Should the US Government bail out car companies?

As the United States entered a recession in 2008, many companies faced bankruptcy. The US Government has bailed out several financial firms, justifying the bailouts on the grounds that such firms are "too big to fail" and would pull down the rest of the economy if they were allowed to go bust. The same argument is now being used to justify bailing out the American auto industry, augmented with the argument of job preservation.

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Was the US government's $700 billion bailout ultimately good for the taxpayer?

Experts and Influencers

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Agree

Experts In Politics

Barack Obama United States President

Agree

The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil. ... I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars here in the United States.

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07 Nov 2008 Source

Experts In Economics

Nouriel Roubini Economics Professor

Mostly Agree

[Paraphrased by Aaron Task] Congress should approve a bailout of the U.S. auto industry because the "collateral damage" of their failure would be "very severe", but any government aid must be "highly conditional" and only occur after a prepackaged bankruptcy that includes: 1) Replacement of current management, 2) Concessions from both the UAW and automakers, 3) A wipe out of existing equity and debt-holders, 4) Temporary nationalization of the auto industry.

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04 Dec 2008 Source

Lawrence Summers Barack Obama's Economic Advisor

Mostly Agree

Firms in the auto industry, which were provided assistance under the EESA, will only receive additional assistance in the context of a comprehensive restructuring designed to achieve long-term viability.

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15 Jan 2009 Source

Disagree

Experts In Politics

The Economist Politics and Business Magazine

Disagree

Politicians, business and the unions all want a bail-out of Ford and General Motors [but doing so] would be a bad use of public money. It would be bad in principle, because it would be an open invitation to companies everywhere to apply for aid to survive the recession [banks are an exception because the entire economy depends upon their services]. [Unfortunately Congress will do so because they are] itching to “save jobs” and to counter the public-relations disaster of bailing out Wall Street.

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13 Nov 2008 Source

Sub-Arguments Of This Expert:
Was the US government's $700 billion bailout ultimately good for the taxpayer?
Mostly Disagree

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0 Points the27th 09 May 2010 Stance on Question: Mostly Disagree

Probably not. Why cars and not something else? It favors one sector over another, which is likely inefficient.

0 Points Ivo Salmre 25 Jan 2009 Stance on Question: Disagree

Sadly the automakers are doomed as “viable entities” – (this is not to say that they will disappear; federal money can prop up all manner of inefficient entities; a classic US example being its national passenger rail Amtrak which loses money on the gross majority of its routes and provides little actual societal benefits that could not easily be subcontracted to, say, bus service). Fundamentally the automakers are at the center of several glacial forces/trends that they simply cannot overcome…

…too many cars are currently being produced

…their technology base is hopelessly outdated (inflexible, large volume manufacture)

…they are not masters of the next generation of technology (e.g. no reason to believe they are the right people to build high capacity batteries or electric motors; why not a new firm that is actually specialized in these things?)

…they are saddled with fixed costs and obligations (e.g. large retiree base, rigid workforce rules)

Far better to rapidly enter bankruptcy and salvage what can be salvaged. Far worse to consume massive bailout resources in a futile effort to prop up the horse-and-buggy industry. Government subsidy rarely produces efficiency.