on an incredibly shallow level (which, of course, is the only level i blog at), i am peeved that the white collar industries of investment banking and credit markets get big billion dollar bailouts, but a hands-on blue collar industry like the making of automobiles does not.

My tongue in cheek proposal for bailing out the US auto industry:

Figure out how much you are willing to throw at bailing out the big three. Assume $100 billion.

Offer Toyota and Honda, hm.... $20 billion to reflag as US automakers. Let big three die a natural death and the new nimble US automakers will fill the void.

There's something really sad & annoying about the guys putting forth arguments like this. They're obviously smart enough to see the practical merits of a particular 'big government' action. So the only way to maintain the moral superiority of the laissez-faire position is to make every single issue a matter of ideology. Which is how so many of them have managed brush aside the financial crisis as irrelevant...results don't matter.

I guess that's a pretty good ideological survival method, but it's a shitty way of running a government.

Free market zealots are lazy thinkers. Let Calvin's invisible hand deal with it and let's get back to our Martinis. That's their take on it.

GM needs to be subjected to an intense and competent review to determine if it has a shot at viability.

At least two areas need examination: pensions/benefits and the GM Volt project. Any financial assistance should include provisions to ensure that the money is actually used to design new, desirable autos or, perhaps, something like rapid transit vehicles. That will be a tough challenge. How to clear away the management dead wood without eliminating essential knowledge about how GM functions as an organism?

Some pundit recently suggested we could use all those GM welders on infrastructure products. This shows an astounding ignorance. Welding was automated twenty years ago. Anyone with half a brain knows this. Yet these are some of the "helpful" suggestions about how to redeploy the assembly line workers. No doubt they could be trained to weld but it's not a skill they have today.

I think we'd be better served by treating GM as a puzzle without a clear solution. None of the proposed remedies seem very good. Wouldn't it be better for us to just say, "Hmmmmmmm. What are we going to do here?" Obviously we need some time to do this and I'd favor minimal cash injection to keep their operation out of bankruptcy during the investigation period. Once the bankruptcy proceeding starts the likelihood of a fibrillation is high. All the kings horses - you know.

There are options somewhere between a massive bailout and letting the company go. Obama seems like the sort of fellow who favors a reasoned approach. That is why he wants to keep GM alive long enough for an assessment and his arrival in office.

And that is what you are doing in this post. I agree with the approach. Let us sally forth, scalpels in hand. But first let us congregate a small team of experts to evaluate GM's current state.

I can't speak for the pension/benefit side of it but I'd be more than content to let the Mars Explorer team evaluate the Volt project. These unsung heroes have kept two robots designed for a ninety day mission running for five years in a most inhospitable environment. I think they might like to do something like get down and dirty with the Volt engineering team.

You know what his post reads like? It reads like it was written by a smart kid who doesn't know shit about life. Put him in a foxhole and fires bullets through the two kids sitting next to him and I bet he has a whole 'nother take on life.

Speaking of which, if there's anything wrong with the blogosphere these days it's that it has become chock-a-block with intellectuals who know a lot about what other people wrote and almost nothing about what it means to have lived a life. Everybody's smart, but nobody's wise.

Andrew Sullivan is a case in point. When he's talking about his stupid dogs or gay causes he's a humanist. Anything else, he's a conservative asshole. What's the problem with that? Well, it never seems to occur to him that if he had the same empathy for straights or working-class people or anybody who's been used and abused by corporate America he might not think that unions are filth.

But he doesn't even see his own blind spots. Because he's too smart for that.

Hilzoy: you wrote a good piece. But you're better than the author you just parsed. Take the lead, blaze a trail, and let these punk kids chew on your words. Be wise.

two points:

1. part of the cost of bailing out The Big Three is taking money away from the successful people and business of the U.S. That will reduce U.S. production. You should at least make a prima facie case that the cost of the bailout is less than the cost of letting The Big Three do the best that they can without help.

2. It's nice to intervene in the market when the people who make the market work are obviously having trouble. But can the people in the government actually propose policies and regulations that are an improvement? In most actual cases, they can not. So even when there is a theoretical case that an intervention might work (Nixon's wage and price controls), the history has shown that most actual interventions do more harm than good.

The Big Three have, in diverse ways, consistently fallen behind their competitors in the last 20 years, at least in the U.S. (reportedly, GM is doing quite well in China). Now the U.S. auto industry, and U.S. auto purchasers, will be better off without them. Not so, perhaps, Democratic politicians and their union supporters.

Offer Toyota and Honda, hm.... $20 billion to reflag as US automakers. Let big three die a natural death and the new nimble US automakers will fill the void.

