Posted: 16 month(s) and 7 days(s) ago   |   1 Comment(s)   |   Rating: 0 0
Posted by: Tyson

WASHINGTON | Finally, the outlines of a coherent debate on the federal bailout. This comes as welcome relief from a campaign season that gave us the House Republicans’ know-nothing rejectionism, John McCain’s mindless railing against “greed and corruption” and Barack Obama’s detached enunciation of vacuous bailout “principles” that allowed him to be all things to all people.

Now clarity is emerging. The fault line is the auto industry bailout. The Democrats are pushing hard for it. The White House is resisting.

Underlying the policy differences is a philosophical divide. The Bush administration sees the $700 billion rescue as an emergency measure to save the financial sector on the grounds that finance is a utility. No government would let the electric companies go under and leave the country without power. By the same token, government must save the financial sector lest credit dry up and strangle the rest of the economy.

Treasury Secretary Henry Paulson is willing to stretch the meaning of “bank” by extending protection to such entities as American Express. But fundamentally, he sees government as saving institutions that deal in money, not other stuff.

Democrats have a larger canvas, with government intervening in other sectors of the economy to prevent the cascade effect of mass unemployment leading to more mortgage defaults and business failures (as consumer spending plummets), in turn dragging down more businesses and financial institutions, producing more unemployment, etc. — the death spiral of the 1930s.

With almost 5 million workers supported by the auto industry, Democrats are pressing for a federal rescue. But the problems are obvious.

First, the arbitrariness. Where do you stop? Once you’ve gone beyond the financial sector, every struggling industry will make a claim on the federal treasury. What are the grounds for saying yes or no?

Second is the sheer inefficiency. Saving Detroit means saving it from bankruptcy. Bankruptcy can allow operations to continue while helping shed fatally unsupportable obligations.

The point of the Democratic bailout is to protect the unions by preventing this kind of restructuring.

Which will guarantee the continued failure of these companies, but now they will burn tens of billions of taxpayer dollars. It’s the ultimate in lemon socialism.

Liberals have always wanted the auto companies to produce the kind of cars they insist everyone should drive: small, light, green and cute. Now they will have the power to do it.

If you think we have economic troubles today, consider the effects of nationalizing an industry of this size, now run by bureaucrats issuing production quotas to meet politically mandated fuel-efficiency standards — to lift us to the sunny uplands of the coming green utopia.

Republican minimalism — saving the credit-issuing utilities — certainly risks not doing enough. But the Democratic drift toward massive industrial policy threatens to grow into the guaranteed inefficiencies of command-economy maximalism. In this crisis, we agree to suspend the invisible hand of Adam Smith, but not in order to be crushed by the heavy hand of government.

http://www.kansascity.com/273/story/895779.html

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