Are Failing Auto Makers The New Katrina?

New Orleans sat paralyzed while it's levees broke, and the rising tide of sludge and apathy ruined thousands. Have politicians and Detroit's automakers taken the same approach?

Just as New Orleans was warned before Katrina struck and the levees collapsed, the rising tide of red ink surrounding the big three automakers has caused numerous alarm bells in Detroit and Washington, and no one listened.

The unions have a stranglehold on the auto companies, and refused to relinquish it even when management turned blue in the face. The issues for years have been wages and health care. The unions, of course, want both increased.

Management is trapped between the threat of massive labor strikes, and a new global market that chugs merrily along, happily cutting it's competitors throats with the sharp edge of market based wages.

The Big Three are paying their workers $20 more per hour than Toyota, and losing $500 for every car they turn out.

Auto prices rose, lining the pockets of foreign manufacturers with easy profits. Despite the increase, American companies were losing money on every car they built, and the unions chose to ignore that in contract talks. While politicians who could have broken the death grip fiddled, the storm tide began to rise...

Gas prices shot up and stayed there, the housing bubble burst, consumer confidence ebbed, and new car dealers began noticing some rust on their inventory. Higher still, the waters rose...

Fanny Mae, Freddy Mac and Lehmans all toppled. We all learned what a collateralized debt obligation was, AIG wobbled and credit seized up. Even people wanting to buy cars were having trouble getting loans. Dealers laid of salesmen, and finally the waters crested against the weakened levees of Detroit's capital reserves.

Stockholders finally took notice of the money leaks, and bailed themselves out by dumping stock. Washington doled out $25 billion, but it was like sending Ray Nagle a couple of boats. Nothing remained to halt the disaster.

Well, the levees are broken, and automakers are busted. As with AIG, it isn't just a case of large companies folding. The problems are much deeper than that.

Faced with a massive surge of laid off workers, the state of Michigan sees itself unable to cover the potential unemployment cost in an area that is far from labor-hungry. The state would also be saddled with the health care of millions of retired union workers whose insurance plans will collapse when union dues stop funding them.

A perfect storm has hit, and the rising cries from the rooftops begin. It will be taxpayers who are expected, once more, to break out the life rafts and row in a boatload of rescue funds. Only the nagging question of Washington agreeing to a bail-out remains.

Be serious.

The Democratic party is neck deep in debt to Big Labor. Even Obama, who raised enough money to single-handedly bail out Ford, relied heavilly on Labor for the grass roots work of his campaign.

And Republicans, who should be the party decrying the government's involvement in any capital enterprise, remember all to well the political damage inflicted on them for appearing unable or unwilling to help suffering Americans during Katrina.

They won't risk long unemployment lines appearing nightly on the news, while Wolf Blitzer wonders how the minority party could ignore such suffering on the part of middle class, blue collar Americans.

Upshot is, politicians in both parties can be relied on to reach into the back pockets of taxpayers for the pay-off. All the debates, posturing and committee meetings at this point are purely for show.

After much public angst, Nancy Pelosi and Harry Reid will pass a bail-out bill. They will pretend to pressure Bush to sign it, and whether he does or not, its a win-win for the Dems.

If Bush signs, the automakers and unions will have been 'saved' due to congressional action and pressure.

If Bush veto's the thing, then it will languish until January, when Obama will ride into Washington, sign the check, and save the day.

We citizens don't have a lot of say in the matter. Calling our Congressmen will do no good. Already short on numbers in a lame duck session, the Republicans who represent our neck of the woods are essentially powerless.

So the question is not should we shore up an industry based on a failing business model with no hope of recovery. The question is when will it happen.

So break out those checkbooks, folks. Higher taxes are coming, and coming fast.