Govenment Bailouts of American Automakers, Financial Firms: Feels Good, But - - -

On the economic scale, sole proprietorships like mine are pretty close to being at the opposite end from outfits like AIG and GM. And, I'm okay with that. Not all businesses can be huge, cripplingly inefficient bureaucracies, desperately seeking federal bailouts.

Watching a panel discussion this morning, I heard something that may be a key to understanding what's gone wrong with Wall Street and automobile industry leaders of the 1950s.

One of the panelists expressed concern that, should GM declare bankruptcy and re-organize, it wouldn't be the same company. He apparently believed that GM not being just the same as it was last year, and the year before that, would be a bad thing.

It was all those people who might be out of a job that concerned him, he said.

Compassion is Nice: So is Common Sense

I don't like to think about people losing their jobs, but I don't see too many alternatives. This is an over-simplification, but I think that, given what's happening, GM will:

1. Declare Bankruptcy and reorganize
   • Some people will lose their jobs
2. Receive federal bailouts until increased taxes and cuts in programs we really need end the gravy train
   • A lot of people will lose their jobs
3. Receive an inheritance from a rich uncle in Australia
   • Which will save the day

I don't think we can count on option #3. At all.

Option #2 doesn't look too appealing. By the time the feds finish draining everyone else to keep the likes of GM going, I fear that quite a number of companies that aren't big and important enough to get Washington's attention, but are taxed just the same, will have gone out of business. That'll mean that the out-of-work auto workers will have lots of company: but that'll be small consolation.

Option #1 isn't all that appealing in the short run, but it may be the least-bad alternative.

The sad fact is that the Big Three automakers haven't been doing all that well. Keeping them just the way they are may be the nostalgic thing to do, but I don't think it's good sense.

Related posts:

• "Bank Bailouts, Bloated Bonuses, and Common Sense"
  (December 21, 2008)
• "So Big Three Collapse: Is That a Problem?"
  (December 12, 2008)