The US senate is not overly enthusiastic about the 14 billion dollar bailout of the car industry. 14 billion is of course much less than the 25 billion that the car industry initially asked for, but it may still be too much.
The bailout will go mainly to General Motors and Chrysler, who are worst off. Ford will lose out comparatively, as they get less money, as a punishment for having run their business better in the past.
The car businesses in other countries will lose competitive advantages against the American firms. Other countries will find the need and a good excuse for subsidising their own car industries, which then will hurt the American car industry.
American consumers, as well as consumers everywhere in the world, will lose out, as three badly run companies will be kept alive - something that hurts the more efficient competition.
American tax payers will lose, as they will have to provide the money.
Producers of other products will lose, as their products will look less accessible than cars.
This does not mean that it is obvious that there should be no bailout, however. There are almost a quarter of a million people directly employed by the three big auto manufacturers, and perhaps as much as three million indirectly depending on it.
If the three companies were to close down overnight, the repercussions are impossible to judge. Banks would fail. The housing market would dive even deeper. It is impossible to tell if the American economy, or the world economy, could handle that.
Luckily, it is unlikely that all three companies will close down suddenly. There will be attempts at solutions, mergers, acquisitions by other companies, domestic or foreign ones. In short, it is possible that the economy could survive without the bailout.
The only worrying detail is that it also is possible that it might not.
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