The Auto Bailout and Fiscal Responsibility

Sometimes fiscal responsibility means making wise investments with long term benefits taking precedence over short term concerns. That seems to be the case with the auto bailout.

It is worth noting that the use of the term “bailout” is a bit of a misnomer as the money given to the auto industry was in the form of a loan and will be repaid with interest. It is by no means a giveaway. However, since it is the well established nickname for the aid given to the auto industry, I will continue to use it.

I probably would not have supported the auto bailout without serious limitations on executive pay. Wealthy executives should not be rolling in piles of money while working class Americans pay for bailouts of the same company. Additionally, unreasonable executive pay indicates problems with the fiscal responsibility of auto companies and their executives and that raises the question of whether the public should be risking their hard earned dollars to bail them out.

However, it seems as though the auto bailout has paid off. One Chrysler plant “added a second shift of production to the tune of about 1,100 jobs.” Another Chrysler plant will add 900 at a plant outside Detroit. In the year following the bailout and bankruptcies, 55,000 jobs were created in the auto industry which is the largest growth for the auto industry in more than a decade. More than 10,000 additional jobs are projected to be created by the end of the year. Chevrolet and Ford are both operating at a profit and Chrysler is nearly profitable with only the interest on the government loans keeping them in the red.

Equally important is the fact that, while the government likely will not recoup the approximately $25 billion given to the auto industry by the Bush administration, all of the $60 billion given by the Obama administration in the form of loans will be recouped with interest. This is obviously good news.

Fiscal responsibility is a long term approach and means making the financial decision that is the most fiscally responsible, not necessarily the one that is the most fiscally reluctant.

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2 Responses to The Auto Bailout and Fiscal Responsibility

  1. Rhonda says:

    Didn’t realize that they had to pay it back. It won’t possibly be forgiven will it? I too have felt that there should be limitations on executive bonuses. Those are ridiculous!

  2. Troy says:

    Some, I believe GM, have already paid back their loans early. Between direct loan payments and stock options that will soon be sold, the government will recover the money. Worth noting is that the increased tax revenues that result from the increased success of the auto companies is not factored in, though it should be.

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