Big Three Theft

Patrick Gibbons

Once again the venerable corporatist Brian Greenspun has written about the need for corporate bailouts, this time criticizing the Senate for killing the auto bailout.  Greenspun notes that about three million people work either directly or indirectly for the Big Three automakers (fewer than 1 million work for the Big Three directly).

Greenspun says that if we don't bail out these industries, all these people could lose their jobs (which would be unlikely even if all three went bankrupt). In order to save three million jobs and avoid disastrous consequences for the nation, he believes, we need this $14-plus billion bailout.

Yes, it is true we could pay $14 billion or more to temporarily "save" some jobs – but at what cost?  GM, Ford and Chrysler have all been bailed out before.  The U.S. government has given them direct subsidies and loan assistance, placed higher taxes on competing imports and even limited the number of cars that foreign manufactures can sell.  Despite nearly 40 years of government protection, the Big Three have still failed to get their act together.

Why does Greenspun think this will suddenly change? His thinking on this appears as clear and deep as a mud puddle.  But here are some other ways of conceiving this situation that should clarify things for readers:

  • Three million workers directly or indirectly benefit from U.S. government limits on competition. By limiting the number of cars that can be imported, the demand for the imported cars is higher than the amount of cars supplied, so the price of imports rises.
  • Three million workers directly or indirectly benefit from the U.S. government placing tariffs (taxes) on imported cars. Everyone knows that when something is taxed, the cost of purchasing that product is higher than if the tax did not exist.

The net effect is an artificial increase in the price of imported cars – making American cars appear less expensive.  The only reason GM, Ford and Chrysler have remained competitive is because federal government politicians have put in place policies that make the American people pay higher prices for the cars they prefer to those from the Big Three.  Had the feds not protected the Big Three for the last 40 years, we could reasonably expect the price of imported cars to drop significantly, perhaps by thousands of dollars.

So here is the final question one should ponder before deciding whether the bailout of the auto industry is worth the price tag:

There are about 300 million Americans, and about 297 million of them work neither directly nor indirectly for the Big Three.  Why should we make 297 million Americans (or their family members) pay higher prices for automobiles so that we can protect those other three million, when it's unlikely those three million would all lose their jobs anyway?