Thursday, November 20, 2008

No Bailout? Washington Bites The Hand That Feeds It.

Washington fiddles as Michigan and the domestic automobile industry burn. It’s not surprising given that Michigan (via its industrial base) has contributed over $200 Billion to federal coffers from 1981 to 2005 according to the non-partisan Tax Foundation (during that time 21 states benefited to the tune of $2.7 TRILLION). Michigan is a perennial donor state; the $200 Billion represents the difference between what Michiganders pay in federal taxes versus what the federal government returns to Michigan. Michigan ranks as the 5th most generous net contributor of federal tax dollars and the 47th worst at getting federal funds back from Washington.

Now Michigan’s industrial giants stand with hat-in-hand requesting a $50 billion bridge loan. Political luminaries and representatives joyfully pour gas onto the flames by encouraging bankruptcy - thank you Mitt Romney. All of this while ignoring decades of positive federal tax payments, taxes that were then handed to states which used our money to attract foreign auto makers with tax abatements, development grants, job training support, and other economic incentives - it would be funny if the stakes weren’t so painfully high.

Ironically, those same politicians have committed $700 Billion for the balance sheets of hundreds of financial firms, but I don’t see Congress demanding 10 year business plans from AIG, JP Morgan, PNC, or Goldman Sachs.

Perhaps our mistake was in manufacturing cars rather than toxic mortgage securities or unintelligible debt securitizations. The makers of those products (and their CEO’s) are seemingly worthy of rescue - despite unanimous agreement that they lit the fuse on this global economic bomb.

The Center for Automotive Research has estimated the cost of failure to the US Government at over $156 Billion in forgone tax receipts and transfer payments (i.e., welfare and unemployment). There is little doubt - at least for those willing to connect the dots - that failure of the US auto industry will accelerate this recession into a full scale depression. Will this be the lasting legacy of the 110th Congress?

Action tied to the reforms already implemented by the Big 3 (which were admittedly late in coming) can turn the tide, inaction will drown us. Congress should provide Michigan and the Big 3 the bridge loan. Put reasonable and achievable restrictions on the loan. It’s an acceptable risk with far greater upside than the alternative. We’ve been dutifully sending our federal tax dollars to others for decades, now it’s time to do the right thing and help our state and industry get through this crisis.

For those willing to make your voice heard - click on this link to send a message to congress.

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