Detroit Bailout: Batteries — er, Cars — Not Included

Bailout by Installment Plan for Detroit?

What if, instead of bailing out Detroit, the government simply ordered every taxpayer to buy a car from one of the three American automakers. Within six months. Whether you needed one or not.

At least you’d have a car, albeit not a very good one.

Instead, the government is pouring taxpayer money into the automakers and getting what in return? Seven percent national unemployment instead of 7.3%? Maybe. Higher taxes, and a bigger national deficit? Certainly.

Not only is the quid pro quo tenuous (technically, the U.S. is getting an IOU), so is the proposed use of the bailout funds.

Detroit apparently is experiencing the mother of all cash crunches, so presumably the money goes towards keeping the lights on, at least for a little while. Practically, that means meeting payroll, paying suppliers, etc.

But just like the earlier cash infusions on Wall Street, cash is fungible, and government oversight appears to be minimal to nonexistent.

You’d think the bailout cash wouldn’t end up paying for an AIG-style corporate retreat, executive bonuses, or shareholder dividends, but: 1) it’s far from clear that that’s prohibited; and 2) you won’t be able to trace it, anyway.

Along with lousy cars, Detroit has famously sloppy accounting.

By its own terms, the $17 billion is a stopgap and short-term.

It’s not much different than helping an overextended household pay the interest on its credit card bills temporarily. Notwithstanding all the political fig leaves, the aid is too little, too late to accomplish its stated goal: making an uncompetitive, money-losing industry lean and mean.

Imagine the outrage if Congress tried to coerce you into buying a car that you didn’t want (and maybe couldn’t afford just now!). No government could get away with that. Except that . . . it effectively just did.

Unfortunately, for their trouble, American taxpayers don’t get a solitary car out of it, not even a mediocre one.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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