Absolutely.

Otherwise, we are just rewarding failure.

They sacrificed long term health for short term profits. That's the epitaph of many American businesses who live for the quarterly earnings report and don't believe in a future outside of 18 months.

I'm sure many advisers told them the SUV market was unsustainable and could prove it beyond a shadow of a doubt. But their annual bonuses speak louder than future generations of consumers and workers.

I would hope that any taxpayer bailouts come with many strings attached.

Of course, the industry "experts" will tell us that having any sort of conditions on the bailout will limit or eliminate the beneficial effects of that bailout.

President Obama, will you sit down to talk with known economic incompetents without preconditions?

What I find curious about this whole bailout business is that when Republicans can convince themselves to do it, they do it in the worst way possible.

They scream about moral hazard till the cows come home - but from what I've seen of Paulson and the Bushies so far in all this, moral hazard is exactly what they encouraging. Money is being handed out with no strings attached. Republicans would far more see bad behaviour rewarded than see government exercising any kind of control over what the companies do with the money, or imposing any kind of punitive action.

On the one hand, their fear of governments and planned economies has some history to back it up. But on the other hand is their real fear - that forceful government intervention might actually do some good and set a precedent for more.

Which is why, if Republicans are forced to have the government step in for any kind of crisis, they'll instinctively do it in the worst way possible to thoroughly discredit it. That certainly explains the last 8 years anyway.

Whenever a business or industry is described as "too big to fail", the government should immediately move in and break it up. Nothing should allowed to reach a size where its single failure can derail a huge segment of the economy. Yes, that means the overall economy will likely appear less efficient. Cry me a river -- these periodic massive interventions prove that unregulated free markets are also wildly inefficient. At least my way would prevent anyone from deriving too much benefit or amassing too much power...

Too big to fail? Make it fail, now, before it can get more dangerous...

If the real problem with BK the big3 is that they fall into a bad chapter of the BK law, then in the discussion already scheduled in Congress why not have it be about an exception to the BK law???

Brilliant point and well stated, Hilzoy. I couldn't agree more.

If we bail out the Big Three, we must do so in a way that not only penalizes its shareholders and management but also ensures that the bailed out company is in good shape.

Fixed that for you. The choice is not just between bailout and no bailout. There are many other options besides "let them fail" and "throw money at them", including many kinds of forced reorganizations, divisions, forced sales, etc.

Those who lean libertarian (but who are honest and not naive) would make an argument against bailout that recalls a prominent anti-war argument: It might be a good idea if done right, but can I trust this government to do it right?

For me the compelling argument for helping Detroit is that the cost of doing nothing is far higher than the cost of doing something, assuming we are successful at whatever we choose to do.

I say help the big three US automakers the way we did with Chrysler -- loan guarantees and warrants. Impose strict conditions and timetables, maybe even force the unions to give up something like $0 co-pay health insurance (do you have a $0 co-pay? I don't). By the way the US treasury made $300 - $400 million on the eventual sale of the Chrysler warrants.

As part of the deal make re-tooling the auto industry a must. Call it the National Defense Auto Re-Tooling Bill. Force Detroit to contribute to our national security by building 0 emission cars so we become independent of foreign oil by 2020. Foreign oil makes up 70 percent of the oil we use. 70 percent of every dollar we spend at the pump now goes to Hugo Chavez or indirectly to al Qaeda through the Saudis.

After all, there are 41,000 miles of US highways built and maintained under the National Defense Highway System, launched at a press conference in Kansas by . . . Dwight Eisenhower, a Republican. The American Society of Civil Engineers now refers to this National Defense Highway System as one of the Seven Wonders of the United States. We should be as proud of our cars -- and the people who make them - as we are of our highways.

Then after bailing out Detroit, we move on to Amtrak -- the National Defense Rail System Act. Then how about the National Defense Higher Education Act and the . . .

Better. Demerits. Please.

I think most rational people understand the necessity of a Detroit bailout. Josh Marshall's post the other day is hard to argue with:

The auto industry -- directly and indirectly -- employs a ton of people. Even in ordinary times having that all gone down the tubes would mean a massive shock to the economy. If we can avoid having that happen now, why would we possibly let them happen in the face of what already promises to be a massive recession?

But neither Josh, Wilkinson, or Hilzoy's post gets at what rankles me and a lot of others: The CEOs and VPs of Ford and GM that have led these companies to this abyss. These leaders ignored peak oil, global warming, the rising demand for petrol in China and India, and the success of the Prius.

If we are going to bail out these companies... Fine. But these dolt-managers have not earned the right of survivorship. They are rank failures. Dumb dinosaurs. To let them stay on is to turbo-charge the anti-meritocracy and feed it high-octane steroids.

