THE KING OF BAILOUTS

Cartoon from here.

Cartoon from here.

How will President George W. Bush be seen by historians?  Well, that depends to some extent on Barack Obama.  How willing is Obama to be seen as the King of Bailouts?   Bush committed to his latest — and hopefully last — bailout yesterday.

The Bush administration said on Friday that it was prepared to intervene to prevent the collapse of General Motors and Chrysler after Republican senators blocked a compromise proposal to rescue the automakers.

The decision came after a tense standoff this week in which senior White House officials pleaded with Senate Republicans not to block the measure, including a warning by Vice President Dick Cheney that they would be remembered for decades as the party of Herbert Hoover if the industry collapsed.

But while Senate Republicans stood their ground — in open revolt against President Bush — it was the White House that gave in.  (from here)

Against all expectations, Senate Republicans held firm.   Then the Bush Administration immediately blinked.  Perhaps that explains why Senate Republicans held firm.

Thanks to government mismanagement — our mismanagement — of the economy, times are getting tougher.  That is so even here in Gainesville, Virginia.  One of the small local newspapers carried the news this week.  Their story featured local small business owners, Kevin and Mimi Schlagel.

The Schlagels, who own the Daily Grind Coffeehouse and Café shop Mimi in the Heritage Hunt area of Gainesville, are weathering their second financial storm since opening up shop in 2006. Both times, extenuating factors put the situation out of his control.

When the extension of Heathcote Boulevard was repeatedly delayed by the residential development company Lennar, as it was part of a proffer package, so were the chances of Kevin Schlagel seeing an increase in walkup traffic. Morning commuters were supposed to be arriving from the Piedmont area directly north of the Town of Haymarket to his café during their morning drives toward U.S. 29 and Interstate 66.

“That road not being open has really set us back since day one,” he said.  (See the rest of the story here.)

Even before the downturn had truly begun, the Schlagels suffered from government ineptitude.  The road that they had depended upon to bring them business was not built on schedule.   Now, because the government created mortgage lending mess is still roiling financial markets, potential customers are more reluctant to part with their money.  Coffee is a luxury people can too easily do without.  So to survive, the Schlagels will have to adapt.

Unlike the Schlagels, some feel less need to readily adapt to circumstances beyond their control.   They grandly sit back and propose “simple solutions.”

The automobile and the energy industries are inexorably linked. A cursory look at the past relationship between Atlantic Richfield and General Motors and the public transportation of Los Angeles is convincing enough. Even the most casual of observers get the fact that as the Big 3 automakers wean themselves from dependence on oil, energy companies are reshaping themselves to something more than oil and gas producers, refiners, and marketers.

There is logic in Congress promoting this linkage. Simplicity is the key. It makes good sense for Congress to say “no” to an outright bridge loan to the automobile industry. It makes more sense for Congress to tell ExxonMobil, ARCO, Chevron, ConocoPhillips and their fellow travelers that they should lend the automobile industry $25 billion. The taxpayers could guarantee the loan based on performance criteria.  (from here)

The Big Three have come to government for money because no private lender considers their business model viable.   So bankruptcy is the only viable alternative.   The whole benefit of Democratic Capitalism — the crux of our society’s success — is that we let people run their own businesses.  As much as possible we put authority and responsibility in the same hands.   We succeed because we accept the harsh reality that some will fail.  We do not burden ourselves by trying to keep failed enterprises alive.   Instead, we help those who do fail with charity, not entitlements.

Other Views

Andrew Clem sees an opportunity for the GOP in the Bailout Mess.  See here.

The Republitarian reminds us that the Big Three make military equipment.  See here.

Jeremy Hinton of Bearing Drift waffles.  See here.   On the other hand, J.R. Hoeft presents the BIG LABOR contract. See here.

Delmarva Dealings wonders where all these bailouts lead to.  See here.

Pros and Cons discusses role of the labor unions.  See here.

Opposing Views has a debate on this question:  Do We Need Another “New Deal?”

Cartoon from here.

When I saw this, I could not resist the temptation to add it.

Cartoon from here.