What now for the automakers? The Troubled Assets Relief Program — TARP — was enacted to save Wall Street but it’s already been so twisted out of its original shape by Hank Paulson that a bit more twisting to save the Big Three from bankruptcy over the next few weeks won’t be difficult. The White House was behind the auto rescue, and Bush doesn’t want to leave yet another failure on the portico as he leaves. Democrats certainly won’t object, and Senate Republicans will growl but so what?
TARP funds will be offered as a bridge loan to Detroit, especially GM and Chrysler, to keep them going until early January. The new Congress convenes January 6, and its first order of business will be to amend TARP and make it official (Bush will be President until January 20, of course, so this will be one of those odd-ball pieces of legislation featuring a new Congress and an old President).
But the real immediate need right now lies with state and local governments. States and locales are already showing shortfalls in the range of $70 to $100 billion this fiscal year, and they can’t officially go into deficit. That means they’re starting to whack public services — teachers, police and fire, social workers, admission to state universities, garbage collections, you name it.
Most of the public has no idea what happens on Wall Street and hasn’t even heard of TARP; and a big portion of the public doesn’t really believe that if the Big Three implode they’ll be hurt. But when it comes to their own local services, it’s a different story. To them, these are the only things government really does. And cuts in these services, on the magnitude just starting to happen, will create a generate holler on Main Street so loud as to crack the windows of every member of Congress back home this holiday season.
If we’re bailing out Wall Street and the Big Three, the public will insist that public services be restored. If not through TARP, then through the big stimulus package that will be signed January 20 or 21st. The federal government is bailout out America. But who’s bailing out the federal government? You and I, as our limited savings move into the safe haven of T-bills, along with a whole bunch of Asians.