Basically put: Bailout the companies. Junkyard management.

GM, Ford and Chrysler are burning through cash so fast that a $25Billion bailout won't save them for long.

Is the idea to give them $25 Billion or to lend them cash? A gift might save them but it would keep them in business for less than 6 months at the rate they are burning cash.

However, if you are claiming that GM will have to liquidate because they can't get DIP or other financing then why doesn't the government give them the $25 billion AFTER they declare bankruptcy?

In bankruptcy, the stockholders get virtually wiped out; the bond holders are forced to take a significant haircut; and the workers have serious layoffs and pay cuts.

GM and the others can't survive unless they drastically change the way they do business. They haven't really changed much as the foreign transplants take more and more market share.

I don't have much hope for them but I can't see any hope at all unless there is a massive restructuring. And that can only realistically be done after declaring bankruptcy.

The "Free Market" presupposes perfect information, which doesn't exist. You might say that regulation could help provide perfect information by requiring producers follow a set of guidelines and perform certain tests on their products to assure themselves and their customers that everything is as it seems.

The "Free Market" assumes that a transaction is between two parties. But if I sell a car with faulty brakes which increases the chance that the buyer will rear-end a third party, have all costs been accounted for? No.

A "Free Market" assumes that known effects from using a product are acceptable to those not using the product. We have second hand smoke, all kinds of pollution, fireworks, First World energy use, pesticides, strip mining.

I don't mind the libertarian view that we should be free to do what we want, but that freedom, in my opinion is tightly circumscribed.

Some think it is okay to run huge deficits just because higher taxes are not good. Unfortunately, someone will eventually pay this deficit, probably our children. And as they pay, they get nothing in return. This is the core issue with an actual "Free Market". It means more than "both parties are happy with the transaction" but that "all parties are happy" with the transaction.

Without this a "Free Market" is just rape, plunder and theft with a little slight of hand.

fair warning, this is a brief rant on an aside in the column that isn't really even the main point. you really can't see any reason to re-regulate the airlines? after all of the failures and consolidations and changes the sum total of which have led to claustrophobic seating, rotten scheduling, and a hundred other small indignities you can't see any reason that deregulation was a terrible idea? i'm guessing you probably never knew what it was like to fly before deregulation.

The "Free Market" presupposes perfect information, which doesn't exist.

Yes, and many Free Market Fundamentalists also believe in the corrective power of "enlightened self-interest," which is somewhere between yetis and unicorns where human beings are concerned.

I agree with the libertarian sentiment that you "can't legislate common sense." But, you can set ground rules that minimize the damage caused by idiots and lunatics.

And then of course, there are those who are both crazy and stupid.

The way we've promoted and mythologized the concept of economic "growth" needs to be challenged in a big way.

I don't see how the U.S. economy grows without more consumer demand and we are already at a negative savings rate. One might argue that we'll provides goods and services to the new hyper-consumerist kids in China and India, but we aren't exactly cheap labor, and their average consumer isn't exactly rich.

Maybe we could create jobs by declaring war on everyone. We'll need lots of scientists, engineers, sales people, support staff and fighters to keep the war machine going.

Hmmm. Maybe I'm on to something here.

Neil,
The problem with the bankruptcy route is the type of product the Big Three sell. When many of the airlines went bankrupt and reorganized, they did so because it would be clear that the declaration of bankruptcy would not impact sales. The cost of the tickets wasn't that high, people usually buy tickets months ahead of time, and these were one trip purchases. When people buy cars they are large purchases, often financed, requiring warranty support for quite a while. Who would take the chance that any of those carmakers would not emerge out of bankruptcy? Would you? I certainly wouldn't. If they can't count on a stream of sales equivalent to those prior to entering the bankruptcy, it guarantees they will not emerge from it.

GM needs 400 billion - and won't get it from the market, because their products suck.

GM hasn't made money off any of their models for the last seven years. That's right: selling a car has cost more than what they've been paid for it. That's how much their products suck.

They have been cost cutting the hell out of cars; building irrelevant vehicles; fucking up DC with their lobbyists, resisting the CAFE standard; taking out ads ridiculing Toyota's Prius effort; Ah, I could go on.

That company's management is vile. Pure, putrid shit. That brand deserves to die.

Break it up into sub-units, comprising a few of the brands. Reboot.

BUT - recognize that you would be awarding total failure, and that you are being played when people state that "millions" would be unemployed if GM fails.
GM management would already have moved every single job abroad if they'd been allowed to.

