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George Bush, why hast thou forsaken me? It’s no great surprise that our President is acting like a K-mart shopper on Boxing Day by committing $17.4 billion in loans to bail out the DOA Detroit auto manufacturers. It is also no great surprise that he is announcing this move on the Friday before Christmas, perfectly timed to fall into the informational black hole that is news during the holidays.
To his credit, president Bush has set conditions for the loan including concessions from the UAW, which has already stated their intention to have those provisions set aside. Apparently the knuckleheads in union management still haven’t figured out that without a company to work for, there are no wages. That being said, the most disturbing condition of these loans is the option to become a stockholder of each auto company, effectively nationalizing the industry. On my scorecard that would be: banking, mortgages and automobiles controlled by our Government, with communications, airlines, electricity and oil left to aquire. I owned my own business that failed after eight years, and I threw plenty good money after bad. It’s easy for me to see what’s happening here, and I’ve got to say that when a business fails, it probably should. The pattern of poor management that causes business failure is not corrected by feeding it more money to squander. Many say that Detroit is failing because they don’t produce what Americans want. I don't believe that is necessarily true. Perhaps they are building exactly what America wants, but the demand is spread over too many choices. Or maybe the legacy costs for union benefits are making the purchase of a new car a luxury reserved for too few. If some of the automakers did go out of business, the demand would shift to remaining companies, with a resulting resurgence of the industry. That is supply and demand, pure and simple, and not necessarily a bad thing. What is a bad thing is our Government ignoring the laws of basic economics and forcing specific agendas by loan, law or regulation. That has been and always will be a recipe for disaster.
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