Wednesday, November 19, 2008

Delaying the Inevitable is a Good Thing

Publius lays out an interesting argument for the auto bailout. Even if the bailout is destined to fail, even if the companies don't deserve it, even if we won't see a penny of the loan ever again, even if all it does is forestall the inevitable collapse of General Motors -- it still might be worth it. Why? Because the companies won't fail now. And now, in the middle of a major economic crisis, is not a time to let a major sector of our economy sink like Atlantis.

If the Big Three go under right now, given all the other economic strains, I genuinely worry that Michigan is going to turn into some sort of hell hole -- like sub-Saharan Africa or Iceland. Of course, the counter argument is that there is never a "good" time for huge employers to fail dramatically, so you might as well suck it up and get it over with. But, granting that statement as true, I can still say that some times are probably worse than others, and now certainly qualifies as a worse time.


PG said...

But we can create other jobs. If you have $25 billion that you're ready to sink into the Big Three and never see again just so people have jobs for the next two years, I can come up with lots of ways to spend that money that will employ people and give us a return on the investment. Put those with some engineering experience to work in vocational schools, training kids who aren't very academically inclined in basic skills for industry. Help them relocate to Mississippi, where Toyota is still opening a new plant despite the economic downturn. Hell, create incentives (tax breaks? government-provided health insurance for workers?) for successful corporations to set up shop in Michigan.

If we are merely delaying the inevitable until the overall economy is back up, what exactly is going to ensure that Michigan's economy specifically will have jobs for the workers the Big Three will slough off as they go into that inevitable bankruptcy?

I'm not categorically opposed to a bailout, but I'm not OK with one that simply puts Michigan in a holding pattern for a couple of years while nothing changes.

Anonymous said...

Not only would a bailout be a massive upward transfer of wealth (the average GM worked makes something on the order of $70k a year counting benefits - well above the national average), but declaring bankruptcy isn't even the major catastrophe that people make it out to be. Through bankruptcy GM would be able to restructure its labor contracts, clear out its management, and actually have a chance of competing with foreign owned car manufacturers.

David Schraub said...

Assuming it could go Chapter 11 instead Chapter 7 -- uncertain in this climate.

Anonymous said...

If anything, that seems to be an argument for a government managed bankruptcy, not a $25 billion payout in order to maintain the status quo for 6 months.