Auto Bailout Distorts Market

By Aaron Rice
December 9, 2008

Would you invest in a company that will be bankrupt by the end of the month? What if the government forced you to invest in that company?

That's exactly what's happening with the proposed bailout of the auto industry. The chairmen of General Motors and Chrysler told Congress they'll run out of money by the end of the month if they don't get some help. And they are asking Congress to force you, through your taxes, to invest in these failing companies.

These executives are asking politicians to give them what they apparently can't get from investors or bankers - two groups of people who are infinitely more capable than of evaluating whether a company is worthy of their investment.

One principle of governing is that the free market should not be distorted by government-designed dictates or advantages. When the government requires you to invest your money in a failing company - especially when there are competitors who will not receive this assistance - it provides an advantage that distorts the market and can exacerbate the problem it is trying to solve.

For more principles of governing, order our booklet, Governing by Principle. Go to or call 601-969-1300.

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