This week, the Senate will debate whether its time to rescue Main Street as well as Wall Street.
At issue are the auto companies -- GM, Ford and Chrysler. The Senate will decide whether to tell the Treasury Department to use part of the $700 billion rescue plan for Wall Street to provide a $25 billion emergency bridge loan to the auto companies. This isn't new money. The question is how to use the money already allocated to help rescue this economy.
The situation facing the auto companies is dire. Sales of vehicles have plummeted to their lowest levels in 25 years. With credit drying up, banks reluctant to offer loans and consumers socked by the decline in value of their homes, they've just stopped buying cars -- and other big-ticket goods.
The result is catastrophic. The companies are burning through billions of their cash reserves. They need help right away or they will be forced into bankruptcy and liquidation.
The consequences of that would be forbidding: It would take what already is a severe economic downturn and turn it into a rout. Hundreds of thousands of workers would lose their jobs directly. But it isn't just autoworkers who are at risk. A total of 2.5 to 3 million jobs would be at risk as auto dealers shut down, suppliers of components and materials lose their market, and the losses
ripple through the economy. Needless to say, retirees and their families -- about a million in all -- would see their pensions and health care benefits slashed.
There are two big arguments against helping Detroit. The first is that the crisis is due to pampered union workers who make too much money. In fact, the autoworkers have been taking hits for some time. New workers start at the princely income of $15 an hour, and don't have the traditional coverage of pension and retiree health care benefits. Health care for those already retired is being spun off. Detroit's problems are not the problems of high-priced workers.
And in any case, this argument strikes me as perverse. We want to come out of this crisis with a broad middle class, not with an unequal society in which middle-income workers are forced to give up salary, health care and pensions. Why would we want to punish autoworkers for gaining what we hope to insure for most workers in our society?
The second argument against helping Detroit focuses on executive mismanagement. For too long, Detroit's executives have been behind the curve, and have let the Japanese and Koreans pass them by.
No one can defend the executive mismanagement of the past. They've been resistant; they're shamefully slow, but they have begun to get the message.
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