Just Say No to GM, and Yes to Detroit

But there's one aspect of business in which the domestic auto makers still excel, which is scaring politicians with the dire consequences of failing to help them out. After years of buying out union members, GM, Ford and Chrysler still employ 240,000 workers in the U.S., every one of them a potential addition to the unemployment rolls swelling alarmingly without their help.

So let's offer the workers deals similar to those eagerly embraced by their colleagues in recent years: for $25 billion, we could give each and every one a $100,000 buyout. This would ensure that the bailout went to people with families to feed, rather than Chrysler owner Cerberus and the hedge funds hoping to make a killing on GM's bonds after buying them at big discounts to face value.

This is not the scenario the industry favors of course -- at least if the industry is defined as the people who've nearly run it into the ground. If Rick Wagoner had made the difficult choice to drastically downsize in 2001, instead of postponing the inevitable with unsustainable discounts, maybe we wouldn't be at this pass now. To give him money so that he can fire all the Chrysler workers and then undercut federally-funded Ford is madness. Better to auction every last big three plant to Nissan, Toyota and Renault, pay generous severance to workers and then cushion the regional shock with small business programs and block grants. We could fix up Detroit, Lansing and Flint. We could improve local schools. These are essential to future economic growth. Helping GM pay off private creditors who should have known better is not just a waste but is likely to prove counterproductive in the long run. We obviously have too many recent-vintage cars and much too much auto making capacity for our current reduced circumstances. We don't need to stimulate continued overproduction and then start handing out tax incentives to clear the lots as Detroit is now requesting. This is exactly the sort of shortsighted thinking that got them in trouble.

Supporters of the subsidies are well-equipped with statistics purporting to prove that the ripple effects of a Big Three bankruptcy would spread wide. But recessions are like that, and every job lost, every asset depreciated has a multiplier. Detroit's defenders are not evaluating the relative economic merits of the aid for GM versus aid for Citigroup or, say, the New York Yankees (who have yet to find buyers for seven luxury boxes at their new digs.) The argument for helping GM stay in business seems to boil down to size, and the jobs lost. So let's help the workers and the region, while making sure that unproductive companies are never again seen as too big to go bust.

As for talk among Democrats -- including the speaker of the House and President-elect -- that the cash would go toward green investments, that's wishful thinking. The green that matters is now needed to make payroll and finance auto loans rather than for fripperies like R&D -- witness GM's reported decision to suspend design work on new models. If there's an economic case for greater fuel efficiency the market will make it -- just look at the Prius. But there's no rational case for bailing out Rick Wagoner and his bondholders. What's good for GM is no longer good for the country.