Chambers/ Flynn British Literature

Chambers/ Flynn

British Literature

21 November 2013

The Right Move: Auto-Bailout of 2008

Imagine a world without the conveniences that automobiles provide. In the United States and worldwide, the automobile has made it easier for people to reach their destinations quickly and with the slightest touch of a pedal. Because of the automobile, people are now able to commute to the office of their employment, ride quickly in an ambulance for a lifesaving procedure, and more. It’s hard to wrap one’s mind around the thought of a world without vehicles, because of the commonality and such widespread use of the automobile. It’s hard to believe that the most economically advanced and richest country in the world could possibly ever reach a state of non-vehicular commute, right? Wrong. In 2008, the government of the United States of America issued a seven hundred billion dollar economic bailout to help prevent the shutdown of businesses in the United States, including three of the biggest vehicle manufacturers in the world. “The Big Three” car manufacturing companies in the United States, General Motors, Chrysler, and Ford, were in dire need of help after the worst economic state since the great depression hit in 2007. This event is now known to economists as “The Great Recession,” which had an almost fatal effect on the auto-industry which employs millions of United States Citizens.

Based on the free market of the people and the laissez faire type government in the United States, capitalism creates a “free market” economic system. Investopedia defines a free market economy as, “a market economy based on supply and demand with little or no government control.” Democrats and Republicans, the two major economic parties of the nation, view the idea of a free market a little differently. Republicans take more conservative, hands- off economic approach to the economy, believing that the economy, if in a crisis, will eventually return to its natural state of equilibrium without the aid of government. Democrats, on the other hand, believe in a more hands on approach, providing whatever government needs necessary to reach economic balance and a state of regularity. In 2008, President Barack Obama, member of the Democratic Party, took the economic unbalance and instability into his own hands. Obama believed that because of the faltering economy a business bailout was necessary to sustain businesses and keep the unemployment level low in the United States. President Obama and the Congress of the United States issued a seven hundred billion dollar government funded bailout to help failing and deteriorating businesses during the recession. “If the U.S. would have let the banks go under, there would have been huge problems, because our whole economic system runs on credit” (Gibbons). The bailout ultimately saved thousands of banks and businesses, positively affecting the economy. Of this huge sum of money, a designated thirty four billion dollars went to assist the “Big Three” automobile manufacturers. This money provided by the government to these manufacturers has ultimately resulted positively in the economy, and has saved the country from car-less chaos.

Without the auto-industry bailout, the millions of people employed by the Big Three automobile manufacturing companies would be jobless. The people who work for these companies often make money on commissions, meaning that their pay is related to the number of sales the company has on the vehicles they manufacture. The more vehicles sold the more money in the workers’ pockets. In 2007 and 2008, sales in almost every industry in the U.S. weakened substantially or even shut down completely. The bailout injected money for the auto companies to pay their staffs and supply the world with U.S. manufactured automobiles. The positive effects of the bailout are finally being seen today. In today’s market, “auto sales are surging across the county, touching off a virtuous cycle of healthy competition, job-creating investment, and high-tech innovation that stands apart from much of the still-sputtering economy” (Cohn). Auto sales are finally increasing and reaching a normal state, and even at some points exceeding expectations during certain quarters of sales. According to J.D. Power, one of the nation’s most trusted global market research companies, “August will prove to be the best month for auto sales since before the recession. Meanwhile, buyers are getting cheaper auto loans, allowing them to pay higher prices, pushing consumer spending on new vehicles in August to what might be “the highest level on record” (Fletcher).

Most Americans own or rent at least one car in their lifetime, so it is fairly easy to understand how important the automobile industry is to the common American citizen. Owning a car to the average middle-class American is so common that it could be considered strange to not own a vehicle. In current years because of the easiness it is to get fairly inexpensive auto loans, more and more families are turning from two car families to three, and three car families to four, etc. And because of the always rising American population, there will always be an increasing number of people (teenagers, first time drivers, etc.) who will be in need of a vehicle. According to calculations produced by the Center for Automotive Research (CAR), “the auto industry has accounted for a quarter of the nation’s overall economic growth since the recession ended in 2009. That’s pretty remarkable given we are less than three percent of the economy,” said Sean McAlinden, CAR’s chief economist (Government).

As a result of the auto-industry bailout of 2008, there are more new American made cars being produced than any other time in the nation’s past. One can barely watch their favorite thirty minute program on the television without seeing at least a few car commercials. These commercials advertise new, more hi-tech versions of their older model cars, and occasionally an entirely new model. Just like in the early 1920’s and 30’s, the middle class is no longer interested in the old and outdated but rather the new and improved, the latest and greatest, and something with the most comfortable and up-to-date features. This trend is noticeable in the automobile industry because of the growing number of people looking for and obtaining new cars. Because of the middle-class’ rush to the newest technology, the auto-industry is now booming and has fully recovered from the recession as a result of the bank and auto-industry bailout.