THE NEXT BAILOUT: DETROIT
August 25, 2008
Earlier this month, the Detroit Free Press reported that the top dogs at Ford, GM and Chrysler had a meeting of the minds and decided that the way out of their current losing streak would be to ask the feds for a lifeline. They figure they'll need $40 billion or so to ride out their current troubles until they reach the promised land of hybrids, the Chevy Volt, and, who knows, maybe even profits, says the Wall Street Journal.
- The plan is for the government to lend some $25 billion to automakers in the first year at an interest rate of 4.5 percent, or about one-third what they're currently paying to borrow.
- What's more, the government would have the option of deferring any payment at all for up to five years.
- Meanwhile, Barack Obama recently signaled that he's open to federal money to help the automakers invest in "renewable" technology, and Michigan Senator Debbie Stabenow and Congressman John Dingell are supporting the $25 billion in loans to the not-so-Big Three as part of a second-round economic "stimulus."
Detroit's political calculation is plain: Having seen the way Washington has bowed to rescue the mortgage industry and Wall Street, why shouldn't auto makers give it a try? Michigan is up for grabs in the election, so now is the time to strike with a goal of getting the Bush Administration and both Presidential candidates to agree.
Regardless of where and why these federal bailouts started, American taxpayers can't save everyone. The only way to stop this parade of supplicants is to start saying no -- and Detroit is as good a place as any, says the Journal.
Source: Editorial, "The Next Bailout: Detroit," Wall Street Journal, August 21, 2008.
Browse more articles on Tax and Spending Issues