Bailout Brainstorm 2: More Ignorant Questions from a Confused Citizen

Can we at least aim before we throw more money at the economic crisis?

It seems a small thing to ask. But, as I made clear in my previous "Bailout Brainstorm," I have no economics credentials whatsoever. So maybe there's some fancy, Ph.D.-level reason why the future of the American economy depends on us hurling taxpayer money indiscriminately in the direction of failing banks and -- in the latest bleak news -- at failing automakers.

The New York Times reports that General Motors "might not survive the year" and Ford and Chrysler are also "using up their cash at unsustainable rates." The same story describes the resulting rift in the coalition that just helped Barack Obama win the presidency:

"Environmentalists are adamant that any aid be conditioned on the auto industry's dropping of its opposition to higher fuel-efficiency standards and investing more in new technology. That puts them at odds with unions, who oppose any strings, leaving it to Mr. Obama to mediate."

So I guess I'm at odds with the unions, too. No strings? Seriously?

I've got to believe strings don't need to doom union jobs. Strings -- especially strings tied in smart spots -- could steer automakers onto a more sustainable path. Greater sustainability should be good news for the union workers whose paychecks and pensions are handcuffed to these sinking automakers.

In that spirit, here is my new wave of (possibly dumb) questions. Feel free to comment below and add your own questions. Maybe something we ask -- even something dumb we ask -- will trigger a useful idea in the brain of someone who actually understands this stuff.

Question 1: The federal government already offers tax incentives for buying fuel-efficient vehicles. Why not be more aggressive, more direct? Why not use the U.S. Treasury to hand out downpayments to prospective buyers of fuel-efficient cars? If people can afford the monthly payments for a Ford Escape Hybrid or a Mercury Mariner Hybrid, let's help make it happen. Cover their downpayment. Make the sale. Help everyone in the big long economic chain that stretches from auto-parts-makers to autoworkers to car dealers to the waiter who brings the car dealer her lunch.

Question 2: Conversely, is any bailout of automakers just "money down the rathole," as Henry Blodget argues in his call to "let the crippled companies finally go bankrupt"? Refusing to at least consider his perspective is reckless.

Question 3: If the big automakers are doomed, might we get more for our tax money by investing in the entrepreneurs who are trying to bring the cars of the future to a mass market? Would these new companies give autoworkers a more stable, hopeful future? Would it be cheaper in the long run to support autoworkers during the lean period between the crash of the old automakers and the rise of the new ones?

Question 4: Are we sending help to the wrong end of the economic ladder? Here's Bob Herbert in today's New York Times:

"When the Champagne and caviar crowd is in trouble, there is no conceivable limit to the amount of taxpayer money that can be found, and found quickly.

"But when it comes to ordinary citizens in dire situations -- those being thrown out of work or forced from their homes by foreclosure or driven into bankruptcy because of illness and a lack of adequate health insurance -- well, then we have to start pinching pennies. That's when it's time to become fiscally conservative."

Question 5: Are we wasting our money by throwing it at the most troubled sectors of the economy? As Herbert also wrote in today's column, "Congress and the new administration need to think big -- bigger than the stimulus package of $100 billion or so, which is being kicked around. Now is the time for a coast-to-coast 'Rebuild America' infrastructure program. Put people to work repairing and rebuilding roads and bridges, decrepit schools and ancient sewer systems."

When those road-builders, bridge-builders, and school-builders get some money in their pockets, they may do more for automakers than any bailout can.

Question 6: Are we forgetting that our real goal should be to foster a vibrant economy that provides good, sustainable jobs for our people? Given a choice between applying makeup to the corpse of the status quo and positioning ourselves for the future, the choice should be obvious.

Unless we panic.

So take a deep breath.

Ask questions.

Think.

Aim.

Then -- and only then -- throw money at our problems.

Comments

[David Quigg - Huffpost Blogger]

Thanks to everyone for the insightful comments. Special thanks to the commenter called "research" for shelving your snark long enough to go and gather some info. I respect that choice.

Meanwhile, I wanted to make sure everyone here got a chance to read Tom Friedman today. His piece called "How To Fix a Flat" and his other work can be linked to here ...

http://www.thomaslfriedman.com/ny-times-articles

I particularly enjoyed this section ...

"The blame for this travesty not only belongs to the auto executives, but must be shared equally with the entire Michigan delegation in the House and Senate, virtually all of whom, year after year, voted however the Detroit automakers and unions instructed them to vote. That shielded General Motors, Ford and Chrysler from environmental concerns, mileage concerns and the full impact of global competition that could have forced Detroit to adapt long ago.

