The BlogPoliticsEnergyuaw

The Peculiar Politics of Bailing Out Detroit

The management of GM doesn't deserve to be bailed out, and it's not clear to me that a bailout would work -- certainly not as long as the company continues its "change as slowly as possible" pace.
By 

Principal Advisor at Inside Straight Strategies

Principal Advisor at Inside Straight Strategies
This post was published on the now-closed HuffPost Contributor platform. Contributors control their own work and posted freely to our site. If you need to flag this entry as abusive, send us an email.

DETROIT -- As of this morning, it appears that the Bush administration and Republicans in Congress are perfectly prepared to let General Motors go into bankruptcy, and that President-elect Obama and the Democrats in Congress are trying to simultaneously reform and rescue GM. Since the auto industry has been, after Big Oil, the most faithful business handmaiden of the Republican Party, you might find this a mite peculiar. And since House Speaker Nancy Pelosi comes from the metropolitan area with probably the lowest percentage of Detroit-made vehicles of any in the country, it seems stranger still.

Let's be clear: The management of GM doesn't deserve to be bailed out, and it's not clear to me that a bailout would work -- certainly not as long as the company continues its "change as slowly as possible" pace. Tom Friedman put it caustically last week when he mocked the idea that a corporation should require federal assistance to "innovate":

I could not help but shout back at the TV screen: "We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?" If we give you another $25 billion, will you also do accounting?

But let's be clear about something else: GM's stock value last week was down to $1.5 billion not because it doesn't have factories and business relationships worth vastly more than that on the open market. It's because it also carries very large pension and healthcare obligations that, should the company go bankrupt, would actually fall on the rest of us.
So the choice facing the federal government is not whether to spend billions on a bailout. It's whether to bail out the company now, in the hope of rescuing it, or to bail out the medical, pension, and unemployment costs of GM retirees, workers, and suppliers after a bankruptcy.
And the media are back to their old tricks. You could read dozens of mainstream media articles quoting Republican Senators such as Richard Shelby on the evils of subsidizing GM without ever once being reminded that Shelby and many of the other Republicans ganging up against a bailout come from states that don't have GM, Ford, or Chrysler plants but do have German or Japanese transplants that would benefit greatly if GM went under.
A major goal of the Bush administration in pushing GM into bankruptcy is to get at the union contracts that provide middle-class wages in states like Michigan, Wisconsin, and Delaware. Breaking these contracts in a bankruptcy court, the Right reasons, would be another blow at the idea that workers ought to have living standards similar to those of managers -- what Barack Obama infamously called "spreading the wealth." GOP blogs make it clear that this is all about the United Auto Workers -- and who cares what it does to our economy.
But you'd never know that from the media.

Read More:

Should the Government Bail Out the Big U.S. Three Automakers? HuffPost Bloggers Weigh In

|
Submit a tip

Popular in the Community

Close

What's Hot