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Band Aid Economics

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If you are not a subscriber, I encourage you to go out and purchase this weeks business weeks. Go ahead I will wait....

This historic issue chronicles the last gasps of the capitalist aspects of our society in the article "Forget Adam Smith... Whatever works". After watching with envious eyes the bailout of the financial markets, the big three automakers are coming to DC looking for a handout.

Why not? Bailing out Ford, GM and Chrysler would have a more direct impact to voters in the fly-over battle ground states then bailing out the banks will. If these companies go out or significantly scale back operations, thousands of American families will lose their main source of income. That's not even considering the ancillary service market built around factories. So it is in the interest of all politicians to be behind the bailout.

The deeper question is then what? You hand a company billions of dollars, which fixes the immediate shortfalls, but what about next week? Next Year? Most economists state we are at the start of a recession. What will change in the next 6 months that will make the company viable again?

A year from now, these same companies will be at the door looking for a government bailout, why would we turn them down then? They will be back the year after that, and the year after that. We are at a historic point of moving to a government subsidized business model and scary enough, most folks are clamoring for it.

Throwing money at the problem will just make these companies dependent on tax payor bailouts rather then fixing the core problems with their business models. We need a little tough love right now, and not a march to socialism/facism based on panic.