The U.S. has always distinguished itself relative to its major trading partners by having a higher faith in free markets and a greater respect for the limits of big government. Sure, the U.S. passed a stimulus package now and then, but it also let failure run its course and refused to resort to excessive big-government intrusions into the private sector.WSJ's Michael E. Levine
The risk is that we will forget this lesson. First we bailed out the financial companies; now President-elect Barack Obama is asking for $50 billion to bail out the auto companies, an effort backed by Treasury Secretary Henry Paulson. Next we will see a tax credit for people who buy General Motors Corp. cars at stores of bankrupt retailer Circuit City, provided they use the car to go to a Detroit Lions game.
A look at economic history suggests that the crazy policy intrusions have to stop. Failure can be a good thing, and recessions force economic stragglers to make tough decisions. Those tough decisions set the stage for the recovery.
Federal law provides a way out of the web: reorganization under Chapter 11 of the bankruptcy code. If GM were told that no assistance would be available without a bankruptcy filing, all options would be put on the table. The web could be cut wherever it needed to be. State protection for dealers would disappear. Labor contracts could be renegotiated. Pension plans could be terminated, with existing pensions turned over to the Pension Benefit Guaranty Corp. (PBGC). Health benefits could be renegotiated. Mortgaged assets could be abandoned, so plants could be closed without being supported as idle hindrances on GM's viability. GM could be rebuilt as a company that had a chance to make vehicles people want and support itself on revenue. It wouldn't be easy but, unlike trying to bail out GM as it is, it wouldn't be impossible.
USA Today's Ken Dilanian
Even among Democrats, there has been a lack of full-throated support. Democratic Sen. Claire McCaskill of Missouri, home to three American-owned auto plants, said in a statement Friday, "We are going to have to do more to protect tax dollars for me to vote for this."
NYT's Louis Uchitelle
But many industry experts say the big foreign makers are established enough to take control of the industry and its vast supplier network more quickly than is widely understood.
“You would have an auto industry in the United States more like that of Mexico and Canada: foreign-owned,” said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich., which describes itself as a nonprofit organization that has “strong relationships with industry, government agencies, universities, research institutes, labor organizations” and other groups with an interest in the auto business.
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