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Tuesday, December 16th, 2008

Here are some worthwhile sources to consider on the GM/Chrysler bailout:

Joseph Stiglitz endorses Chapter 11 over an auto industry bailout (via Mankiw).

Todd Zywicki takes the same position, arguing the industry is merely “financially failed”.

Richard Posner comes out for at least a temporary reprieve, acknowledging that

The realistic goal of an auto-industry bailout is not to reform, revitalize, or restructure the domestic industry; it is merely to postpone its bankruptcy for a year or two, until the end of the depression is at least in sight and consumer confidence is restored to the point at which the bankruptcy of the domestic manufacturers can be taken in stride.

Gary Becker responds that a recession is a relatively good time to make the required adjustments to supply that will enable the industry to again become competitive.

Mickey Kaus has several posts, with the key one arguing that the problem is the very nature of Wagner Act unionism (i.e. work rules), even more than wages and benefits, that hobble the industry and doom a bailout.

Michael Barone adds some historical perspective to Kaus’ position, describing how the work rules were a response to early 20th century industrial efficiency theories and a GM that, just before the industry was transformed in the 70’s (by gas prices, environmental regulation and foreign competition), feared most of all a federal antitrust action to break it up.

Which brings to mind one of the Ronald Reagan’s classic jokes. The government’s view of the economy can be summed up in a few short phrases:

  • If it moves, tax it.
  • If it keeps moving, regulate it.
  • And if it stops moving, subsidize it.

Kaus: PATCO in reverse

Wednesday, December 10th, 2008

Mickey Kaus nails it.

Requiring painful, bankruptcy-style reopening [of UAW contracts]¬†would set a cautionary precedent. Just as Rick Wagoner’s removal will warn timid management, it would warn unions that their function isn’t to squeeze the absolute maximum possible from their companies every moment. They need to leave enough of a margin of error so that in a downturn their industry doesn’t have to come running to the taxpayers.¬†

But of course that’s not what Pelosi and Reid are trying to achieve, is it?