Bailout vs. checks and balances

| Comments (1) | Misc
Now that it looks like there's a serious chance of bailing out the car companies, you're starting to hear the suggestion that any bailout should come with conditions. For instance, here's Pat Garafalo at ThinkProgress

More importantly though - as Pelosi and Reid said - "federal aid should come with 'strong conditions,' such as requirements that car makers build more fuel-efficient vehicles." Bill Scher at OurFuture writes, "With the auto industry in dire straits, we taxpayers have maximum leverage to demand the cars necessary to help lower energy costs, cut carbon emissions and reduce our dependency on foreign oil."

I agree that it seems likely that making cars with lower carbon emissions (which at least for now more or less means more energy efficient) would be a good thing, and absent much higher gas prices (or some Pigouvian tax) it also seems likely that they US auto manufacturers won't do this on their own, and it's obviously true that when the manufacturers are begging for a bailout is a good time to extract concessions. So, this may not be crazy policy. On the other hand, it seems somewhat problematic to put the executive branch in a position where they can just impose this sort of condition without going back to Congress. 700 billion (or whatever) is a huge amount of money and if the economy gets worse more and more companies are going to be wanting bailouts. To give the executive the discretion to impose essentially any conditions they want in return for a bailout starts to look a lot like creating a command economy with the president in command. Now, that may seem like a good thing if the current President's political views happen to line up with yours, but taking the long view, the US political system is designed to avoid giving any individual actor too much unchecked power. Try imagining this power in the hands of a politician you hate (which ought to be pretty easy seeing as we're about to see a polar transition in the presidency, so it's likely you either hate the outgoing or incoming president).

1 Comments

Are you saying that the US government should bail out the big three, then force them to build fuel-efficient cars that customers won't want to buy? Wouldn't it be more efficient to have the government let the auto companies go bankrupt, then pay the unemployed autoworkers to ship huge quantities of government-purchased sheet metal directly to gigantic government-owned scrapyards?

If the goal is to rescue the auto industry, then it needs to be free to compete as best it can for the dwindling supply of customers. If the goal is to force auto companies to build more fuel-efficient cars, then all companies, not just the ones currently cadging loans from the government, need to be brought to heel--and that requires legislated regulation of the entire industry, not just conditions on rescue loans to the weakest competitors.

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