Commentary Magazine


Re: Bombers and the Bailout

Max, I think there is something else also at play here. Even if one assumes that it is in our interests to “do something” about the car companies, there is absolutely no indication that–absent a reworking of labor contracts, employment agreements, pension and health obligations–simply throwing more money at them will do a bit of good. As Stephen Bainbridge writes:

Letting GM avoid bankruptcy by giving it a federal bailout ought to be unthinkable, because of the very real risk that a federal bailout will come with conditions that preclude GM from fixing its core problems. It’s likely to preserve the gold plated union contracts, the excess payroll numbers, the excess plant capacity, and the excess number of dealers.

Alternatively, if taxpayers are to incur further obligations to yet another failing business, we should insist on some fairly stiff terms. The Wall Street Journal suggests that, at a minimum, the bailout proponents should

at least do so in a way that really protects taxpayers. That means handing a receiver the power to replace current management, zero out current shareholders, and especially to rewrite labor and other contracts. Anything less is merely a payoff to Michigan politicians and their union allies.

Aside from all this, there is the (very legitimate) concern about the creep of government intervention into each and every sector of the economy. There really is no rationale, after we depart from the financial sector, for picking and choosing among the pleaders. They might as well all line up.

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