It would be callous were I to react to the Chinese melamine contamination by saying: we can't have government inspections of milk producers; that's government interference, and as the experience of Stalinist Russia shows us, government interference is always counterproductive. If I take those dead kids seriously, I ought to ask myself: is it really obvious that just having people test milk for melamine will lead to the institution of gulags, the killing of kulaks, and so forth?

The problem is that there are many people in blog- and comment-land who will make this kind of argument, out of Randite dogmatism, psychopathic delight in the suffering of others, or the childish common or garden troll's delight in saying something that will upset normal people and make them angry, disrupting the thread.

Of course, I doubt that any of them would willingly ingest a nutritious (see the sellers' claims for the nitrogen count!) melamine malted milkshake on the spot.

I want to wait and see if the big three are able to take advantage of the 25B in low interest loans Bush made available to the auto industry. They should be able to get these loans in mid 2009.

As for regulation Wall Street definitely needs regulation, just look at the bait and switch Paulson recently pulled with the bailout money he got. Just cant trust greed.

As usual, thank you for a very thoughtful post, Hilzoy. I don't really know enough to say whether I support a bailout or not, but, hey, I have an opinion, too.

First, we are talking about 3 different companies with 3 different sets of circumstances. I really see no hope for Chrysler surviving. GM has made some changes in the past 2 years or so which might again make it healthy if it can get past the current cash flow problem. Ford might be able to make it without help, except its stock price seems very artificially low, thus shooting down its chances for financing.

Second, last year, they renegotiated with the UAW to relieve themselves of a great deal of pension & medical coverage expenses, with hefty up-front costs that are coming at exactly the wrong time. Perhaps the UAW needs to give a little more (or not) to achieve closer parity with wages & benefits at the foreign owned factories. Seems like it makes more sense for the workers to take a 10 to 20% or so cut in pay & benefits than to close the plants & lose everything they own & eventually end up working for less than half what they make now.

Third, bankruptcy in any form is not an option except to liquidate the companies. After all, would you buy a car from a company that is in the bankruptcy process? Neither will anyone else.

Fourth, Sixty years ago, the US was the leading manufacturing nation in the world. Today, the auto industry is the last major industry left. I can't see how letting it go under will help the country in any way. At the very least, it would destroy what little prosperity Michigan, Indiana, & Ohio still have.

$25B has been appropriated by Congress already; Bush needs to release the money to the companies. Beyond that, I would hope that the Obama administration will take a long, hard look at them & decide what to do next. And do it.

The funny thing is, in the presence of perfect information, central planning is in fact provably better at allocating resources than a "free" market. You move directly to the desired state without all that need for feedback. The free-marketers' initial insight was that centrally-planned states not only couldn't get perfect information, but that because of the authoritarianism that tended to go along with central planning their information sucked so badly that it was worse than what you got with the chaotic signals of prices and purchase volumes in an unplanned economy.

But to step from that to claiming that a "free" market has anything like perfect information is just religion.

The degree of playing with the "millions of jobs could be lost" thing is even bigger than most people claim -- If restructuring is going to produce a GM that builds the number of cars that people seem to want to buy from them at prices that make a profit and at externalities that the rest of us can afford, millions of jobs are going to be lost anyway. The questions are about how to manage that process and how to make jobs (maybe at a GM successor, maybe not) to replace the ones that will be lost.

The logic behind the bailout is simple: GM is too big to ignore and therefore should be tended like a precious relative.

In the movie Bladerunner, Roy asks Priss what will happen if the replicants fail to defeat the bioengineering that will shorten their lives: Priss says, 'then we're stupid, and we'll die.'

The problem here is that we've allowed GM to get so fucking big in the first place. And so now we pay the price.

Chapter 11 answers all the points I've seen so far.

The right wing economists are Capitalist Utopians, convinced that if the right theories are rigidly implemented, only good things will result.

But the Detroit Bailout is really about unions. One, the GOP right wing wants the UAW to be put out of business as a precondition for any help to the auto industry. For the same reason that they want to reform education by busting the teacher unions. Because those unions represent a real obstacle to their political power.

Two, they want to prove a point: that to unionize an industry is to guarantee its failure. They want every American worker to know that this system cannot offer working people good jobs, good wages, good benefits and a middle class lifestyle without bringing about failure. They seek the death of hope.

This is not a pragmatic question to them; it is ideological -- it is not about zombie industries or sending good money after bad -- it is proving that unions can't, won't and shouldn't work for the benefit of working people.

It is more important than the card-check-off.

Dear Hilzoy:

Your dense, halting, and overblown prose style obscure what it is you are trying to say. I think I understand your point, but the rambling route thereto was stultifying.

