...is a disaster for everyone else.
The end result is that G.M. will not become more like successful car companies. It will become less like them. The federal merger will not accelerate the company’s viability. It will impede it. We’ve seen this before, albeit in different context: An overconfident government throws itself into a dysfunctional culture it doesn’t really understand. The result is quagmire. The costs escalate. There is no exit strategy.
So the Obama administration is, in effect, paying $60bn to buy off both constituencies. It is telling the first group that jobs and communities dependent on GM will be better preserved because of the bail-out, and the second that taxpayers and creditors will be rewarded by it. But it is not telling anyone the complete truth: GM will disappear, eventually. The bail-out is designed to give the economy time to reduce the social costs of the blow.
When two such disparate economists come to similar conclusions, one must pay attention. My comments are 1) Sure the $60 billion is a boondoggle-- a bipartisan boondoggle started by the previous administration, 2) Even with the extreme waste, this will provide a huge Keynesian stimulus with immediate results*, 3) $60 billion is the same as 4 months in Iraq, and we haven't heard much ado about that lately.
*but why not just give $1,000,000 to each auto worker instead?
And now, for the lighter side:
