Monday, November 17, 2008

Questions About Bailouts & the Threat of Socialism

What's wrong with offering loans to US automakers on the condition that they commit themselves to immediate chapter 11 reorganization? It seems to me that in doing so the principal sources of their insolvency, i.e. overpaid union workers, princely benefits plans and defective management, can be cut down to manageable size. Result: the industry will finally become more competitive with Toyota, among other auto makers, and American jobs will be protected. Am I being simplistic or is this just plain 'ole commonsense? And especially in these trying times, can or should the unions and managers in Detroit have their frosted cake and eat it too? In short, should failure be rewarded in a free market?

Also, at a time when national solvency itself is at risk, why are the President-elect and his congressional minions pressing for passage of the Jubilee Act (S.2166) and the Global Poverty Act (S.2433), all in an effort to help implement the UN Milennium Development Goal.

The Jubilee Act forgives $75 billion in debts owed to the USA with little convincing proof that recipient countries will not again irresponsibly slip into onerous debt.

And with the idealistic goal of reducing by 1/2 the proportion of people worldwide who live on less than $1/day, the Global Poverty Act dramatically increases US foreign aid by $845 billion over a 13-year period. This is over and above the $65 billion/yr in foreign aid the USA already spends. Can we afford this profligacy? Or is this old humanitarian worker just being cheap and uncaring?

Ultimately, can a vibrant and essentially self-correcting free market operating within the realm of natural economic laws sustain itself without the infusion of legislative mandates and gargantuan financial stimulants? And can untested governmental interventions, aka "fixes", unintentionally (or otherwise) imperil the efficacy of a free market? In our politicians' haste to fix the economy's financial problems, will our free market economy irreversibly morph into Socialism?

My not being an economics major, I'm just not sufficiently knowledgeable to adequately answer these questions myself. Anyone out there have any instructive comments?