Commentary: Bailout of Big Three is necessary

This editorial appeared in The Miami Herald.

Most Americans believe a business should stand or fall on its own merit. So do we. Government shouldn't try to save a business that can't save itself by earning money in a competitive marketplace. So why support a bailout for the auto industry? Because the alternative is worse.

Detroit executives have managed to run the industry into a ditch by engaging in a host of bad business practices. They kept making cars with diminishing appeal for American drivers while foreign brands like Honda and Toyota won a bigger share of the U.S. market offering smaller, better-built cars with higher mileage. Detroit responded by sending armies of lobbyists to Capitol Hill to defeat calls for better fuel standards.

Now the enablers and the enabled have come up with a plan to "save" Detroit by offering a $14 billion loan that will no doubt become the first of who-knows-how-many installments. No wonder so many folks want no part of this deal.

We sympathize, but take a hard look at the consequences of letting the Big Three go under. A story in Thursday's Business Section made clear that government coffers would lose about $15 billion – roughly the same as the loan – in a bankruptcy due to lower tax collections and the payment of pension, unemployment and other benefits to out-of-work carmakers. Some say a bankruptcy need not entail huge job losses, but that seems like wishful thinking.

To read the complete editorial, visit The Miami Herald.