Driving to a BBQ

Here’s what happens when Congress approves a $700 billion bill with no plan and no accountability:

PorkFest 2008.

We’re not talking just any old pig roast here. This is a 50-pound pork chop stuffed with pork sausage and wrapped in bacon.

The bill began as a plan to purchase “toxic assets” – AKA crap no sane investor wants – from drowning financial firms, with the feds taking stock in the companies.

But Wednesday, U.S. Treasury Henry Paulson changed his mind and said the government wouldn’t buy these toxic assets.

Now, we’re left with a $700 billion pool of money and nothing the government is specifically directed to spend it on.

Cue the barbecue.

While Paulson considers new rounds of investment into a financial services sector he’s gradually socializing, congressional Democrats want to spend that money to bail out Ford, GM and Chrysler, AKA the world’s worst-managed corporate giants. (Congress would like to spend on other things too, but today we’ll focus on cars.)

The only way the Big Three should get anything from the feds is if there are major strings attached. We’re talking major reworks of union contracts, mandates on producing more fuel-efficient cars, and jettisoning management and the whole board.

Otherwise, forget about it. Let them die.

Chapter 11 bankruptcy wouldn’t be all bad. It could give General Motors – and GM seems more endangered than Ford – enough protection from creditors so they could revamp themselves.

And if it’s Chapter 7? I hate to say it, but so be it. Yes, there are a lot of jobs at stake, but you’re telling me Honda, Toyota and others won’t rush in to fill the gap and expand? I think they will. That’s a huge opportunity. Just like Southwest Airlines replaced unwieldy, inefficient and eventually bankrupted airlines, automobile companies will do the same.

The Big Three have shown over the last 30 years that they will not innovate unless held at gunpoint by market forces. We finally have that, thanks to Americans similarly responding to the market and rejecting gas-guzzling SUVs.

The question now is how the feds will use that gun at Detroit’s head: Will it encourage and incentivize the necessary changes, or will it blow it and hand the Big Three a blank check?

The cynic in me says it’s blank check or nothing, because Congress gave up its right to have any say in the matter by once again giving the Bush administration a $700 billion check with no strings attached.

When the bailout passed, Congress told us we were getting one thing, Paulson’s plan to buy toxic assets. But now we’re not getting that. Congress ceded the cash and control to the Treasury Department by not binding Paulson to spend the money how they said he would.

In so doing, Congress has effectively castrated itself and come very close to abdicating its constitutionally mandated role as regulator of federal spending. By dictating how federal money is spent, it gains a major role in dictating government policy. But if Congress hands over the cash with no strings attached, it becomes no more than a sugar daddy to an executive branch that can do whatever it pleases. Congress did this with Iraq, and now they’ve done it again.

So the toxic assets buy-up is out the window, replaced by round after round of direct investment into a gradually socialized financial sector. Maybe it will work. Maybe it won’t. Treasury looks rudderless, and that doesn’t inspire confidence in the marketplace. Our best hope may be that things remain static till the Obama administration takes over.

But along the way, rest assured that Congress will bust tail to slip in as many pet projects as possible. After all, it’s how they got the bailout passed in the first place.