Congressman Dingell Wants Subsidies for Alternative Fuel

Congressman John Dingell is a Democrat who represents America’s automakers as much as the people of the 15th Congressional District of Michigan. So, it’s no surprise that he’s pushing for a hand-out to the Big 3 automakers to help them convert to alternative fuels. He wants $25 billion in loans for that purpose, which were part of last year's energy bill, to be freed up early. The Energy Department should do just that, but these loans aren’t the best way to go about it.

For all of its capitalistic bluster, the American car business has been nurtured and protected by the government since the Depression. Whether it was all that lovely money for building tanks in World War II or for bailing out Chrysler back in the 1970s, the US auto industry enjoys a degree of socialized care that few Swedish babies get.

Now that gasoline has hit $4 a gallon, the big margins are vanishing because no one wants the SUVs and light trucks that Detroit has been cranking out. The result is GM's $15.5 billion quarterly loss and Ford's $8.7 billion setback. And they aren’t out of the woods yet. Bloomberg reported, “One of the nation's automakers is almost certain to default within the next five years, according to a UniCredit analysis of costly contracts to insure debt. As those costs increase, the probability that one of the three will be unable to fund its business is more than 95%, UniCredit warned.”

They need to start making more hybrids, cars that burn ammonia or ethanol, and vehicles that run on fuel cells. In any other industry, the big boys would simply do it. For some reason, though, Detroit needs subsidies to undertake the actions necessary to survive. Fair enough, one can’t have them going bust.

The loans should be freed up, but the pay back should be more aggressive that the law currently requires. Each company accepting the loan should have to issue non-voting preferred shares to the US Treasury. When these investments pay off, the Treasury should get more than a few percentage points in profit from the loans. It should get a chance to double or triple its money. Alternate fuels is a sure bet, and if Detroit can’t make itself put down the money for that bet, Uncle Sam deserves a proper payoff.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

Kensington Review Home