Obama's Bailouts are Failing

Let me first take issue with your initial conclusion and your definitions which therein causes your debate to fall on its face. The bailout was a resounding success based on the information you provided. It is not, by any means, intended to be a long-term solution or a part of a viable business model. As CPR is only intended to stimulate one's heart until a defibrillator can be brought in, these bailouts are merely a means with which to prevent bankruptcy in these two instrumental companies. Let me address each specifically and explain to you why each is vitally important to the American economy and what else the U.S government is doing to help them. AIG is a large part of the bedrock of the American economy. Their failure is due not to their own negligence or irresponsibility, but rather due to the American's government failure to set and outright removal of guidelines that would clearly define what can be considered dangerous or risky to the U.S economy. Because these laws were not set, AIG did as any company must do; it responded to its shareholders. Companies like AIG were being left behind by hedge fund managers and other, smaller banks who were cashing in big-time on the housing boom. Their actions were merely part of their obligation to do whatever they can, in the confines of the law, to maximize profit for their shareholders. What's more, the Clinton and Bush administrations actually encouraged this risky mortgage trading so as to provide lower-income Americans with affordable homes. These Americans began to default on these mortgages in 2007/2008 and so the economics crisis began. These mortgages (dubbed 'toxic assets') are a burden on the books of AIG and other banks and it ties up their assets so that they can no longer provide new mortgages to responsible homeowners or give loans to cautious investors. What the American government did was to infuse cash into this bank and ensure that they not default. By doing this, the American government saved a company that did only as it was supposed to, and was hit with an unexpected recession. Assuming that AIG can limp out of this recession, infused with government cash, it will almost certainly recover its losses. All banks are suffering, but by 2010 they will begin to see a reversal of their fortune. If the American government can ensure that no more banks or insurance companies fail until then, they will see 8.5% return rates on their investment, which will help to pay off debt in the future (5 years.) If we were to allow this company to fail, it would entail a deepening of the recession, higher homelessness and increased unemployment all around the world. General Motors is a different case. The bailouts are merely an anesthetic for their eventual collapse. The American auto industry, while patriotic and nice as it is, cannot survive. It is an inefficient company that simply cannot compare to the motivated, low-wage workers of China. The unions, while well-intentioned, have pushed up benefits for auto workers to the point where it will actually cause them to lose their job. Sad as it is, it is unavoidable. Where the manufacturing of automobiles is large automated; anyone can do it. To think that it requires a special American fortitude and ingenuity is incorrect. While this may be the eventual reality, now is the exact wrong time to let GM fail. The company needs to be slowly led out, its workers need to be retrained to work on other (probably tech-based) industries. This is a long-term solution that must be worked out in times where there is a high demand for skilled workers. Because we are currently in a recession and there is practically no jobs for unskilled assembly-line workers, they will likely find jobs, therefore their incomes will be greatly reduced, they will rely on welfare and they will not spend or invest. This is exactly what turns a recession into a depression and will cause more industries to fail. Furthermore, the government is killing two birds with one stone as it has committed itself to investing in green energy and green automobiles, which the Chinese and Indian industries simply cannot ensure. GM is shedding jobs but you must realize that it is the only thing ensuring that these 5,000 job losses do not turn into 250,000 lost jobs is the U.S government. You can say what you will about the bonuses, but it hardly seems like reason to allow your economy to fall apart at the seams. Yes, the economy is cyclical, but any economist will tell you that anti-cyclical activity must happen so as to lessen the effects of any recession. The economy further says that yes, throwing money at it absolutely will help, which I will expand upon later. Your final point fails, as it is an illogical post hoc conclusion. Unemployment has occurred under Obama, as it did under Bush and as it would under anyone. He has unequivocally helped to stem the losses and protect many jobs. Obama is the last line of defense from a truly painful re