Friday

After the Bailout, Now What?


So with a lot of strings likely to be attached, Detroit finally gets a bailout. The sweating is over but now what?

With free money passed out to bankers and insurance companies and stock brokers, there was really very little choice that President Bush could realistically make when it came to the auto industry. After all, at least they manufacture something that is real and don't just pass money around the table and skim some off the top for themselves with each pass. Those are the guys who got the last bailout and the Detroit bailout is only 2% of what those rich and powerful guys took home for Chistmas.

For now, what's the auto industry bailout going to mean for you?

The next focus of the media is likely to be what strings the administration attaches to the loans. Undoubtedly the unions are going to get the brunt of it since conservatives have a long and storied acrimony there. Suppliers will also likely have to take a hit on their price structuring. And the financial industry, that has millions on the hook with loans to the factories, will also find themselves being asked to hold off getting paid, but that won't likely bother them much since they probably are already standing at the federal bailout trough.

But the little guy will get hurt. Downsizing and belt-tightening always means someone gets laid off somewhere in the process and this will be no different.

Detroit got a reprieve today from an out-going President who passed the hot potato to an in-coming Presidential team. Let's hope the new team is brighter than the last one that got us into this mess.

For car buyers, it will mean skepticism building about the long-term health of Detroit and whether buying a car from there is still a good idea. Frankly, folks, we don't really have a lot of smart choice about that. If the public doesn't support the Big 3, no one else will. So, how important is Detroit?

The outsourcing philosophy of big business, encouraged by a decade of tax breaks that highly incentivized opening up manufacturing plants in Mexico, South America, New Zealand, Asia and elsewhere, has all but stripped this country of its heavy duty manufacturing capacity. Detroit is about all we have left. We can't all become Wall Street brokers while everything we use is built overseas somewhere. We need Detroit. In fact, we need a lot more towns like Detroit, where the small manufacturing plants still struggle to exist.

It's time for big business to come home. Products built overseas need to be treated for what they are, products that have taken away an American's job.

At the end of the day, big business is about numbers. If it is cost effective to build it in America, then that's where big business will build it. The main factor in all this outsourcing has been the tax system that has made it more advantageous to go overseas. It isn't poor quality or lazy workers or even any insurance-company-proclaimed "litigation crisis".

Change the tax incentives and you change big business. And that's probably the only way big business will come home again.

We could certainly blame this administration or that politician for not seeing this train coming at us a hundred miles an hour, and undoubtedly a lot of people will and maybe we should, but for now we need to stop standing on the tracks.

Meanwhile there's a lot of people in Detroit that are breathing a sigh of relief. But when they go to bed tonight, the nightmare will still be there.

Burdge Law Office
Helping Consumers Fight Back Since 1978.