Xananar, you're interpreting the perception of their reality. That is the reality proposed by people like 'marketeer'. Here's my reality. they are crooks. it's actually quite simple; They don't give a shit about moral hazard. Wanna know the roots of the republican party? it's the medicine and minstrel show circuit and the traveling preacher/huckster.

They fear regulation and intervention not because of ideology but because it prevents them from robbing and looting everyone blind. They want to sell magic elixir's and if people question them they are questioning free speech, if government is trying to regulate it's because the government is run by socialists who want to take your money and give it to poor blacks and hispanics.

Ponzi scheme/creepshow no more non less.

Of the Big 3, I think that the only one worthy of a bailout is GM. Over the last few years GM has invested a huge amount of money in Hybrid technologies -- the "mild" hybrid, the "two mode hybrid", which they are currently deploying on their large trucks and which provides a more than 50% increase in city mileage, and the soon to be available Volt project which is a truly revolutionary technology which will prove to be a key to our fight against global warming and our attempts to become energy independent.

Yes, GM was late to the party, but they have made an honest effort at developing the technologies which will be necessary to move forward and become competitive again. Ford and Chyrsler have made no efforts in this direction, I'm not sure that we should provide any financing to them. They are the bad actors in the American automobile industry.

Which is the point of them also trying to get Obama to cave to the unions. He won't by the way. Did anyone catch Bush' speech the other day about free markets. It was embarassing and idiotic the entire world is laughing at Republican ideology and they are doubling down on it on all fronts. Whoever made th point that it's about busting the unions to snip the strings of power and the democratic coalition is right on. The thing is that it's such and obvious play and Obama has probably seen it from miles away. It's just a wedge and has absolutely NOTHING to do with governing and everything to do with winning the next election.

Republican leadership is so fucking sad. Alot of people have bought their idiotic market religion bullshit though.

Hooray, PHANTOM!

Aren't battery powered vehicles just as "green" as any run of the mill 30mpg car? The energy to extract the resources is roughly equal if I'm not mistaken.

My understading is that the Prius is essentially a lifestyle car when the numbers are crunched and if you wanted to be "green" you'd by a used car with a strong track record (toyota camry/volvos/mercedes etc) that got decent gas mileage and keep it on the road for as long as possible.

My guess is that the Volt, like the Prius is a marketing choice and in the end just one big toxic pile of metal ready to be used and then dumped on some third world country.

The calculations which show that the Prius is a "lifestyle" car do not count the extenalities. If there were reasonable carbon taxes on gasoline the Prius would no longer be considered a lifestyle car, it would represent a reasonable deployment of economic resources. The problem is that our current economic model and thinking about the price of externalities is not accounted for in the equation of consumer value. Currently buying a Prius, or any other hybrid vechicle, does not make economic sense. Buying a car, such as the Honda Fit, Toyota Yaris or Nissan Versa makes more sense economicaly because there is no pricing of the CO2 emissions, when this is taken into account -- as it soon must be -- a Prius will make a lot more sense.

As far as thinking that dead cars are dumped on the third world, you are sadly mistaken. Once a car ends up in a junkyard parts are sold off of them and reused to fix existing vehicles. After a car no longer has value for scrap parts vitually every part of the vehicle is recycled. The Lithium ion batteries can be recycled and the steel which makes up the majority of the car is recycled. Did you know that steel is the most recycled material in the world? So far from being dumped in the third world, dead cars end up in your next car. Strawmen make for bad targets.

Grinning Cat,

"Aren't battery powered vehicles just as "green" as any run of the mill 30mpg car?"

The internal combustion engine has an efficiency of 18-20%, and loses a lot of energy in terms of heat. It's technology that is over a century old, albeit improved upon quite a bit since then.

We can do better, much better, and electric motors for automobiles is a start. Isolating the efficiency concerns at the generation and distribution stages allows us to roll out widespread efficiencies as they become available, without needing to force customers to buy new automobiles. The same is true for battery technology, which can usually be retrofitted to existing designs without impacting the powertrain. For example, some of the electric cars available today allow you to choose between lead-acid and nickel metal hydride batteries (I'm not sure if anyone is actually selling lithium-ion batteries for cars yet).

To me this is the main reason why electric vehicles are preferable:

EVs can get their energy from many more types of sources, which will better fit the future where specific energy sources may not be plentiful enough to cover all of our needs, by themselves.

Your dense, halting, and overblown prose style obscure what it is you are trying to say . . .

Yes, it certainly do. You has a point there.

U.S. Treachery Secretary Henry Paulson won't help out Detroit and U.S. automakers for one reason only: Labor Unions.

