Obama Promises Crowd New Government Funding ( Bailout ) For Auto Industry!

Less than 1 week after both the House and Senate passed a $25 billion bailout for the automotive industry, Senator Obama promised a crowd in Michigan government intervention and funding for the industry. The bailout passed as part of the stop-gap bill came in the form of low interest government loans expected to save the automotive industry over $100 billion in interest and designed to be used for improvements to factories and re-tooling for new hybrid vehicles. Yet the bill that passed, had no built-in restrictions or oversight on how the industry was to utilize the money. In addition, the $25 billion, a mere 25 times larger than the 1979-1980 bailout of Chrysler, contained no provisions for limitations on executive pay, no requirement for restructuring of operations and no repayment schedule; all of which were contained in the 1979-1980 bailout.

Perhaps more disturbing is the fact that an economic stimulus package introduced into the Senate last Thursday contained language for an additional $25 billion in loans/bailout funds for the industry. Although lawmakers have stated that this $25 billion were the same loans, the bill was introduced the same day that the Senate received the Stop-Gap bill and the language calling for the additional $25 billion has never been removed.

Senator Obama made no mention of this loan/bailout in his speech in Grand Rapids on Thursday, but did promise the crowd that he would provide new Government funding for the automotive industry. In his prepared remarks, Obama stated, "But I refuse to accept that Washington has to stand idly by while foreign automakers outpace us. I’m running for President to make sure the cars of the future are made in the same place they’ve always been made – right here in Michigan. I’ll be a President who finally keeps the promise that’s made year after year by providing the funding our automakers need to retool their factories and make fuel-efficient and alternative fuel cars and trucks."

"Funding Our Automakers Need"!

Obama;s statement amounts to nothing more than dangerous populous pandering, especially in light of the $25 billion our government is handing automakers to "retool their factories". Obama's statements can only be taken two ways:

A) He is simply trying to accept credit for a bailout that has already been passed, or

B) He is promising a new bailout of the industry aimed at capturing votes in a state that appears to be in perpetual recession.

My guess is the latter.

Obama of course, failed to recognize the fact that foreign automakers such as Daimler, Toyota, Honda and others employ tens of thousands of Americans. However, Obama's statements should worry everyone. This congress has done nothing to address the underlying problems of plummeting sales within the auto industry. This week they threw $25 billion to this industry without any preconditions at a time in which Ford & GM lost over $22 billion in the second-quarter alone. New Government Funding of the auto industry, as Obama is now promising, does nothing to solve automakers' underlying problems and will do nothing to create new jobs in Michigan. Just last week, despite the passage of the bailout funds, ford announced additional layoffs, and to believe that throwing more money at these companies will solve the problem is ridiculous.

If Obama wants to help the auto industry, then he should work to take steps to immediately lower energy prices. Lower energy costs mean a revival in sales for the industry; and with profits comes reinvestment in new technologies and new jobs. Throwing more bailout dollars to an industry with no sales, will do nothing more than allow these companies to barley survive while continuing to lose billions. Bailout dollars will be diverted into payroll, insurance and increased operating costs in order to survive and will never find their way back to their original purpose.

The American taxpayer should not have to continue to foot the bill for these companies whose own mismanagement and bloated expenses have ruined their ability to compete in the marketplace. But then again, Obama is just telling the crowd what they want to hear.

Populism within this campaign cycle is out of control; and as history has proven, turmoiled economic times threaten the very basis of capitalism and democracy. Today's populism prey's upon the fears that every American family has and promises that the Government will solve their problems. The government should only have 2 purposes in intervening in private industry; first to protect consumers & workers, and second, to promote competition.

Additional government bailouts of the auto industry (or government funding as Senator Obama call it) will do nothing to solve the underlying structural and macro-economic challenges that face that industry. Pumping billions of taxpayer dollars into companies whose products that taxpayers aren't purchasing is ridiculous. If Senator Obama really wanted to help Michigan workers than he would not offer billions in bailout funds while at the same time proposing a massive tax-increase on these companies (sort of hypocritical). Instead, he should be offering automakers new tax-cuts or credits based upon expanding investment and hiring new employees. Obama should be suggesting ways to strengthen the dollar and lower short-term energy costs which would revive purchases of the products these companies sell.

At the end of day, the Senator who just months ago attacked automotive industry executives is now promising them "government funding", which should prove to everyone he will say anything so long as he gets your vote. The combination of Bush's inability to veto spending legislation and a Democratic Congressional Leadership with no fiscal constraint will break all previous deficit records. As our deficit grows; the dollar will fall. As our deficit grows; the cost of clothes, food and energy will rise. And despite all of this, Senator Obama is now promising new bailouts for an Auto Industry that congress just gave $25 billion too.

J Brown
October 3rd, 2008
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