Bankruptcy over Bailout

November 21, 2008

Congress is getting so much pressure and hearing so many tall tales these days that it’s akin to unscrupulous telemarketers battering the simple minded to buy their product.  It is getting to the point where Congress will need to pass legislation to protect itself from money grubbing shysters.  First, it was the Paulson/Bernanke Crime Syndicate (their specialty is counterfeiting) that told Congress they needed a cool $700 billion or the sky would collapse on the United States.  Now, it is the poor automobile industry (that just got $25 billion from Congress in October) that needs another $25 billion lest the unemployment rolls in this country will swell by 13 million or 4 million (they haven’t decided on a number yet).  Next month, Congress will probably hear from the airline industry and how it needs billions.  After that, look for the agriculture sector to weigh in and then who knows, cigarette companies?

The fact is, soon there will be no end in sight to the steady stream of industries and groups that will lobby Congress for federal largess unless they put an immediate halt to the giveaways.  Congress has a golden opportunity to do just that right now by saying no to the automobile industry.  No matter what the costs, Congress must say in the words of Roberto Duran “no mas” to billions in bailouts for Detroit. 

For one thing, all of these bailouts are unconstitutional and thus illegal.  Article 1 Section 8 of the U.S. Constitution clearly specifies the powers delegated to Congress.  Nowhere in those roughly 17 powers is Congress given the authority to transfer money from one constituency to another.  Nowhere in there does it say Congress can use the federal Treasury to prevent corporate bankruptcies.  Critics of this position will say, “but what about the general welfare clause in the same section?”   The answer is, if the general welfare clause gives the Congress the power to bailout corporations with taxpayer funds then why did the authors of the Constitution not delineate that power among the 17 powers in that section of the Constitution?  Why did they delineate any powers at all if the general welfare clause includes any power?  According to the general welfare clause logic of the statists, the Congress can do whatever it wants under that one clause.  That is why we are in the mess we are in.

Another reason Congress must put an end to its handouts is because it is investing in losing propositions.  The Big Three automakers are a perfect example.  Their stock has plummeted by 75 percent since the beginning of the year and all three are on the brink of bankruptcy.  If investors are bailing on the Big Three in droves and each has one foot in bankruptcy court and the other on a banana peel, why in the world would our elected representatives even consider putting billions of dollars in them.  Would you?

Of course there is a good reason why the carmakers are collapsing.  Like other industries that have disappeared from the American landscape, the automobile companies have been the victims of collective bargaining laws passed by Washington and the State of Michigan.  It has been estimated that the average GM worker makes $81.80 an hour in wages and benefits.  In comparison, non-union Toyota pays $48 per hour in wages and benefits. The legalized extortion that the UAW is allowed to hold over GM puts the company at a competitive disadvantage costs wise by about $1000 per vehicle produced.

So, if Congress should not bail out these broke companies, then what should be done?  The same fate should befall the automakers that should have befallen the failing banks.  They should be allowed to go bankrupt.  “But they are too big to fail.”  “Many people will lose their jobs, their homes, and their healthcare.”  The bottom line is that the Congress cannot solve our economic problems by throwing good money into unsustainable enterprises.  The more than $2 trillion the government has already injected into the economy has proven that.  Besides, at the right price, entrepreneurs will buy the assets of the bankrupt firms and start a new American auto industry.  There is a market for cars in the U.S. and it is only a matter of time before some American(s) fills that market need.  Then the millions of workers who lost their jobs with the Big Three bankruptcies will have an opportunity to work for a competitive company.


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