Automakers are using bailout money to lobby - for more bailout money; this is an odd economic philosophy

Wednesday, April 22, 2009

I firmly believe history will judge harshly the stimulus mentality that has engulfed the nation's Capitol.

Spending your way out of debt does not work on your household budget, nor will it work on our national budget.

But the forces are clearly in place to spend future generations deeper into debt through some odd mix of economic philosophy.

Shovel-ready projects were all the rage when the money from Washington first was announced. However, lawmakers across the land are still debating the best use for this infusion of tax dollars from afar.

We have yet to be stimulated.

The bailout of the auto industry will someday fill pages of college economic texts and the question will remain on why these once-proud firms were not allowed to declare bankruptcy and forge a path toward profitability.

Today we learned something new about the bailout dollars. The major auto companies are using a chunk of their bailout money to lobby Congress for even more dollars. Bet you didn't see that coming!

The auto makers are on strict deadlines to cut expenses. Without the mandated cuts, Congress has vowed that the money stream of your tax dollars will end. And, in bits and pieces, the companies are reducing payroll and other expenses.

But GM and Chrysler have spent $4 million in the last three months to lobby Congress on the need for even more money. Yes, they used the original bailout dollars to fund that lobbying effort.

If the automakers are to survive -- and the jury remains out on that question -- then the central issue must be the salary structure and the legacy costs that drive up the price of their products. Unless they can reduce those costs, our government is throwing good money after bad.

My first preference would have been to allow the automakers to reorganize under a bankruptcy order and allow them time to reshape their industry. But the economists in Washington believed a better approach would be government assistance.

Perhaps they know a lot more than I, and perhaps their approach will work.

What won't work is to spend massive funds on a plan doomed to failure. I fear that is the approach we have taken.

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