Guest Opinion
We Must Do Better Than Bailouts
Idaho First District Congressman-elect Walt Minnick writes about bailouts and the economy.
By Contributing Writer, 12-23-08
Like the many Idahoans who own and operate businesses, I have spent my entire adult life paying my bills, looking for ways to reduce costs and meeting a payroll. I never expected the taxpayers to bail me out when I made bad decisions, nor did I expect to keep my job if those decisions had led to the failure of my company.
Those values led me to promise during my campaign that I would demand fiscal responsibility from our nation’s leadership. That’s why I opposed the federal government’s bailout earlier this year of Wall Street fat cats. And that’s why I now oppose the President’s plan to give $15 billion of taxpayers’ money to the Big Three automakers, who - best case - will limp along for another month or two.
The American auto industry is too important for us to let it disintegrate. But to survive it must radically restructure - and do it now. To become competitive with its foreign competition, The Big Three must introduce new, fuel-efficient cars, close surplus plants, abandon corporate jets and luxury office space, slash executive overhead, restructure labor agreements, radically change supplier contracts, and write off its bad debts. Each company also needs “best in the world” new management, not some politically selected “auto czar” who second-guesses the same bad CEOs whose greed and poor decisions caused the problem in the first place.
The only way to quickly save the industry and the majority of its jobs is for government to force each of the companies to go through a “pre-packaged” bankruptcy. Under this process an impartial and experienced bankruptcy judge approves each company’s reorganization plan after weighing the objections and suggestions of those affected. These plans would force each company to scour the world for the best new management, and then order each company to restructure its balance sheet, most likely wiping out the interests of existing management and investors.
Part of the plan could offer taxpayer debt guarantees to induce private banks and bondholders to provide the necessary credit to keep the companies solvent. If done right, it shouldn’t require any direct taxpayer investment.
This is “tough love,” but it’s what the airline industry did to survive. Half measures like those the President just promised, or like most in Congress unfortunately seem to favor, simply won’t get the job done. They just prolong the agony, waste billions we taxpayers don’t have and leave a crippled, inefficient auto industry which still can’t compete with its more nimble foreign competitors.
Free enterprise only works when business is free to fail as well as free to succeed, and where CEOs are fired without any “golden parachutes” when their companies fail. Dedication to this principle is what for years made American business the envy of the its foreign competition, allowed each generation of Americans for 200 years to live better than their parents and made our country the most powerful nation in the world.
Bailouts to prop up bloated, inefficient big companies is what other countries do. It’s what caused socialist systems to fail. We must do better.
[End of article]Just curious, but which countries are you aware of that bail out inefficient, bloated big companies? And which socialist countries did this? And which ones failed as a result?
I can only assume you are referring to the USSR, which is the only failed "socialist" country that we can imagine possibly bailing out bloated failed companies, but even that stretches the imagination, since the USSR was not a real socialist country, but a command economy, and the "companies" it kept going were run by the government. No similarity there.
So, once again, what on earth are you talking about? For a future policy maker, you sound remarkably ignorant.
I'm certain, like his fellow Idahoians, Minnick believes, with Bush, that a free market economy (such as has just collapsed around our ears) need only steer clear of government oversight; and reduce taxes on big business to ensure the prosperity of privilege.
Comment By G.Jones, 12-24-08Minnick may have put it a bit poorly. In socialist systems, business enterprises are state owned in the first place so they can't be bailed out per se. However, it's true enough that the government's propping up of such enterprises was part of the reason for the collapse of eastern European governments.
Wikipedia says: "by 1990 the Soviet government had lost control over economic conditions. Government spending increased sharply as an increasing number of unprofitable enterprises required state support and consumer price subsidies to continue." And "Perestroika resulted in the fall of communist regimes in the Soviet Union and Eastern Europe, as well as the end of the Cold War."
Actually, I think Mr. Minnick is pretty much "right-on" with the philiosophy of allowing the automakers to go through bankruptcy. It's not like this hasn't happened before (major airlines) and the companies survived to provide service to the consumers. Whatever internal decisions were made by the CEOs and Boards of the "big 3", clearly they did not serve the long term interests of investors or consumers. So as Walt noted, these free enterprise companies should restructure themselves, either internally or through bankruptcy, but without government intervention. The "incentives" provided by government for improving vehicle efficiencies are miniscule, especially when compared to the incentives afforded to large, consumptive vehicles and the meager CAFE standards resulting from intense lobbying by the large automakers. Let them live with their decisions, and if manufacturers of smaller, more fuel-efficient vehicles do better in the marketplace, then so be it; that is what free enterprise competition is all about!
Comment By Native, 12-24-08For those earlier commenters - you may want to spend sometime looking at Korea, Japan, Taiwan, and numerous European countries before speaking about governments NOT bailing out their companies. And then I would spend sometime looking at the definition of socialism. I think the underlying message from Minnick is that there is no reason "we" should pay for the decisions made by those companies while their grossly overpaid management AND labor paid little if any attention to what was actually happening in the global marketplace. Market corrections are not always painless and there are lots of folks who thought the good times would never end (right, builders, realtors, bankers???)
Comment By Dan, 12-24-08I find it funny that we are placing a microscope on companies that are asking for --loans-- with conditions and --make "something"-- on American soil with American workers-- while we just give $750 billion to a non-transparent, no conditions, no holds barred, "We trade paper" financial services industry with almost no conditions or oversight. The hypocrisy boggles the mind. What boggles the mind even more is that the people said NO to the "first bailout" for financial services and our representatives ignored us. I wrote countless letters with the simple message... just say no. The financial services industry is the one we should placed under the microscope FIRST.
Comment By Tom, 12-24-08I heard on this morning's news that the uaw refuses to make any concesions regarding wages and benefits. So I, making $11/hr with no benefits have to pay for these scumbags to make over $50/hr with benefits that amount to at least much? And they want to talk about golden parchutes? They all deserve to lose their jobs. If the comopanies are failing and they refuse to take a pay cut to keep their jobs, why should we be bailing them out?
Comment By flounder, 12-31-08I agree in part with Minnick. The foreign car competitors pay their executives a lot less. Their executives make 12-20 times what the average worker makes. At an American company this jumps to 300 times.
The CEO of Toyota makes less than $1 million a year. We should impose such competitive pay scales on not only auto makers but financial companies that take bailout money.
Also, foreign auto makers have all taken health care costs "off the books" because health care is taken care of by the government. Doing so here could save these companies and most other companies a bundle.
P.S. Tom, if you don't like making $11/hour without benefits, get another job. According to the Republicans I hear, people are supposed to pull themselves up by their bootstraps and make a lot of money, those who don't are lazy leeches...the true, as you so eloquently put it "scumbags".