Democrats in the auto business

Morgan Reynolds, professor emeritus at Texas A&M University, served as chief economist for the U.S. Department of Labor during President Bush's first term, in 2001 and 2002.

Writing this week at www.lewrockwell.com/reynolds/reynolds18.html, Mr. Reynolds pulls no punches, warning the economy is "going to get much worse. ... Why am I so sure? Because the depth and duration of a downturn depend positively on 1) how long the preceding boom lasted, 2) how distorted its capital structure became, and most importantly, 3) how much government interferes with the classical medicine administered by the marketplace."

And that's just what Washington's money managers are currently doing, Mr. Reynolds warns -- keeping the patient from taking his bitter medicine.

After all, "The bust is curative," Mr. Reynolds explains. When Ben "Bernanke fights the market by injecting new credit in the next crisis he will sustain unsound debt, weak debtors and lousy companies, prolonging depression. That's the opposite of 'putting it behind us.' ...

"The cause of our sick economy was world-class injections of artificial credit by Maestro Greenspan and his Merry Band for double-digit years. Now the inevitable bust is being aggravated by 'stimulus' programs mercilessly foisted on us by Ben Bernanke, in turn aided and abetted by big business pleaders, business media, (Treasury Secretary Henry) Paulson, Congress, state governments, Ohio school districts, and assorted panhandlers in business suits. ..."

The United States has an admirable system for sorting out who gets the remaining assets of a firm that's misallocated its resources so badly that it can't meet its obligations. The owners and managers are free to seek short-term protection of the bankruptcy courts, at which point independent auditors and masters make partial payments to creditors and see that the outfit's factories are transferred in an orderly manner to someone who may be able to run them better -- freed of the failed firm's debt load.

It's in the light of these facts that many American taxpayers quite rightly view with shock and alarm the current congressional plot to take over an auto industry burdened with excess pension obligations, blocking its transfer to new private owners, instead scheming to protect the auto unions from taking a financial hit, through the simple expedient of declaring some government bureaucrat will now oversee the whole shebang -- the way Benito Mussolini did it in Italy in the 1930s.

Democratic congressional leaders and the Bush administration on Wednesday announced they had finalized a $14 billion bailout, though minority Republicans properly raised deep concerns.

The deal would place a "car czar" named by President Bush in charge of a restructured auto industry in return for emergency government loans.

This is like a wet dream for congressional would-be fascists, who have long yearned for the power to install some government bureaucrat with powers to instruct Detroit to build crash-prone "green" go-carts the public doesn't want, while essentially banning the large pickups and SUVs loved by most Americans who don't live in New York, Los Angeles or San Francisco.

But Nevada Sen. John Ensign and other Republicans said Wednesday they may try to block the Senate from passing the bailout.

"We're looking at that very hard, because I have some serious, serious problems with this package as it currently stands," said Sen. Ensign, a Republican. The deal amounts to "the government picking the winners and losers instead of the market," Sen. Ensign said. "We're just going down further and further and further toward socializing our economy. ...

"The automakers' biggest problem going into Chapter 11," Sen. Ensign explained, is that "they said nobody will buy cars because they won't know whether they can get a warranty. Well, the government can guarantee the warranties. That's not a problem, and that would be a lot cheaper for the taxpayer and a lot safer way to go."

Other industries are suffering, including the hotel and gaming industries, "and we don't hear people saying, 'Oh, let's bail out the tourism industry,' " Sen. Ensign pointed out.

Imagine that. From little Nevada, bold leadership with a set jaw and a clear vision of the likely long-term consequences of the disastrous path Washington's money men have adopted in recent months.

Some might have expected such firmness and clear thinking from Nevada's other senator. But we -- and many American taxpayers -- are happy to take such qualities where we find them.