Auto Bailout Debate: The Dummies Version

In some way, I'd like to help the (4.00 / 2)

let em die crowd cut off their noses to spite their faces.  

Scenario #1:  100 Percent Reduction in Detroit Three U.S. Operations

In economic terms, the rapid termination of Detroit Three U.S. operations in 2009 would reduce U.S. personal income by over $150.7 billion in the first year, and generate a total loss of $398.2 billion over the course of three years. The impact of this personal income loss on fiscal government operations at the local, state and federal levels include an increase in transfer payments, a reduction in social security receipts and personal income taxes paid. The net impact of all three of these categories is negative on the government balance sheet, resulting in a loss to the government of $60.1 billion in 2009, $54.3 billion in 2010, and $42.0 billion in 2011-a total government tax loss of over $156.4 billion over three year.

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The model represents only the impacts resulting from the initial contraction of the Detroit Three within the U.S. economy. It is reasonable to expect that a permanent contraction in the U.S. auto industry would negatively impact the auto industries of Canada and Mexico, since producers in these regions rely heavily upon U.S.-produced parts and components. This interdependency of the NAFTA automotive producers means that the total economic impacts presented here underestimate the full impact of the scenarios. The decline of Detroit Three production in Canada and Mexico would result in further U.S. losses in employment, income, and government revenues. Finally, the bankruptcy of any of the Detroit automakers may have serious implications for their pension funds
and the level of obligations of the Pension Benefit Guarantee Corporation, as well as funding of the nation's health care system. The Detroit Three are directly and indirectly responsible for funding the health care of 2 million employees, retirees, and dependents of their own companies and their suppliers.

So Obama and Dems whip 780 billion to WS no strings attached and then make the union and autos grovel for a measly 25.  In many ways, I'd like to see them tell the Senate where to put it.  You know, go ahead punk - make my day.  

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by: dkmich @ Tue Nov 18, 2008 at 17:22:00 PM UTC

people indirectly affected by US autocompany woes (0.00 / 0)

are very hard to quantify, I'm certain.

I'd never show up on any counts of people who are dramatically, yet indirectly affected by the CUTBACKS - let alone the possible bankruptcy - of any of the Big 3.

I'm the type of person that all of the political leaders try to put on a pedestal - the self-employed business owner. Living the American dream... paying a fortune for health insurance, and watching my income whittle away as my customers can't afford my services.

I'll never show up on a spreadsheet of people who would be affected by problems with the auto industry. My biz is in the arts and education. And just like me, people involved in the arts and involved in education, like people in the retail biz, people working in the restaurant biz, people bagging groceries at your local store, people installing (or removing) your cable tv or internet... People trying to make a living in nearly any way in Michigan are going to be indirectly affected by this. Our income will drop. It might not be as sudden as those who are laid off... our work dwindles until the businesses die. We have no safety nets. The self-employed or under-employed people that have a very tangental connection to the auto industry will struggle.

In the meantime, there are less tax revenues for the cities. People who would volunteer to help others in their communities are working extra hours (if they still have a job, or two or three part-time jobs) can't help out at the soup kitchens, or by raking their elderly neighbor's leaves or shoveling their snow, or any charitable opportunities. We have more need for help then ever, and we have less money and less volunteers to help weather the storm.

So many people will fall through the cracks if the government does not help.

I'm struggling with how to explain this to people outside of the midwest. I heard on the radio the other day, an expert was saying that "the further away you are from the midwest, the less support you have for this so-called bailout" (which I prefer to call a bridge loan). I've been told on other forums that "you need to understand that it's not the 1950s anymore. The auto industry didn't keep up, they refused to change". I call bs on that. They did change, but truly, who expected gas to more than triple in price in such a short timeframe? No one did. That it would correspond with the massive credit crisis? Who really saw all of this coming as quickly as it did? No one saw it all two to four years before it would come to a head... and the carmakers can't turn on a dime.

GM itself has invested billions into retooling, to make new vehicles with new technology. It wasn't fast enough because no one anticipated how freaking horrible GWBush would make the economy in such a short period of time.

I keep going back to healthcare. If the government provided healthcare now (like the Japanese and other foreign automakers do for their employees), it would save billions from these car companies. They don't have a fair playing field to compete on. Over $1500 per vehicle manufactured goes to healthcare for workers. THink of what that money could have been spent on in the past 40 years.

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by: land of the free @ Tue Nov 18, 2008 at 23:37:16 PM UTC