The GAO Weighs in on the Auto Industry Bailout

That was quick…

In addition to causing potential job losses at auto manufacturers, failure of the domestic auto industry would likely adversely affect other sectors. Officials from the Big 3 have requested, and Congress is considering, immediate federal financial assistance. This testimony discusses principles that can serve as a framework for considering the desirability, nature, scope, and conditions of federal financial assistance. Should Congress decide to provide financial assistance, we also discuss how these principles could be applied in these circumstances. The testimony is based on GAO’s extensive body of work on previous federal rescue efforts that dates back to the 1970s.

There have long been close ties between the auto industry and Congress. The recent decision by the Republican Party to essentially bail on Detroit stems from the fact that they can’t carry Michigan as a state in the Presidential race and the fact that lobbying money is going more towards Democrats than Republicans. I think that’s a mistake—Republicans should try to compete in Michigan under the banner “Democrats—aren’t they the ones who screwed up Michigan, Dawg?” If that doesn’t work, there’s always my old stand-by—“Conservatism is Cool Beans.”

The GAO also says:

If Congress determines that a legislative solution is in the national interest, a two-pronged approach could be appropriate in these circumstances. Specifically, Congress could 1) authorize immediate, but temporary, financial assistance to the auto manufacturing industry and 2) concurrently establish a board to approve, disburse, and oversee the use of these initial funds and provide any additional federal funds and continued oversight. This board could also oversee any structural reforms of the companies. Among other responsibilities, Congress could give the board authority to establish and implement eligibility criteria for potential borrowers and to implement procedures and controls in order to protect the government’s interests.

If one dollar of assistance goes overseas to prop up their job-killing policies, then the automakers should then be directed to simply file for bankruptcy protection. If they engage in positive and meaningful reform of their business model, and I would describe that as expanding efforts to make cars that run on alternative energy, then repaying those loans shouldn’t be a problem. The taxpayers should never “give” money but should “loan” money. Please pay us back with a smidgen of interest, sir.