It should come as no shock that GM and Chrysler are asking for nearly $22B in additional taxpayer funding. Nor should it come as a surprise that the UAW hasn’t reached agreement on renegotiating the terms of the trust fund for retiree health-care. This is, of course, madness. No rational person thinks this will be the end of the gravy train for the car companies or that they’ll be viable anytime soon. But the Obama administration, I would wager, is going to keep on driving down the road to auto company nationalization, begun so imprudently by the Bush administration.
Such a course is unwise for multiple reasons. First, since the car companies themselves are cutting tens of thousands of jobs, none of this can any longer be justified under the premise of “keeping jobs.” (By the way, do those come out of the 3.5 million jobs Obama’s stimulus is going to save?) For that amount of money we are talking about hundreds of thousands per job “saved.” Why not give each of the remaining workers the cash and send them on their way?
Second, we essentially are looking at an auto industry run by government committee — the car czar’s new incarnation, the inter-agency task force. (It does sound like a bad joke that this will be co-headed by the person whose bank bailout debut spooked the markets.) David Boaz of CATO explains:
Summers, Geithner, and the president are all smart men. But none of them has ever run a successful company. Putting technocrats in charge of business firms is only a slight improvement over direct control by politicians. Business firms should be run by entrepreneurs and managers who face the challenge of making or losing money according to their success at satisfying consumer demand. When government officials run companies, they don’t focus on consumer demand. We’ll hear a lot about “balancing competing interests” — that is, responding to the political lobbying from managers, unions, environmentalists, mayors, governors, the Japanese government, and more. With officials in charge, no doubt we’ll produce companies with the world-beating dynamism of French firms.
And finally, there simply isn’t any moral or economic rationale to explain why taxpayers whose income is less than auto workers should be subsidizing them. We are piling up more and more debt, which will need to be repaid by those same taxpayers, for a project with virtually no chance for success.
Even decidedly non-conservative observers agree. Robert Reich is telling us to send GM to bankruptcy (call it “chopped liver,” he says, if it makes them feel better). The Washington Post editors concur: “The outright collapse of General Motors and Chrysler might be one more shock than the fragile U.S. economy can absorb at the moment. But we can think of something even worse: propping them up through an endless series of government bailouts, with no prospect of long-term viability.”
Call it socialism or corporate welfare. It is just an awful idea. And it will open the floodgates for other ailing businesses to step forward, escape the consequences of their failure, and step permanently onto the public dole.