Obama looked pretty good on 60 Minutes Sunday evening. He looked like he had everything under control in his "no drama Obama" way.
But the world has changed again. With Citibank's layoff of 53,000 employees and the Republicans in Congress still fighting against the bailout, one wonders what unemployment will look like before this is "over," whatever that means.
I've been debating with myself for weeks over whether we ought to bail out the auto industry. I made a little pro-con list for myself today.
On one hand, the auto industry is a huge industry, symbolic of American engineering and technical leadership. American cars are part of everyone's gay mad youth (unless they are young today). On the other hand, the industry has been staggering and contracting under the weight of both its own profligacy and global competition for years.
On one hand, Detroit has a supply chain of about 3 million total jobs. On the other hand, not every job is lost in bankruptcy and those suppliers can continue to supply Honda, Toyota, and the others who are competing successfully.
On one hand, all these workers will go on welfare and public assistance, further taxing our entitlement programs. On the other hand, a bailout is just an entitlement program distributed differently.
On one hand, we can attach strings to the bailout that will force the companies to do business differently. On the other hand, the President of GM has already indicated he won't resign for a bailout and the current POTUS has already said he'd give them $25B with no strings to keep them in business.
You see where this is heading. I am heading to a conclusion that we ought to let these companies go bankrupt, and throw our energy into restructuring them forcibly while shielding them from creditors so they can continue to operate, which always happens in a Chapter 11 filing. They will get DIP (debtor-in-possession) filing, won't they? The board can then throw out the CEO if he isn't doing the job, can't it? And the company will come out stronger.
Look at Continental Airlines. It went bankrupt and came out much better for it. So have many other, less notable examples.
If we let them go bankrupt ( they might not all have to seek Chapter 11, but if you give out bailout money, you can be sure they will all ask for it, and their suppliers, too), jobs will be lost, but those jobs will be lost no matter what. Many of those jobs are "faux," created by unions and by bloat, the way big companies always grow when they have the money to do it.
I find all this hard to square with my social safety net predilections. But I've been watching layoffs in Arizona for two years now, and layoffs in Silicon Valley, and now in New York. We've seen Wall Street completely collapse and restructure.
Why should the auto industry be immune?
Update: After I wrote this, I was led by Paul Kedrosky to this video posted by GMblogs about the consequences of a bankruptcy.
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