THE TIM

What Would Happen …

jeffmiller:

What would happen if we don’t bailout the auto industry? Would we stop making cars in America? Would three million jobs disappear?

If we choose not to bailout the auto industry, I would expect one of these two things will likely happen:

1. The auto companies declare bankruptcy, just like a ton of other companies have. During the bankruptcy, they renegotiate their obligations, which lowers their operating costs. They emerge from bankruptcy with less overhead and a chance at making a profit. They keep making cars.

2. The auto companies declare bankruptcy. Their assets are sold. Other companies buy up their factories and contracts. A new American auto industry emerges.

Both of these possibilities seem far more promising than a taxpayer bailout. So why is Washington planning to help the automakers? Mainly because Washington (in this particular case, mostly the Democratic Party) doesn’t want the automakers to renegotiate the pension and healthcare agreements they’ve made with the unions.

So basically, we’re going to bailout the automakers so they can use the money to pay off the unions.

Look … I don’t think it’s a good thing that the automakers have to renegotiate their pension and health care obligations. I think it’s quite awful, for all involved. But by socializing the automakers obligations, we’re requiring all taxpayers to take over these obligations, while doing nothing to give the automakers the clean break they need to be competitive in auto industry. It would be nice if we (the taxpayers) could swoop in and pay employees what they are owed every time their employers’ businesses fail, but we can’t. And I can’t see any principled reason why an autoworker is more important to this country than a waiter or a teacher or a real estate agent or a salesman at Circuit City.