, they will receive up to 50 billion in aid from your tax dollars.

Rather than offering Detroit billions in government loans, Congress should let GM drown and designate that money to retraining programs for displaced workers. If the Democrats want to subsidize something, allocate money to green business and to auto manufacturers that make decisions based on market competitiveness and environmental concern.

By implementing these bailouts, a country that has risen to global dominance on free-market principles is dangerously distorting its ideals and sealing its fate as a drain on the global auto industry.