Mikey's Musings

America, the Spoiled

With the continuance of the downward spiral of the U.S. economy (Congrats Wall Street! The Dow has officially dropped below 8,000!),we have seen several companies prostrate themselves before Capitol Hill in hopes to receive bailouts to survive this unstable economy. One of the latest topics in regards to this subject is that of the auto industry crisis. In a nutshell, the Detroit-based auto makers are losing money fast, and without immediate government aid, GM could face bankruptcy.

Although the auto industry has been pleading to Washington for a $25 billion aid package, warning that "the societal costs would be catastrophic"¹ if no aid is received, there is a current head-butt going on between President Bush and many Democrats in Congress, causing a "deadlock"² to prevent any aid coming to the auto industry any time soon.

Despite the dark and ominous clouds that are rapidly moving in and covering any optimism for the auto makers to receive any kind of aid and, thus, bypassing an otherwise highly-probable bankruptcy, former governor and Bain & Company (and Bain Capital) CEO Mitt Romney suggests that there is still hope for the crippled industry. In yesterday's New York Times he writes an article outlining a strategy that could get the American auto makers back on their feet and become more competitive with foreign auto makers, who are now leaving GM et al in the dust. Basically, he tells the auto industry not to take a bailout, to tough it up, and swallow its pride to ensure future success.

As tough as Romney appears on the auto industry, the solutions he offers are very practical and focuses on the reality that a bailout would only delay the problem instead of proactively solving it and moving on. The following are some "prescriptions" he gives to Detroit's auto makers:

1. There are costs that can be alleviated, such as new labor agreements and cutting back retiree benefits (which, according to Mitt, is a large reason why the costs per domestic auto is much more than those of foreign autos).
2. The current management needs to leave. There needs to be a fresh view on how things are run, and they need to cut back on some (if not many) of the luxurious costs of being an executive.
3. Stop looking for quick profits and focus on investing in the future.
4. Don't get rid of the sales people that can grow sales.

I couldn't agree more with Mitt Romney about not giving the auto industry a bailout. In fact, I'm really not an advocate of giving out bailouts anyway (at least, not freely like Washington has been doing). As is the case in human nature, once one company or industry gets a bailout from a liberal Uncle Sam, it's inevitable that other companies and industries will throw a fit like a spoiled child, crying for their necessity of a bailout as well. What good is that for our economy? More reliance and dependence on big government? Why has the American economy thrived for so many years, and even been able to pick itself up after sudden economic downturns? It's because of America's belief and focus on capitalism, on a free-market society. Now, with our spoiled-more-than-ever behavior, if things don't go our way, we turn to the government for aid. Why must our society shame ourselves and defame Capitalism by demanding governmental aid, instead of overcoming our own challenges? What happened to self-reliance? What happened to independence? Have we forgotten the American Dream? Have we forgotten the foundation upon which today's richly blessed America is built?

It seems that the call of a bailout is too much of a quick fix and is based off of selfishness and greed, two things that will NOT help this economy get out of its slump. In fact, it's because of selfishness and greed as underlying factors that put the U.S. in the mess we are in today with our financial/credit crisis. I say SUCK IT UP America; it's time for us to grow up and rebuild ourselves as a "city upon a hill"³, just as we were foreordained to be!

I'll get off of my soap box now. I have a lot more to say about the topic, but I think you get my drift. What are your thoughts???

Footnotes:

1. The MarketWatch website.
2. Bloomberg website.
3. John Winthrop's "A Model of Christian Charity" in 1630. This speech was given aboard the Arbella, traveling to the American continent from Europe.