In Paulson's "Goldman Sachs" frame of mind, giving billions of taxpayer dollars to Wall Street firms and banks is ideologically acceptable because at these financial institutions the only workers possibly connected to labor unions are members of the overnight cleaning crews.

In Detroit, on the other hand, the United Auto Workers and other labor unions have a major presence, successfully representing working Americans in Detroit's boardrooms for many years.

Plus, one can't discount the possibility of "race" being behind U.S. Treachery Secretary Paulson's decision to stiff Detroit, with far more blacks being members of labor unions in Detroit as compared to the dearth of blacks being in middle- to top-level positions at Wall Street firms/banks.

I guess what I'm trying to say is that U.S. Treachery Secretary Henry Paulson is a typical Republican, which is why he was chosen by other typical Republicans like Bush and Cheney to be their U.S. Treachery Secretary...which means we are still in the Herbert Hoover phase of this world-wide financial crisis with the financial situation for millions of U.S. citizens bound to get much, much worse...with things turning around only when U.S. Treachery Secretary Henry Paulson is gone (no doubt back to a corporate boardroom somewhere) and replaced by someone who cares about America and American workers for a change.

Some people have touched on this but let's make it clear.

There are no such things as free markets any more than free society. Both need conventions, understandings, and, yes, laws and oversight to function.

The US is seeing the culmination of 28 years of weakening laws, conventions and oversight in the markets, financial and other, where, particularly, loose credit and huksterism has eventually brought down the house of cards built on the back of freemarket ideology.

One can say much the same for US society except that the gradual erosion and decay accumulated isn't being monitored.

As to the auto industry, 50 years ago the big 3 plus AMC was just about it except for some imported sports cars. Now there are a number of sizable foreign owned manufacturers here. Last year there were 16 million vehicles sold and still overcapacity -- particularly the "Big 3". Next year they expect 12 million and that might be generous. Something has to give and the first in line is Chrysler. Let it go.

She had a chance in the 80s with Iaccoca and a Reagan bail out. Then with Daimler-Benz who realized that they could not make a silk purse and dumped it for a huge loss after years and billions of dollars of sweat. That should tell you all you need to know.

If Ford and GM require help, the taxpayer should take equity and the top management should go. They both need streamlining, reorganizing, downsizing. And union renegotiation. And that's the truth.

For those of you who find that hard to stomach, maybe you forgot the 80s -- or weren't there -- when the rust belt got reorganized. In 1984 I remember driving into Lakawanna, south of Buffalo, where a huge steel mill had closed. It was a literal ghost town. The only occupant was one person at the mill gate. Not a soul in the streets. All the houses empty. I was stunned. But it was happening all over. From Maine to Michigan to West Virginia. Pittsburg has since remade itself as a city.

The point being that a huge dislocation can be handled but it must be managed. Retraining help. Extended unemployment. Help to move. A compassionate economy. Just remember, the free-market economy seems just fine as long as it's not you and your kids being thrown on the scrap heap.

I'm just trying to figure out how deep this recession is likely to be.

This is why we should not encourage "economies of scale", and GM should be broken up into smaller companies, carefully so that all the downstream companies and industries that feed GM aren't put out of business.

Smaller is better, if only because you may allow enterprise to succeed or fail on it own terms, within the networked business environment.

It is the "fundamentals" of the free market that have brought us to the edge of the abyss upon which we now find ourselves; our profit-based enterprises, with their antiquated emphasis on the almighty dollar and its siren-call, are now the caterwauling albatross hung around our collective necks, threatening with each kick, flap, and contortion against its bindings to pull us out of balance and over the precipice into a long-overdue penance as an emerging, second-rate "mouse that roared."

The core premise of the argument, as I see it, is that both sides are presenting in their own fashion to Phoenix-like notion that something must be rendered unto ashes as a prerequisite to something new rising from those ashes. The subject selected by both sides---Detroit's "Big Three"---has invested decades in quashing innovations that, had they been embraced in a timely and reasonable manner, would have by this very moment in time released us from our addictive bonds to the internal combustion engine.

Wilkinson's article can easily be dismissed if it is viewed from an inside-the-box vantage point, but by examining its message from outside the box, one finds that his basic premise---the argument that there are different levels of economic hurt---is at the very least palpable. His argument that the domestic automakers deserve to be cut loose from their lifeline is a justifiable argument; the notion of mass suffering if something like GM collapses being less than the sufferings of keeping GM afloat are valid.

Simply put, he is comparing apples and oranges---but deep down, the comparison appears to be more about apples and peanut butter. Some of us do not have a problem with either; some of us actually enjoy the blending of the two into a culinary hybrid; some of us may even crave peanut butter while at the same time hating apples with a passion, and yet for some of us, peanut butter is a deadly toxin for which their is no known antidote.

