White House Auto Bailout a Recipe for Failure

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Washington, D.C., December 19, 2008—Sam Kazman, General Counsel of the
Competitive Enterprise Institute, issued the following statement on the White
House bailout plan for car manufacturers:

“Today’s White House auto bailout represents both the
continuation of a hand-out strategy that has proven worthless, and a missed
opportunity to free the auto industry of a needless burden. What the
President should have done was to lift the federal fuel economy standards on
the grounds of economic practicability, similar to the government’s rollback of
these standards in the late 1980s. The new standards have been estimated
to impose a $50 billion R&D burden on the industry over the next five
years. They could have been suspended at zero cost to taxpayers.

“Such a suspension would end up benefitting not only the
auto industry, but consumers as well—by expanding the availability of new car
models, minimizing R&D-induced price increases, and, most importantly,
reducing the traffic deaths attributable to the vehicle downsizing promoted by
the Corporate Average Fuel Economy (CAFE) regulations. The only obstacle
to suspending CAFE is the holy-grail nature of fuel economy mandates among many
politicians and environmentalists. It’s a pity that the President couldn’t
muster up the courage to challenge that view in this time of crisis.”

Additionally, John
Berlau, director the Competitive Enterprise Institute’s Center for
Entrepreneurship, points out the economic impediments created by existing
antitrust law:

“The deal does nothing to remove government
impediments to what could be the most effective step for the auto
companies to avert a collapse: a merger between Chrysler and General Motors.
Experts have said that even in the companies’ dire straits, antitrust laws
may serve as severe obstacles to a merger, based on outdated methods of
measuring market ‘domination.’ The Detroit
News reported that a merger review would take at least a year, effectively
putting it off the table. If the government really wanted to make the companies
viable, they would immediately suspend antitrust rules to allow a merger to
take place.”

CEI is a non-profit, non-partisan
public policy group dedicated to the principles of free enterprise and limited
government. For more information about
CEI, please visit our website at www.cei.org.

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