Gas-guzzlers bailed out

By Brian Kernan

With American auto makers facing an uncertain future, David Bowie's 1973 classic "Panic in Detroit" seems more relevant than ever.

The city that gave us Motown Records and Eminem is in trouble, and it's inevitably up to Washington to come to the rescue. Or is it?

President-elect Barack Obama and Speaker of the House Nancy Pelosi have recently taken up the torch to save the American auto industry. They want to use funds from the $700 billion financial bailout package to help prop up the Big Three American auto makers -- General Motors, Ford and Chrysler. The line of thinking goes like this: We bailed out the financial sector, why not the auto makers? Simply put, the financial sector provides the axel grease that makes America's economic wheels turn. Stop greasing that axel and everything riding on it is going to have some major troubles.

And wait, Didn't the government just give auto makers an exorbitant stimulus package? Back in September, the Senate voted 78 to 12 to pass a spending bill that included $7.5 billion to start a loan program for the auto industry. This was part of a $25 billion aid package designed to help U.S. manufacturers produce more fuel-efficient cars.

The American auto industry is already partly sheltered from foreign competition by a 2.5 percent tariff on passenger cars and a 25 percent tariff on light trucks. The U.S. has also put down tariffs on foreign SUVs. Despite this advantage, sales of American cars have continued to drop as consumer preferences have shifted. Basically, Americans aren't buying as many SUVs and large trucks -- the longtime staple of the Big Three -- as we once did.

The auto companies in Detroit are failing largely because they've been sheltered from the market forces that would have likely made them turn to more fuel-efficient vehicles years ago.

While companies like Toyota were thinking smaller and more efficient, the Big Three were shoving gas-guzzlers down our throats. Without some major changes, pumping money into the Big Three now isn't going to make them any more cost effective in the future. Neither will a Ford-GM merger. Again, think smaller, not bigger.

There are millions of jobs that depend on the American auto industry. But if we're looking at the long term and how to make Detroit competitive again, we need to expose it to the market pressures our government has shielded it from, not perpetuate the problem on the American taxpayers' dollar.

Though Obama will undoubtedly provide many eloquently-delivered justifications for this bailout, I challenge you to think about America in 2050, not just in 2008.

Brian Kernan is an economics and history double major and the opinion editor for The Santa Clara.