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Why Auto Industry Must Be Saved

Check out this clip of Jim on the Today show again today, explaining why we have to save deadbeat homeowners in order to save regular homeowners and defending the latest plan.

He also made the case for bailing out the automakers, something he advocated on Monday night's show. The thesis behind both ideas is the same: It may stick in your craw to save General Motors or Ford or the private equity guys at Cerberus who bought Chrysler after they've made decades of mistakes, but the consequences of letting these companies fail are almost too terrible to contemplate.

The people who oppose an auto industry bailout are missing a huge point: letting these companies fail will be more expensive than a bailout. That's true in the short run, and it's true even if you just look at the tax revenue the federal and state governments would lose as autoworkers lose their jobs. And I just found some new data that makes Jim's argument in favor of a bailout for the autos even stronger.

In a study from the Center for Automotive Research, which I'll admit may not be the most unbiased organization, they estimate that if the Big Three cut their output and employment by 50% to cope with their declining market share in a declining auto market, 2.46 million jobs would vanish. That would lead federal, state and local governments to lose $108 billion in tax revenue over the following three years. And that's the less pessimistic scenario they outlined.

Throw in the cost of unemployment benefits for 2.46 million people, and you're seeing how costly it would be for the government to let the Big Three fail.

If these numbers are right, the feds should be willing to pony up at least $100 billion to save the automakers, and probably much more than that. Because even if we just gave the Big Three that money, rather than making loans or taking equity stakes, it will cost us less over the next three years than letting them go under.

This shouldn't even be an argument simply because of the way the numbers stack up.





Cliff Mason is the Senior Writer of CNBC's Mad Money w/Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Richand Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like.

Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.




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