This can’t be good!
The Detroit Free Press reported August 5 that the country’s top three automakers are looking for a bailout from Washington. So, you ask, what else is new?
Answer: the money and the likelihood.
Apparently, the “asking price” just a few months ago was about $20 billion, but now insiders say it may need to be closer to $40 billion. By the time the election rolls around, who knows? $80 billion? $100 billion?
And with Washington in a bailout mood these days, there’s little reason to hope for restraint.
The paper reports that Democratic presidential candidate Barack Obama, who never misses a chance to throw money at causes, has already offered to toss in $4 billion to help Detroit build “cars of the future.” No word yet whether consumers will be any more excited about those future cars than they have been about what Detroit has been pumping out lately.
And the bailout may not depend solely on Obama winning the presidency. When former Republican presidential candidate—and possible vice presidential candidate—Mitt Romney was touring the state earlier this year, he greeted Michiganders’ open arms with hints of an open wallet, if only they would vote for him.
But a financial bailout for Detroit may be the lesser of two evils. In the past few years, GM, Ford and Chrysler executives have been trolling Washington looking for a bailout on their health care obligations—the so-called “legacy costs.”
Of course, the two are intertwined. If it weren’t for the high labor costs, including health care and pension benefits, the car companies might not need a huge financial bailout. Note that Toyota and Honda, which also make cars in the U.S., aren’t racking up the frequent-flier miles to DC.
For our part, we’re opposed to either a financial or a benefits bailout. But if Washington is determined to do one or the other, it should probably stay with a limited financial bailout.
That’s because Washington is already facing its own looming health and pension bailout, otherwise known as Social Security, Medicare and Medicaid. And as anyone who’s listened to former U.S. Comptroller General David Walker lately knows, the country’s entitlement tank is on empty.