Commentary Magazine


Contentions

Bailout or Bankruptcy?

Professor Douglas Baird of the University of Chicago Law School has some sober words of advice for GM. The entire interview is worth listening to, but the bottom line is simple: GM can’t pay its bills, and it is making a product no one wants. So, a bailout just puts off the inevitable. Oh, and there’s no guarantee that bankruptcy will help, either. As Baird puts it, if a restaurant makes bad food, bankruptcy won’t help it recover.

At least with bankruptcy, however, taxpayers dollars aren’t at stake. Moreover, unlike the vision portrayed by allies of the car companies, bankruptcy won’t mean that GM stops operating–only that its shareholders get wiped out, its creditors “get a haircut,” and that new management likely will be brought in. (Remember United Airlines?)

There is little doubt that neither management (which doesn’t want to get booted) nor the UAW (which wants to keep its rich benefit and wage structure) likes the bankruptcy option. And both groups have a lot of political muscle. On the other side are the taxpayers, businesses who have just as much claim to public dollars (and a better track record), and people warning against the never-ending parade of petitioners an open-ended bailout policy will invite.

It will be an interesting test for the President-Elect. Can he stand up to Big Labor? Does he see through the emotional cant (“The auto industry is the backbone of our economy!”)? Can he perceive the systemic danger of perpetual government rescues? Stay tuned . . .



Join the discussion…

Are you a subscriber? Log in to comment »

Not a subscriber? Join the discussion today, subscribe to Commentary »





Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor to our site, you are allowed 8 free articles this month.
This is your first of 8 free articles.

If you are already a digital subscriber, log in here »

Print subscriber? For free access to the website and iPad, register here »

To subscribe, click here to see our subscription offers »

Please note this is an advertisement skip this ad
Clearly, you have a passion for ideas.
Subscribe today for unlimited digital access to the publication that shapes the minds of the people who shape our world.
Get for just
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor, you are allowed 8 free articles.
This is your first article.
You have read of 8 free articles this month.
YOU HAVE READ 8 OF 8
FREE ARTICLES THIS MONTH.
for full access to
CommentaryMagazine.com
INCLUDES FULL ACCESS TO:
Digital subscriber?
Print subscriber? Get free access »
Call to subscribe: 1-800-829-6270
You can also subscribe
on your computer at
CommentaryMagazine.com.
LOG IN WITH YOUR
COMMENTARY MAGAZINE ID
Don't have a CommentaryMagazine.com log in?
CREATE A COMMENTARY
LOG IN ID
Enter you email address and password below. A confirmation email will be sent to the email address that you provide.