Monday, September 08, 2008

Detroit-The Next Bailout?

With polls moving in McCain's direction after the Republican convention and the choice of the popular VP candidate Sarah Palin, the battle for the White House is bound to get tougher. This means likely that both McCain-Palin and Obama-Biden will focus on winning over the key swing voter bloc of white working class voters, so-called Reagan Democrats, particularly those living in battleground states such as Michigan, Ohio and Pennsylvania. While McCain-Palin will likely focus on the issue of "values", they will have to respond even on the economy as Obama-Biden is likely to focus on that issue.

That in turn means that both candidates will be highly reluctant to reject ideas popular among those swing voters. And with the precedent set by the government bailout of various financial institutions such as Bear Stearns, Fannie Mae and Freddie Mac, this means a risk that Detroit car makers will seize this opportunity to demand a bailout, as Paul Ingrassa points out in Wall Street Journal. Why should only super rich Wall Street traders driving Maseratis and drinking champagne (preferably not at the same time) get bailed out while middle class Detroit auto workers driving Chevrolets and drinking beer (again preferably not at the same time) receive no help, many will ask. As Ingrassa notes, not only Obama, but recently even McCain have expressed sympathy for such a proposal, so there is a significant risk that it might happen, though probably not in the exact same form as the Wall Street bailouts.


Anonymous Dr511scj said...

Well said. There are "One hundred billion reasons why the U.S. government ought to guarantee loans to the Detroit 3 automakers.

10:41 PM  

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