Saturday, May 30, 2009

$50 Billion Tucked Into Legislation for Auto Makers

If this sticks, Goldman Sachs is going to be jealous

Robert Reich's policy recommendations, if implemented, would be disastrous, but at least he sees what is going on now, and he is connected enough to know where some of the multi-billion in gifts are buried:

America now has a full-blown industrial policy. But it's an odd one -- a combination of lemon socialism and taxpayer-financed regulation.

Consider GM and Chysler. To what purpose are our taxpayer dollars being put as we bail them out? Apparently only to help them survive, even as pale shadows of their former selves. Steve Rattner, the Administration's auto expert, explained last month that the government was "making an investment decision. We're not running these auto companies. We are helping them restructure and reposition themselves for the future." Which raises the question: Why bother at all, if a huge portion of their employees and those of their dealers and suppliers are losing their jobs?

This week the Administration announced new fuel economy targets. But auto buyers aren't particularly interested in fuel efficiency now that gas prices are low. So how are GM and Chrysler to pay the costs of achieving the new targets? One way, according to GM, will be to build lighter cars and trucks abroad. Even then, the new standards will raise costs. So tucked into the latest version of climate legislation unveiled this week by the House Energy and Commerce Committee is a provision that doubles to $50 billion loans to help auto makers comply.

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