"Indeed, if and when they do have to bury Detroit, I hope that all the current and past representatives and senators from Michigan have to serve as pallbearers. And no one has earned the "honor" of chief pallbearer more than the Michigan Representative John Dingell, the chairman of the House Energy and Commerce Committee who is more responsible for protecting Detroit to death than any single legislator."

[onenvrnos]

This may be a "superficial" post in light of all the pressing demands that are faced, but...As a consumer, I had heard that GM was going to produce a totally green car by 2010--possibly electric. Since we had an electric car that was all ready for the market but was slam-dunked by those supporting the oil industry in years past, I offer the following. Build the damn "green" car...be innovative for a change, be a leader. We were all psyched to finally buy a car in 2010 on GM's direction. Now, to throw money at dead inventory is a colossal mistake. The auto industry has only itself to blame, along with all the oil burners. Bring it on with something new and exciting, and you will have the American (and other) consumers knocking at the door. Do not think that you can continue to produce the same ol, same ol and think the American public will support it. We all know the drill...and it isdefinitely not Drill, Baby, Drill.

[beaupritchard]

Not sure a new "green" car is the answer but I'm willing to listen. I'm thinking part of the answer is to move companies ... factories ... stores closer to where people work. This may mean allowing corporations to fail ... be broken up into smaller entities ... and allow them to move into communities with a smaller footprint.

Another thing that needs to be done is congress needs to "take the money back" from Paulson. The things that are being done to save their precious investor class market are obscene. Banks are now witholding money in anticipation of failures so they can maximize profit on the ensuing pain.

[MaynardGK]

Relief of consumer debt should be a big part of stimulus, and relatively costless
in the wake of the banking bailouts. A national bank should be set up,
1. seizing AIG, fannie Mae, anything else in debt that much to Uncle Sam.
2. Proceed to bank with the public, including unsecured debt.
3. Interest on these should be systematically reduced as payment history is successful.

[watchingthings]

This bailout is reward for making it so many "fat cats" can easily defraud the public and it all seems so ligitimate. The huge bonuses are "shut your mouth money" to top executives who know what is going on.

[DuganS1]

Giving the domestic auto makers loans to invest in more fuel efficient vehicles does not guarantee the companies will sell more cars or make more money selling these cars. One problem is that people might not buy these fuel efficient cars anyway because gas prices have gone down so much. People will probably go back to buying SUVs and trucks. People may also continue to prefer cars from companies like Toyota and Honda. Second, a big problem with GM, Ford, and Chrysler is that they make very low profit margins on autos because of very high legacy costs. It won't even help much if they sell a lot more cars because they simply don't make that much money selling cars. For example, GM sold a lot of cars in 2005 and still lost a cool $10 billion. In my opinion, we should give the domestic auto companies enough money to survive, but if we want to invest funds in the auto sector we should invest in a good company like Toyota. Maybe we should just declare Toyota to be a American company.

[watchingthings]

Losing all that money I would chalk up to mismanagement mainly. Why are these loser type CEO's being given such huge bonuses?

[DuganS1]

Mismanagement in the sense that they signed contracts favorable to the union workers and retirees but bad for their business.

[noblefuse]

Hello, my name is Solomon Azar- I HAVE FOUND THE ROAD TO SAFE CLEAN NUCLEAR FUSION- When this is found and understood- the energy crisis will end- I have been looking at this system since 2002 and it is perfect in every way. I finished my experiments April-2007. I have since that time tried to the best of my abilities to inform many people upon the net- there is no question It would be nice if concerned citizens would offer suggestions or help provoke a university to simply repeat my experiment to end the energy crisis- 19 months and I still wait as the world crumbles from lack of abundant clean energy.

I have performed an experiment never done before in science- I used a Tesla coil for its use in high voltage high frequency and apply its discharge plasma not upon the dielectric of free air- but to the dielectric of water itself-

[research]

I was going to be snarky, but I read your documents.

It's interesting.

Build your prototype and prove your theory.

Good luck.

[watchingthings]

This strongly reminds me of horsefeathers.

[Chicago48]

Sir, you make too much sense. As you know the Government is full of fools and they don't think straight. Good suggestions that will go unnoticed and the taxpayer again will be hung to dry upside down. For a nation full of the smartest educated people in the world, why does Europe and So.American leaders outshine our leaders with policies? For example, France and its use of nuclear power. Why oh why can't we get our nuclear plants fired up? Or Brazil and the use of SUGAR ! SUGAR! to fuel cars....not to mention diesel....and Mr. Obama may like being president, but he just stepped into a pile of shiz, with every interest group and their begging hands.
Who would want that mess?