The Driver’s Seat

The government’s continuing decision to pour money into GM is looking more and more like a horrible disaster for taxpayers and consumers. Billions of dollars are being poured into an uncompetitive entity that is unable to build cars that people want to buy at prices that people want to pay. As this article points out, the terms of the bailout deal leave the United Auto Workers in the driver’s seat, with a labor agreement that does not require any reductions in base pay, pension benefits, or health care for active workers — and, not incidentally, an agreement that must be renegotiated on the eve of the next presidential election, when demagoguery about the need to avoid job losses will have maximum impact. It is absurd that workers in a bankrupt commercial entity get to keep their jobs, at taxpayer expense, at the same pay levels and benefit levels that helped to drive the company into bankruptcy in the first place. (Let’s hope, incidentally, that the Administration drives a harder bargain in its negotiations with other countries, like North Korea and Iran, than it did with the UAW.)

I don’t know whether, as some are predicting, the federal government will now try to dictate what kinds of cars the “New GM” builds. I’m not sure, frankly, that even a bunch of bureaucrats could do a worse job on that score than the corporate oficers who managed to run GM into the ground. What I do know is that the federal government cannot continue to bail out every failing enterprise in the name of saving jobs. Eventually our federal debt will become too great, and foreign investors will stop buying American debt instruments or will insist on ruinously high interest rates. If that were to happen it would be an economic disaster beyond anything our country has experienced. Weathering the economic dislocation and job losses that would be caused by just letting GM fail are a small price to pay to avoid that eventuality.

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