As the debate rages on Capital Hill about an "automotive bailout", we at the The Party of Common Sense thought we would weigh in. The real problem is declining market share. US car manufactures only own about 48% of the today's market, yet they have to support the entire base of retirees when the car manufactures owned almost all of the US market. In addition, to some degree, the car companies are a victim of their own success. Thirty years ago, a car wouldn't last as long as it does today and the cost of a car has risen much faster than inflation. This means that we can only afford to buy fewer cars and we hold onto cars longer - and even those that do buy the latest and greatest model cars dispose of theirs to in the used car market. Another problem is the lag between design and delivery. Americans wanted and bought large SUVs and pick-ups, then when the energy crisis hit earlier this year, the car manufactures were completely unprepared with smaller, more fuel efficient cars.

But without making excuses, under normal circumstances, at the The Party of Common Sense we would agree that one or even two of the car manufactures should go out of business - consolidating as happened in the airplane manufacturing industry (McDonald Douglas, Lockheed, and Boeing all consolidated into Boeing). However, at this critical time of economic distress, doing nothing will likely drive all three out of business, put 2.5 million that are directly employed by the automakers (4 million including those indirectly employed) out of work, further exasperate an already dicey economic situation, and could potentially push America's economy over the edge. After all, if you are Keebler making crackers or Chrysler making cars, if your industry sales slide 40% last quarter alone (as occurred to car manufactures), there is no way to cut costs fast enough. Here are five good reasons we believe to provide a bailout.

One: For those free market types, who believe the car companies should be allowed to collapse, should consider the side effects of a collapse. A much tossed around figure is that Toyota pays its US workers $42/hr where as the big three pay $73/hr. This slightly misleading because these figures include the cost of the pensions and benefits for retired workers. (The actual figure for "take home pay" for GM is $28/hr and $25/hr for Toyota.) Since the big three have been around longer, they have more retirees and have been losing market share to imports. According to GM (in 2006, the latest figures available) of the $73.26 per active hour worked, $33.58 consists of benefits/government required programs. There is a government run program called Pension Benefit Guaranty Corporation (PBGC), which picks up pensions from bankrupt companies. Obviously, with no payroll being paid the government won't receive those taxes and since PBGC will pickup the pensions - we're just shifting the cost to the government. Sure out of the ashes of GM, Ford, and Chrysler a new automotive industry will emerge - and it will likely be more around the $42/hr of the foreign manufactures. So either we bail the automotive companies out now and try to keep the benefits privately paid - or we allow them to go bust and socialize the retirement benefits and have the tax payers pick up the tab over the next sixty years. (Note: to be fair, if PBGC picked up the tab it would payout less than $1 for every dollar lost.)

Two: Most economists agree that in an economic recession, you want to spend and it's perfectly acceptable to run deficits to get the economy going. The mistake FDR made was trying to balance the budget in tough economic times - the reduction in spending only worsened the problem. Ultimately, it took WWII and the accompanying spending to recover from the Depression. The idea is to get people working. Letting the car companies fail not only defeats this goal, it takes a step back. If you take the $34 billion that the car companies are asking, and put it towards some other public works project - it will take months to put these programs in place - even the "shovel ready" projects the state and local governments claim to have lined up (does anyone actually believe the dump trucks are lined up and waiting?). Even if these localities get the money to spend - will they actually spend the money, or will they use it to prop up their ravaged pension plans? The big three have no choice but to spend the money, since they need it to fund ongoing operations.

Three: For every dollar spent by the big three, it represents seven times as much. GM spends money to a supplier, who spends on their sub-suppliers, who pays a worker, who spends it on other goods, and so on. Stop that cycle and the ripple effect could devastate certain communities, and likely would cause a big enough ripple to affect the economy as a whole, which brings us to the next point.

Four: Can the economy take another body blow? Would GM failing be the main street equivalent of Wall Street's collapse of Lehman Brothers? The failure of Lehman practically overnight resulted in the disappearance of the credit markets on Wall Street. The problem is that people started to ask, if Lehman can fail, is anyone safe? When you trade with a company, you need someone at the other end of the phone. How can you do a trade if you're not sure anyone will answer the phone tomorrow? In normal times there is little worry of default. If GM fails, it is possible that American business may not be willing to extend payment terms for goods and services to their customers, but rather demand immediate payment. Normally suppliers provide terms - such as net 30 (payment due within 30 days of receipt of the bill). If no one knows whose going be next to collapse, they don't want to get stiffed and therefore trusts no other business. We become a cash based society. The ripple effect begins and business slowly grinds to a halt.

Five: There is a case that can be made that keeping at least one US based automaker is critical to our national defense. In the event of a major conventional war, it would be critical to be able to mass produce the military vehicles to be able to field and army and defeat a foe. In a large conventional war, we may have no facilities and no expertise to mass produce things like troop transports. If all three go under, I guess we'll be going to war in Peugeot and Fiats.

Sure there are those, such as Tennessee Republican Senator Bob Corker, whose state paid $169,000 in incentives and tax credits per job created for a BMW plant, who would love to see the American automakers go under. Fewer competitors means more work for those foreign automakers that operating in the southern states such as Tennessee. Too bad "America First" really isn't anything more than a slogan to these legislators. Rather than concentrating on breaking the unions and their own parochial interests, they should think through the actual ramifications of driving all three remaining Automakers out of business.

It is certainly distasteful to have to bail out the automotive manufactures. The best option is not to appoint a "car czar" or "auto-crat" to dictate to the auto makers - rather take an interest in the manufactures, set standards for new fuel efficiency (or require certain fuel efficiency) and then to let them succeed or fail. Hopefully, when one or more fails we will be beyond this economic crisis and our economy will be able to whether the shock. 'Tis the season - how about an early Christmas present to the American people?