No on the auto bailout

December 11, 2008

The auto bailout seems like a staggeringly bad idea to me. Sure, compared to the size of the bank bailout it’s not that large, but $14 billion still amounts to a lot of money (enough to buy a $30,000 car for every member of the United Auto Workers union, for example) and of course it is only the beginning.

The fact that Congress seems to want to use this opportunity to force car companies to adopt high fuel efficiency standards and impose a political agenda on the manufacturers via a “car czar” makes the idea even worse, since we are likely to get car companies that continue to limp along making cars that no one wants and that take actions not to improve their market viability but to please political considerations in Washington.

A much better idea, as painful as it may be, would be to let the car companies fail and see what replaces them. Many of the workers may be hired by foreign auto makers with plants in the United States. New car companies may even spring up with new blood and new ideas. The auto bailout merely preserves an unworkable status quo while adding layers of bureaucracy that will confuse the purpose of any auto maker: to make cars that people will buy.

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