A Canadian's random thoughts on personal finance

Feb 23, 2009

The auto bailout: wrong in so many ways

Michael James hit the nail on the head today in his comments regarding the auto bailouts. I've made the same point about boosting EI rather than writing a vast cheque to a mismanaged company that makes inferior products.

It's importat to realize that the Canadian government is indebted to the EI system (at least morally, if not fiscally) to the tune of $51 billion anyway, so it seems perfectly fair for them to pay out an extra few billion in EI benefits to auto workers to tide them over until new jobs arise. It would also seem reasonable to fund re-training for the auto workers, and tax incentives for successful manufacturing companies (say, Japanese auto makers) to set up plants in Ontario.

All of this would seem more likely to succeed than to deliver billions of buckets to the crew of the Titanic.

I'd like to add that the way the Canadian bailout was determined also shows a startling lack of leadership. Queen's park decided ahead of time that they would pay 20% of whatever figure the US government arrived at, thereby abdicating our nation's fiscal sovereignty on one of its largest expenditures. This is just the latest in a string of actions since parliament was prorogued against all logic in December, all of which show that the current federal government is a rudderless ship.


Michael James said...

Thanks for the mention. I saw an article (http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090222/clement_qp_090222/20090222?hub=TopStories) saying that Clement "wants Canada's auto bailout to be a one-time deal, and if General Motors and Chrysler request additional money 'the answer would be no.'" This sounds entirely designed to make the current bailout more palatable to Canadians. If the government bails out the auto companies this time, they'll likely do it again next time.

Patrick said...

Hi Michael. It also seems infeasible and unwise. Why send them billions now and then let them collapse later? If the government is going to embark in a program of resuscitating the auto industry, they should come up with a workable plan and then see it through to completion.

Michael James said...

I have doubts that the government is capable of evaluating an auto recovery plan to determine whether it is workable. The only way for car companies to survive is to be competitive in their market. The only people I would trust to judge a recovery plan are successful auto companies. But I doubt they would help :-)