Matthew 6:3

On the heels of closing over 800 Chrysler dealerships, with untold numbers more to close once the GM bankruptcy hammer drops on Monday, the Obama administration has announced a brilliant new stimulus plan: Subsidies for auto dealers.

The Obama administration will offer U.S. auto dealerships loans of up to $2 million to help buy vehicles and maintain inventories, the top members of the Senate's Small Business Committee said on Thursday.

The U.S. Small Business Administration's pilot program will provide loans of $500,000 up to $2 million that are repayable over five years and backed by a 75 percent government guarantee, according to Senator Mary Landrieu, the Democrat who chairs the committee, and Senator Olympia Snowe, the top Republican on the panel.

"The SBA's plan to offer floor plan loans to America's dealerships will help small businesses stay open in this uncertain economy," the senators said in a joint statement. "These loans will enable dealerships to maintain their inventory and save jobs."

We've been informed time and again that a major problem facing the Big Three is an overabundance of auto dealers in the chain, auto dealers whose irrevocable (outside the bankruptcy system) contracts forced the auto makers to overproduce; auto dealers who prevented the manufacturers from economizing in supply and distribution chains.

So the administration handed the remaining Chrysler dealers (as it will soon give lucky or politically connected GM dealers) the greatest gift a government can offer: it killed their competition.

It's a truism that if you reward a behavior, you will have more of it.  As the administration now intends to reward the behavior of auto dealers, through subsidies, logically we will have more auto dealers.  Oh sure, they'll be Toyota and Honda and Ford dealers, once the government swings the axe on GM, but…

Wouldn't it have been less expensive, and more efficient, to have let the market kill non-competitive auto dealers in the first place?

Via the John Locke Foundation.

Last 5 posts by Patrick Non-White


  1. says

    I grow increasingly dismayed with the new government. I am now less likely to buy an American car than before (not that I'm getting a car any time soon).

  2. says

    Yesterday I saw a car ahead of me with a license plate frame that said "be a loser — buy a foreign car."

    I wanted to pull next to the guy at the light and say, "Yeah, because winners buy shitty, substandard products from incompetently-run companies that have to be dragged kicking and screaming into every innovation, and which bend over for rapacious unions."

  3. says

    I can't tell if you are being wry and snarky with the "lucky or politically connected GM dealers" line, or if you buy into it. In a post that I otherwise completely agree with, I find that apparent acceptance jarring. I read The Corner on occasion, but there is little denying there partisan idenity, and doubly so for gatewaypundit, who gives up the game right off by using world net daily as theiir primary source. I'm not saying with certainty it didn't happen, but it sure looks like a lot of "fun with statistics" to me. Particularly gateways' map comparison of closed dealers to red counties.

  4. Patrick says

    I don't trust statistics in politics Jack, but it isn't because I don't trust statistics. It's because I don't trust the government, no matter which gang is in charge. I'm paranoid.

    In any case, it's a tangent to the main point of the post, which is that this is horrible economic policy, a reward for failure. I'm glad to see we agree there.

  5. says

    I walked into my highschool economics class on day one with a number of assumptions about how things should work, at the forefront "buy american!" I walked out of that class with a very different outlook on the world, thanks in no small part to the excellent teacher.

  6. says

    Yeah, wasn't the whole point of capitalism letting things FAIL that could not compete in the market place? And wasn't the whole point of communism was to subsidise companies so that they could create jobs for the masses reguardless of how competitive they were or not? Is the USA now spelled CHINA because it sure seems to me that they have a much more capitalistic society than we have.