Let the Big Three Die

All of the consequences of GMs failure that proponents of a bailout use to argue support the bailout idea are true. If GM fails, people are out of jobs, good companies that have done nothing worse than offer services to GM will suddenly be saddled with bad receivables and the prospect of not making payrolls, and the state of Michigan will plummet in despair. 

But those arguments do not justify a bailout. Ford, GM, and Chrysler are poorly run companies with bad products. They have not continued to operate over the last 20 years by innovating and meeting consumer demand; they have remained in business by chaining the state of Michigan to their well-buying and spending money lobbying the US government for regulations that favor the folly of their product offerings.

Few industries have the luxury of seeing a trend coming for 30 years. The auto industry has had that luxury. We have all known that the price of gas would eventually go through the roof (and it will again). Japan, Germany, and the other auto-making countries recognized this and have a number of different products on the road today to match that need.

But not Detroit. 

In the past election, we had a number of silly discussions about "socialism" and "capitalism"—as if a 4% difference in tax rates on the highest 5% of income earners was somehow that dividing line. Bailing out the Big Three, however, is actual socialism. The worst of socialism. It says that employing people is more important than the value they add to our society. It also ignores what we know is a failure of socialism: if you save a job today that should not be saved, you will have to save it again tomorrow, and the next day, and the next day. And they will become less and less worthy of having a job as time goes on.

So, the bailout people have clearly illustrated a short-term impact. It's devastating and real.

Here's the long term outlook:

GM fails and sells off its assets, probably to a foreign car marker or a silicon valley company. Ford fails and sells off its assets. Chrysler sneaks by. Michigan goes into a severe depression and hordes of people leave Michigan for good. The auto-makers no longer control Michigan politicians and, amazingly enough, Michigan finally diversifies its economy. It learns how to survive without the auto-makers and eventually starts to see a prosperity that is actually earned prosperity. Detroit is no longer the cesspool of the nation.

On the other hand, if the Big Three are bailed out, we will save some jobs (there will still be a lot of layoffs), executives will get their golden parachutes, and we will be back in this position again in the future. You know why? Because these are bad companies. They must fail.

And if they truly are too big to fail, they must be broken up.