I've read opinions from both sides of the debate and there is one distinct difference in the two sides. Those supporting a bailout of some kind are saying, "The federal government should provide financial help...". Those skeptical any help will help or will help with the current proposed plans are saying, "...and we would not be serving the American taxpayer well if we spent their hard-earned money...". Note that supporters say the federal government should help and those skeptical say it would be the American taxpayer doing the helping. I ask you, who is trying to protect the interests of the American people as a whole and who is missing one of the key components of the financial impact of the bailout?

Mark Zandi, Chief Economist of Moody's Economy.com, went before the U.S. Senate Committee on Banking, Housing and Urban Affairs on December 4, 2008 to testify (PDF of Zandi testimony) on behalf of supporting the $34 billion bailout. He testified, "The Big Three employ fewer than 250,000 people in the U.S., but given their broad links into the rest of the economy, closer to 2.5 million jobs would be immediately at risk." His point was that if the Big Three went under and shut their doors that many related industries would be affected. Such as auto parts manufacturing, auto maintenance and repair, trucking, warehousing, machine shops, foundaries, plastics, nuts & bolts, machinery repair, motor vehicle bodies, glass, steel mills, tires, etc. However, such a claim does not hold water when you think about the Honda, Toyota and other foreign owned companies that have plants in the U.S. that will get increased demand with the loss of one, two or all of the Big Three. People will continue to buy cars, trucks, minivans, crossovers and SUVs produced by the remaining auto makers. Their increased demand will probably require them to expand to fill the void of the loss of those that go under. They will also probably need to employ the displaced workers from those that go under. Just because one or two businesses go under isn't the end of the world.

Zandi's whole premise is that the economy is currently hurting and adding to the unemployment by liquidation of one, two or all of the Big Three would devastate the economy even more. He even stated in the beginning of his testimony, "Under the most likely outlook for the economy and auto industry, the restructuring plans in which the Big Three have requested $34 billion in loans will not be sufficient for them to avoid bankruptcy at some point in the next two years. They would ultimately need $75 billion to $125 billion to avoid this fate."

Then later he said, "I recommend that Congress provide the $34 billion in aid that the Big Three have requested in two tranches in exchange for warrants and restrictions on executive compensation and dividend payments. The first payout should be sufficient to forestall the automakers' imminent disorderly bankruptcy at an extraordinarily fragile time for the economy. The second payout should be made only if the restructuring plans are proceeding successfully. Congress should also at the same time make it clear that if the restructuring plans are unsuccessful, then no more government loans will be forthcoming. Instead, Congress will work to ensure that there is an orderly bankruptcy process by providing financing in bankruptcy and guaranteeing warranties on new vehicles sold."

After saying that $34 billion is only one quarter to one half of what they need he suggested the government use American taxpayer dollars to solve the problem, but that they only give them half of the money now and half later if it worked. He said that $34 billion wasn't enough to make it work, but expects half of $34 billion now to test and half later to keep things going. But, he also said, " Congress should also at the same time make it clear that if the restructuring plans are unsuccessful, then no more government loans will be forthcoming." He knows the restructuring plans won't be successful with $34 billion. So, does this mean he is advocating that if things are going successfully with the first $34 billion that the federal government should spend at minimum another 40 to 90 billion in American taxpayer dollars later to finish solving the problem?

"The Big Three's market share will come under even more intense pressure given their current financial problems. Potential buyers will fear that their new car would not be serviced properly and any warranties could become void. Foreign automakers will also step up their efforts to gain market share through more aggressive marketing and discounting," Zandi testified to the committee.

I agree with this opinion and noting that a chart he supplied to the committee showing that the Big Three market share has dropped about 5% this year alone with word of economic problems with the companies. However, what's the proposed plan to stop this slide through 2009? If auto buyers aren't buying from the Big Three because of problems, I don't see their confidence being helped by government involvement.

Plus, if their market share is in a constant state of decline since the mid 1990s when they had a 75% market share down to now 47% and as a result they've been making significant cuts over the years then they"ve been adding to the unemployment problems. Proposed plans require more significant cuts and plant closures. Yet, this will require many lost jobs, which will be "layoffs at just the wrong time for the sliding economy," according to Zandi.

However, Zandi states, "It will be very difficult for the Big Three to make the even more substantial changes now needed to quickly become viable companies. This is evident in that most of what the Big Three outlined in their restructuring plans had already been announced. There is nothing particularly new in the plans they put forth in part because their current plans are so ambitious and in part because it is difficult to envisage other changes that could be implemented anytime soon."

He continued, "Conspicuously missing from the plans is exactly what more the UAW will be required to do. For the Big Three to become viable will require substantially smaller headcounts and other compensation concessions. The UAW can reasonably argue that it has already done a lot to help the Big Three, but it is not enough."

If the UAW is going to be a known problem and the "current plans are so ambitious and in part because it is difficult to envisage other changes that could be implemented anytime soon" then why bother wasting even half of the $34 billion in American taxpayer support.

Zandi is pretty much saying that giving the Big Three anything now would be pointless and just delay the problem, but that it still should be done. It sounds just like many of the other liberal government plans to throw money at it now and deal with it later. I say that we deal with it now and start the healing process of the economy rather than prolong the poor economy with consumer confidence fading even more.

"Some argue that the effects of an auto industry collapse would be too acute and far-reaching for an already-struggling economy to bear," said Mitch McConnell, Kentucky Senator. He continued, "This is impossible to know. And even if we grant that these companies would fail without taxpayer help, we would still have to ask ourselves whether the proposal before us achieves the goal that everyone claims to embrace - namely, the long-term viability of ailing car companies - and, in my view, it does not."

It would appear that Senator McConnell and Mark Zandi agree in theory that failure is in the future for one, two or all of the Big Three even with taxpayer assistance.

McConnell, also said in his statement, "In some ways, the proposal that was worked out by the White House and Congressional Democrats appears tough. It calls on struggling auto companies and autoworkers to make the sort of sacrifices they have not been accustomed to making in the past. It also includes time limits as a way of hastening necessary reforms. But in reality, this proposal isn"t nearly tough enough. A primary weakness relates to the so-called 'Car Czar,' who has nearly unlimited power to allocate taxpayer dollars but limited ability to force the kinds of tough concessions that long-term viability would require."

McConnell also believes that more help will be needed in the future as Zandi also seems to advocate to the tune of $40 to 90 billion. McConnell doesn't specify how much, but he said, "I have already enumerated some of the weaknesses in the plan. But in the end, its greatest single flaw is that it promises taxpayer money today for reforms that may or may not come tomorrow. And we would not be serving the American taxpayer well if we spent their hard-earned money without knowing with certainty that their investment would result in stronger, leaner auto companies that would not need additional taxpayer help just a few months or weeks down the road. We simply cannot ask the American taxpayer to subsidize failure."

McConnell's fear as well as many American's is that, "the prospect of the government intervening on behalf of some industries and not intervening on behalf of others - especially when there is no guarantee that the interventions will work. They wonder when the spending stops. If I were to vote in favor of this bill, I would not have a good answer for them."

McConnell said, "There are many principled reasons to oppose this bill. But the simplest one is also the best: 'a government big enough to give us everything we want is a government big enough to take everything we have.' This is as true for individuals as it is for business. It's the primary principle on which American industry, including the auto industry, was built. And even in turbulent moments like this - perhaps especially at moments like this - it's a principle well worth defending."

He continued, "The best route for the long-term viability of ailing car companies may be a rocky one. Government help is not the only option. It"s not even the best option. Long-term viability is still possible. But it's only possible if these companies are forced to make the tough choices necessary for their survival."

I think that we should bite the bullet now and force the companies to make the cuts they need to in order to survive. They're in the business of selling cars to get American taxpayer dollars as income not demanding that they collect the American taxpayer dollars through the government in a handout.