Bailout’s risk is far too high

An auto bailout of any type bears huge risks for America, long term.

A bailout of the type being considered would be a disaster for democracy.

Washington is weighing aid for the Big Three U.S. automakers in return for some form of “ownership,” or control.

At first glance, that might seem to make sense. If the Big Three have mismanaged themselves into crisis, then maybe Washington should actively step in — overseeing them to ensure that taxpayers’ money is spent wisely.

But since when has government known how to spend wisely, much less effectively oversee others’ spending? To see that, you have only to look at the repetitive record of Pentagon misspending ($600 toilets and similar boondoggles, year after year); and the current banking/mortgage crisis, generated largely by bad federal laws and lax federal oversight.

And that’s just the practical, economic side of the issue. There is also an important philosophical question.

As an analysis in the Dec. 9 New York Times suggests (“Washington Takes Risks With Its Auto Bailout Plans”), ideas being put forth now edge the United States uncomfortably close to a precipice.

Government could tell the automakers what kinds of cars to make, what investments they are permitted to pursue and a host of other choices normally left to the private sector.

These interventions might go so far as to convert the Big Three into nationalized entities. And if that happens, the United States will have abandoned one more principle of its free economic and political systems.

Meanwhile, analysts are still debating whether Detroit needs a bailout, as well as what form it might take.

Some argue that the $15 billion loan being considered would save state and local governments at least that much in the long run in tax revenue that would be lost if the companies crashed.

Others say that the economic impact would not be so large if the companies declared bankruptcy and then reorganized themselves. (Airlines declared bankruptcy and emerged flying high.)  Still others envision some variation of “restructuring.”

Another question is one of fairness. While the Big Three have been foundering, foreign auto companies have been building plants across the country, manufacturing cars under their nameplates right here in America, and doing well financially. Their good management has been rewarded with business success.

The free-enterprise systems works when it winnows out bad products. Detroit has been producing unpopular products, while consumers have been gravitating to foreign autos that are less expensive and better made.

Why should the bad management of domestic automakers be rewarded with a bailout? Where is the justice in rescuing failing companies at the competitive expense of those that are thriving? And where is the justice to consumers if a bailout puts foreign companies at a competitive disadvantage and perhaps forces them to raise prices?

Certainly there are risks in letting the Big Three face the consequences of their poor business choices.

But the risks of a bailout are even bigger.