Not A Dime More Than $2 Billion

This smartly sums up the economics and the politics of the car bailout:

I’ve been warning for some time that the key to both a successful bailout bill and the post-2010 viability of Detroit was getting its total per-vehicle labor costs (current wages and benefits plus retiree costs) into line with their US-based foreign competition. Anything less would merely be a slower death and horrible waste of money. Apparently it was the UAW’s refusal to go along with that cost cut, not inter-party bickering, that killed a deal that was tantalizingly close in the Senate last night. I fault the Administration for not being adamant enough on this specific issue from the beginning, and Democrats for leaving Senate Republicans (who had a very good alternative measure) out of the discussions until very recently.

The Bush administration is apparently trying to free the UAW from making the very sacrifice needed to get GM on the road to recovery. (Ford is declining funds at this point, and the betting is that Chrysler, really Cerberus, isn’t going to get much, if anything.)

President Bush’s actions in all this remain a mystery. Did he and his advisors badly miscalculate the Senate Republicans’ ability to scuttle the deal? Perhaps if they included them in the negotiating process, they would have figured that out. (Are you taking notes, President-elect Obama?) And on the “merits” (which aren’t quite the merits), President Bush seems to think that dooming GM to Chapter 11 (rather than beginning a process of funneling tens of billions to GM before it then goes bankrupt) will make his legacy worse than it would otherwise be. There was another option of course. But, unfortunately, by sparing GM the Corker “tough love” option President Bush is likely dooming GM to failure anyway — and historians surely will remember who missed the window of opportunity to apply needed pressure to the UAW.

If President Bush is incapable of holding the line and doling out the tough medicine, he should at least be circumspect with the taxpayers’ dollars. Inauguration Day is slightly more than a month away. We were told GM burns through $2B a month. It seems that should be the absolute limit of any funds given before President Obama must deal with his UAW friends. If President Bush can’t do the right thing, at least do the bare minimum amount of harm.