Gov’t shouldn’t finance merger

‘ ‘ ‘ Secretary of the Treasury Henry Paulson is thinking about using billions of federal… ‘ ‘ ‘ Secretary of the Treasury Henry Paulson is thinking about using billions of federal dollars to finance a merger between Chrysler and GM. The point is to save Chrysler and to keep GM from shrinking. That’s not a good idea. ‘ ‘ ‘ The New York Times is in favor of it. It says there’s a chance the government’s loan will be paid back, but it’s not too confident.They say it’s ‘not unreasonable’ to expect that the company will survive. Maybe I’m stingy for asking tax money to go toward things we’d go so far as to call ‘reasonable.’ If I want to bet on Cinderella stories, my money’s on the Penguins, not Chrysler. The government actually bailed out Chrysler already, back in the 1980s. ‘ ‘ ‘ Even if the loan won’t be paid back, though, the Times believes that sinking money into keeping the terminal patient of Chrysler alive is still worthwhile. Jobs could be lost, not just in Detroit but on and down the chain at suppliers nationwide. A few dozen billion, even in bad loans, will push the headache further into the future, when we’re better situated to deal with it, maybe. So goes the reasoning. ‘ ‘ ‘ I can see where the Times is coming from. After all, in the past few months, the government has been attempting Hail Mary plays to rescue financial institutions. What’s so different about a car company? ‘ ‘ ‘ Actually, a lot. Banks rely on confidence, which is a psychological state, not a physical reality like the tendency of an engine to break down. ‘ ‘ ‘ The moment depositors lose their confidence in a bank, their fear is justified. And that confidence depends on the perception of the banking sector, so one failure can easily ripple outward to undermine even soundly run banks. Cue ‘The Great Depression.’ ‘ ‘ ‘ In contrast, the entirety of other industries rarely falls into trouble. Ford, Chrysler and GM are messed up, but Toyota, Honda and Volkswagen are soundly afloat. ‘ ‘ ‘ And even though auto sales are down across the entire industry ‘mdash; 26.6 percent, according to MSNBC ‘mdash; the latter companies aren’t about to go bankrupt. They are doing better because they make better cars using less resources. The American consumer’s ability to get a car is not in danger ‘mdash;just the ability to get a car from a particular company, which shouldn’t bother us. That’s capitalism. ‘ ‘ ‘ The government plays a part ensuring work for the willing. Recessions have tried remedies. But we should resuscitate demand in general ‘mdash; aggregate demand, not demand for certain products. To boost buying, the Fed cuts interest rates, but the Fed is almost targeting 0 percent. Now Congress should help out by cutting taxes, boosting social spending, replacing broken infrastructure and helping lower governments that would’ve cut essential services. ‘ ‘ ‘ These measures help cities and states buy what they planned to anyway and let consumers spend how they want, but they sustain competition between firms in the same industry. If the government puts money in consumer’s pockets, and consumers don’t choose certain cars, it’s because those cars are worse. We want firms that make worse cars to close up shop, so that the resources those firms use ‘mdash; including workers ‘mdash; can be bought up by firms that make what consumers actually want. ‘ ‘ ‘ When we’re scared to let Chrysler go under, the image that comes before our minds is one of millions of workers, like specially designed machines, who came out of the uterus ready to make car parts. ‘ ‘ ‘ Those workers are phantoms. Real American workers can turn time and energy toward whatever task employers demand. For example, just two days after the editorial outlined above, the New York Times ran an article about new jobs in green energy that said, ‘In Northwestern Ohio, glass factories suffering because of the downturn in the auto industry are retooling to make solar energy panels.’ ‘ ‘ ‘ Real American workers can learn different jobs; they can even move across the country for work, and they can even go back to school. ‘ ‘ ‘ Adjusting is hard, but that doesn’t mean we should forgo progress. And that’s easy for Lewis Lehe to say, but that doesn’t mean I’m wrong. ‘ ‘ ‘ For the workers who lose, America should have a safety net. We already do to a great extent. But money for bailouts means less money for social programs. America has prospered with a capitalist welfare state. This bailout endangers welfare as much as capitalism. ‘ ‘ ‘ The biggest danger, though, is the Treasury becoming an economic St. Jude: A Patron Bank of Lost Causes. What will guide this bank’s loans is not profitability, or any predictable and consistent value. Congress will make loans based on lobbying and contributions. Voters will support any cause in fashion, whatever’s marketed to the vague intuitions of a disinterested crowd. If a common voter cannot imagine life without a company, politicians would rather stretch the budget than stretch the voter’s imagination. ‘ ‘ ‘ If you can imagine this future, I think you’ll agree with me. Whatever might happen to Chrysler, intervention is unreasonable. E-mail Lewis at ljl10@pitt.edu.