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Originally Posted by PsyDoc
Potato...Patatah. "Loan" just sounds better than "Bailout" plain and simple. There is nothing stated in the definition of "bailout" that implies it's money that never has to be paid back. In my opinion, the term bailout is more applicable because the Big 3 cannot secure loan anywhere else...it's government to the rescue or bust.
The real issue is whether an infusion of capital will save them and whether another $25 billion is enough or if it's just the foot-in-the-door technique where they keep asking for "a little" multiple times rather than one big chunk at once where most people would likely balk. Look at AIG..."We need $85 billion (Sept. 16th)...yeah...that will set things right. No wait, that's just not enough...now we need another $37.8 billion (Oct. 8th)...yeah, that will do it for sure. Wait...we still need more money...how about $20.9 billion (Oct. 31) for now. Crap, sorry...if we could just get a little more...perhaps $40 billion (Nov. 11th...looks like)." If they had stated up front that they needed well over $150 billion, then they might not have gotten the money. But, once they got their foot-in-the-door and the government committed to "saving them," then it is easy to keep getting more money. Why? Because if AIG failed, the government would appear to have wasted all that money. The government is basically honoring sunk costs (Dawes, 2001); they are in too deep to back out now.
What if each year, as individuals, we had to allocate what percent of our taxes would go to which programs. For example, some people might allocate 40% military, 20% homeland security, 40% infrastructure, or whatever while others would chose to support different programs. This might make the statement "government by the people" a bit more salient.
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It is a loan. Fundamentally, this is not a bailout. Are you saying we shouldn't protect any of America's businesses. Why don't we just sell our country to China? Let's all become communists! This is a ridiculous way of thinking. We need to protect America's interests, and one of those interests is tax money. The Big 3 produce a ridiculous amount of taxes for the government. Without them, their suppliers won't exist to pay taxes, their employees won't have jobs to pay taxes, and they won't make cars that produce sales and property taxes. Another interest is national prestige. If America doesn't make cars, other countries don't see America on the same level they see Japan on the streets. It is a subtle form of national influence in other countries. It makes them dependent on us to some small extent. Yet another interest is keeping civilians employed. These people won't be losing their jobs due to poor performance. They will be losing their jobs due to corporate inadequacy. It may not be the fault of the companies that their markets suck, but it is certainly not the fault of some poor guy who makes car seats for a living that his company went bankrupt because they depend on the auto industry to stay afloat and buy his chairs. He did nothing wrong, and that dependency in the auto industry is a big part of why the government needs to get involved. An estimated 1.4 million Americans will lose their jobs if one of the Big 3 fails. After one company fails, the whole corporate food chain will collapse. A company that makes 50% of its income from Chrysler and the other 50% from Honda will go under because Chrysler collapsed. Suddenly, Honda will not have whatever that company provides. In effect, Honda will not be able to make cars. Now Honda has gone under, and all of Honda's suppliers, some of which also do business with GM, will disappear. Now, GM can't make cars, and GM goes under. Do you see how this works? It is an international market. Each company is somehow dependent on the next. The whole world operates on road-based transportation, and we can't allow every major automotive company to go under because a few wealthy politicians feel that a liberal free economy will fix itself. We must act to help them. We should bail them out, but instead we're giving them a loan. Someday, the US will get all of its money back, and all the people complaining about this so-called bailout can shut up. In the meantime, the US government has Americans to protect. :flag2:
Will this alone save the auto industry? We all know that it won't save them if they don't sell cars. We need the whole market to return to normalcy. That means that leases and loans need to be offered again. People need credit, and no industry will function without some form of credit. When credit returns, we can expect the auto industry to flourish again.
We are a representative democracy. There are way too many people to allocate the money on our own for government programs. I'm not going to argue any more on this point because most people wouldn't know what's what when looking at a federal budget. It is far more complicated than simple percents and political obligations.