The End of Auto Bailouts (Not.)

Reports have it that Congress and the President have agreed to an auto industry bailout. Bad idea. But here’s one prediction: this $15 billion stopgap is all the automakers will get in direct aid-as-aid. It isn’t that Congress will suddenly become convinced that bad companies should be allowed to fail. Rather, it’s that other concerns will take precedence and can serve the function of an auto bailout anyway. Thus, I’d suspect that future aid to automakers, direct and indirect, will flow under other labels. Two likely vehicles: infrastructure stimulus and health care reform. An infrastructure bill could and probably will include grants and loans to help build “green” industry. Cash-desperate automakers will take them. Health care reform, if it strengthens the individual market and shifts some obligations, subsidies, and incentives from businesses to individuals, could also let automakers welsh on commitments they’ve made to union healthcare trusts and save money that way.
If Congress is going to do bailouts, I’d actually prefer a system that makes them transparent. But I’d bet they will be hidden elsewhere instead.