We may hate the banks with a violent passion comparable to those who flung themselves mercilessly against each other at Gettysburg or Verdun, but we cannot legitimately break our bonds of servitude to their demigod---the dollar---until we reject in its entirety the premise of the free market system and all that it has stood for over the millenia, since the first antiquated measures of "net worth" were developed in the ancient economies of Sumer and the pre-pharaohnic days of Northeast Africa. The collapse of General Motors---the wholesale cremation of the entire automobile industry, for that matter---may be nothing more than a very painful first step in what might well be the right direction for the planet; for the United States; for you and me.

We will not, as the collective human race, break the tyrannical bonds of servitude to the Oil god until we relinquish our addiction to privatized transportation and stand to the task of establishing a fully-functional, mass-transportation network---rail-based intraurban, interurban, and cross-country. The development, construction, operation, and maintenance of which will supersede the wildest dreams of anything and everything ever envisioned by the amassed thought processes of Detroit.

But---just as the Phoenix must burn to ash before it can be reincarnated, then so too must Detroit and our hallucinogenic need for thousand-plus-pound, iron status symbols be allowed to die before the transportation industry of this Republic, and thus the economic well-being of that Republic, can be successfully reborn....

Wapiti is right as a serious solution, not just tongue in cheek.

I'm appalled and disgusted at the idea of bailing out not only the inefficient formerly-Big Three, but the antienvironmental formerly-Big Three.

As for workers, hell, I'll take Wapiti a step further. We could give every formerly-Big Three person on the assembly line $100K PLUS, say $20K for retraining and STILL come out ahead.

Beyond that, UAW leadership was right there with the Big Three on being antienvironmentalist. They made their bed...

I just had an idea. If we are buying these auto makers maybe we can make them produce cars we want? Like why isn't that 65 mpg Ford available in the U.S.? That is what I am sick of. Capitalist selling us products that aren't the best they can be. In many cases defects are built into the products. I heard a story a long time ago about when DuPont first introduced nylon stockings at a worlds fair. They gave each lady one pair. When the fair ended they noticed the they hadn't run. DuPont went back to the drawing board and made them so they run. Imagine how much money they made making a product you had to replace instead of just one that lasted for years. When you show me a sector that makes those products and I will show you a sector that doesn't need oversight. Their should be a chapter devoted to this practice in capitalism 101. Please enlighten me on the official jargon for this. What ever the technical term for this practice, it needs to be pushed front and center. These car companies are dying because they have, for decades, REFUSED to make the cars we need. Now they make a car we need and they wont sell it to us. I don't see how 25 or 105 billion is going to make that situation profitable. Do you?

As far as the lot of the little people. I would rather give them a year off with pay and force management to come up with a profitable business plan then pay a dime to the people who won't sell us the Fiesta ECOnetic.

Will said that "there is no justice and great harm, in diminishing the whole array....." I don't think he was making a case for justice. He was making a case for economic growth. Justice is hardly in need of economic growth and economic growth would be happier not discussing justice. Just ask the Chinese.

Gee, you think? Let me weigh it up. Dead kids versus melamine-enhanced profits. Well, that's a tough one. How much were those kids going to contribute to the bottom line, after all? We'll never know. So let's count them as zero, like everything else we can't estimate. What do you know, it looks like melamine is coming out ahead!

Many of the comments in this thread ignore the current, real, state of the companies involved. GM management was hailed as brilliant in late 2007, when the current UAW contract was signed, because finally they had gotten their costs in line with Toyotas, and had worked out an acceptable long term solution to the health and pension issues. Some analysts even expected GM to have a cost advantage versus Toyota.

The obvious development has been the work done towards the Volt, but GM has also brought out hybrid buses in cities around the US that have the environmental impact of putting 30-40 Priuses on the road, so there is an effort by the company to address the market demand for more fuel efficient vehicles.

The conservatives who are now arguing that the "market should be allowed to work" were decrying the "unfunded mandate" of CAFE regulation when standards were raised. They were either wrong then or now.

Finally, it needs to be recognized that different countries have different regulations. The 65 mpg car from Ford may not be legal for sale due to differences in crash standards and emissions. It's not a simple matter of choosing where to sell the vehicles. International harmonization of standards is an issue, and GM has led the beginning of that discussion, but it's a years long process.

With GE genius Nardelli in charge, Cerberus has discovered that making cars is really, really complicated. Everyone making blithe comments about this or that easy solution should keep this in mind.

One obvious solution noone talks about for companies that are too big to fail is to break them into companies that are small enough to fail.

