As the clamoring for a bailout of the Big Three U.S. automakers reaches a crescendo, it's still unclear if such a bailout is the right course of action. The total bailout could reach into the $30 plus billion range. That's a lot of zeros.
The main reason that seems to be out there for the bailout is an implosion of the Big Three would be bad for the economy, but where's the proof that this would be the case? It obvious that the Big Three are in need of a course correction. Aren't bankruptcies intended to allow companies to find a course correction?
So if we're talking about bailouts, why not a bailout of California? The current estimate of the state's budget deficit is at about $11 billion. Various proposals have contemplated closing this deficit through raising the state sales tax, raising the auto registration fee, imposing a new tax on any oil produced in California, raise the excise tax on alcohol sales, reducing K-12 education funding, reducing college education funding, reduce the amount available for the state's welfare-to-work program, require state employees to take a one-day a month unpaid furlough, reduce the number of paid state holidays by two days, and postponing some mandatory regulations aimed at reducing greenhouse gas emissions. Quite sweeping.
If the auto industry is to be bailed out, the concessions by the auto industry must be at least the equivalent of these kinds of cut-backs being contemplated by states such as California.
After all, if California were a country it would have the 8th highest gross domestic product (GDP), about equivalent to that of France's GDP. So one could make an argument that a bailout of a state such as California might be more important to the national economy than the bailout of private companies that surely would be replaced by other private companies.
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