RIGONOMICS:

It has been 15 weeks since my last column graced these pages. To say the least, a lot has happened since then. I took a self-imposed sabbatical to run for Costa Mesa City Council.

The fact that I am back writing this column probably gives you a clue that I did not get enough votes.

My best wishes to the winners, Mayor Eric Bever, Councilwoman Katrina Foley and former Mayor Gary Monahan.

Together with Councilman Allan Mansoor and Councilwoman Wendy Leece, I expect to see a very productive City Council this year. They have a lot of work ahead of them.

The last column I wrote in August was about how high gasoline prices would bring down consumption, increase supply and lower the price at the pump.

Back then I was happy to see that gas prices had dropped from $4.49 a gallon to $3.99 a gallon. Today, just 105 days later, the price is $1.99 at U.S. Gas at Harbor Boulevard and Fair Drive. It is amazing what the free market can do if we just get out of the way.

I am afraid that as far as the rest of the economy is concerned, our elected officials in Washington cannot seem to get out of the way.

During the same time that gas prices dropped in half, the federal government went on a bailout binge. Ronald Reagan’s quote about government’s view of the economy was never so apropos. “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

On Sept. 7, the federal government started a new program called “bail it out.” On that fateful day the inevitable happened: The government had to step in and guarantee the debt of the largest holders of mortgages in the world, Fannie Mae and Freddie Mac.

These government-sponsored enterprises, or “GSEs,” that were privately owned had the full faith and credit of the federal government to guarantee all the money they borrowed.

It was a business model only Congress could create; the shareholders make all the profits and the taxpayers take the losses.

This bailout started the domino effect which is still falling as I write these words. Seven days after the Fannie/Freddie debacle Merrill Lynch sold itself to Bank of America at a 50%-off sale. Two days later, on Sept. 17, the Feds bailed out AIG insurance with an $85-billion loan. Seven days later Congress approved a budget with $25 billion set aside to help the big three automakers create new “greener” cars. Chalk up one more for socialism.

The following morning, the FDIC took over the $307-billion Washington Mutual and sold it to JPMorgan for $1.9 billion. Eight days later Congress created the $700-billion Troubled Assets Relief Program, a.k.a. “TARP,” to buy preferred stock in troubled banks. In fact, the Feds used TARP money to buy $25 billion of preferred stock from Citibank. Today you can buy all of Citibank for less than $20 billion.

This last week The Big Three automakers went to Washington D.C. to get an additional $25 billion. It is amazing to watch the chief executives of General Motors, Ford and Chrysler tell Congress why it is in the best interest of the American people to give their companies a $25 billion, low-interest loan. This is a loan that has no hope of ever being repaid. This is in addition to the $25 billion Congress set aside to help the big three create new “greener” cars. Based on the close of the market price Thursday you could buy GM for less than $1.7 billion.

What is even more comical is to watch our own Sen. Dianne Feinstein and the rest of the Senate explain that they are not going to just write a blank check; that in order for them to fund this bailout they want to see a business plan that shows how the Big Three will make a profit.

It will take more than a business plan for Ford, GM or Chrysler to make a profit. It will take a Chapter 11 reorganization bankruptcy. Based on the testimony of all three chief executives, each company is already bankrupt. All the money in the U.S. Treasury cannot make a competitive car when the automakers cannot layoff workers they have no work for, close plants that don’t make cars and shrink a dealership network that is too expensive to operate. Only a bankruptcy court can do that.

There is no doubt the recession and credit crunch has hurt car sales. But ask yourself: Why is it we have other car manufacturers in this country that can get by without a government handout?

Toyota, Nissan, Mercedes and Honda all build cars in this country. They all have pension plans and healthcare expenses and they pay good wages. The scare tactics are always the same — if the government does not step in with taxpayer money the world will come to an end.

The taxpayers are having bailout fatigue. It is time to let the free market work. Trust me: 24 months after Ford, GM and Chrysler come out of bankruptcy they will be lean, mean auto-making machines and will be able to produce cars Americans will buy.

JIM RIGHEIMER is a Costa Mesa planning commissioner, a local developer and a GOP activist. He may be reached at [email protected].