In any real free marketplace of ideas, Will Wilkinson would be a low paid civil servant, boring his co-workers at lunch with his endless blather. Responding to him is like swatting a fly while you're mountain climbing. After all, how stupid do you need to be, to look at the endless statistics of rising productivity during the Bush years, and the imploding black hole of the actual economy, and conclude that all is for the best in the best of all possible worlds.

Building vehicles was always one leg of the GM tripod- the other two were financing new vehicle sales, and consuming the products of the DuPont chemical industries. All of this worked very well as the US government spent about $6 trillion over the past half century building freeways and ensuring the supply of cheap oil.

Along the way the auto industry, which by the mid 50s was in no way a market economy, but an oligarchy of the Big Three, discovered a wonderful thing- trade barriers could be erected in the name of safety.

Just as liberals were co-opted into the Drug Wars, perpetuating segregation for another 40 years, so they were co-opted into protectionism for Detroit Dinosaurs.

Of course, cars and trucks are hardly made in Detroit any more. Detroit has become a second New Orleans, a city Republicans are happy to consign to oblivion because so many black people live there. Again, liberals happily echo the cries of the red-coated foxhunters dashing after that villainous "Detroit". Probably not one person in ten thousand has any real idea where what is made, so let the language of a half century ago serve us- poorly, as any set of words that do not describe reality must.

As an aging "hippy", I can only reflect with amusement on how well a basic maxim of the sixties has served- "Dope will get you through times of no money better than money will get you through times of no dope". Learn how to get to work on a bicycle, learn a job people still want done when times are hard, and learn how to make pea soup- this will get you through the depression better than arguing with Will Wilkinson.

Relief for us, the autoworkers, and "Detroit", will come when we apply the same techniques to changing our energy paradigms that we did to building markets for cars. Then, it was three trillion building freeways over forty years. Soon, it must be spending trillions building renewable energy sources and transmission facilities, with all that implies.

This nation has never had a "free market" economy and it's not about to start now. The only real question is when we're going to start making our "socialism for the rich" work for the poor as well.

The purpose of the constant barrage of market fundamentalist rhetoric is not to elicit precise and careful thought, it is the opposite -- to so disparage actual rational, careful thought that it becomes politically damaging to engage in it.

And the market fundamentalists have done a pretty good job of it the last 30 years.

I keep hearing that the big auto execs are entirely to blame for their current troubles. Certainly there's plenty of blame to go around, but no American had a gun held to their head forcing them to buy a damned SUV. So let's hear less of "Gee, if they'd just built more hybrids!" - which, until 6 months ago, needed to have tax breaks to get them off the lots.

A lot of what's going on here is a Repug wet dream of getting rid of tens of thousands of union jobs all at one fell swoop while handing hundreds of billions to the corrupt bankers at the same time. And too many progressives are falling for their crap.

"Secretary of Treachery"?

Ha, LOL, that's a good one. Any recommendations for Obama to fill that post?

Back to my two points:

the money for the bailout has to come from successful businesses and taxpayers; this isn't an abstract argument about "free" versus "other" markets, or "perfect information" versus something else. Saving the jobs of the autoworkers will cost the jobs of other Americans in other industries.

Aside from the abstract question of whether the U.S. does or does not have a free market, or some degree of freedom, or whatever -- do we have any evidence that a bunch of people in government really have better ideas than the people who have (in diverse ways) mismanaged GM, Ford and Chrysler? The people with the good ideas are those in the other auto companies.

This isn't about "saving the American automobile industry", it's about saving 3 particular unsuccessful companies. The rest of the American automobile industry is healthy and productive. A government led bailout of "the big three" may simply punish them.

If it were your $25B (as some of it may be), wouldn't you want it invested in something better than 3 old companies? Is the bailout really better than, say, new lightbulb companies?

But what bothers me about what Wilkinson wrote is not exactly its callousness so much as the sense I have that he is arguing with people who do not exist.

A conservative relying on straw-man arguments?! You dont say!

he took the invocation of a piece of economic dogma as sufficient to make his case.

I stand corrected -- Wilkinson could as well be taken for libertarian as conservative.

Speaking of taking the invocation of a piece of economic dogma as sufficient to make his case, hello, "marketeer!"

Saving the jobs of the autoworkers will cost the jobs of other Americans in other industries.

Evidence for this assertion, please.

do we have any evidence that a bunch of people in government really have better ideas than the people who have (in diverse ways) mismanaged GM, Ford and Chrysler?

A bunch of people in government had the idea to increase CAFE standards. The leadership of the Big Three fought it because it'd reduce their focus on building SUVs. QED.