Tuesday, November 18, 2008

The Case For GM Bankruptcy

Robert Tracinski has made an analysis very similar to the one I did of why the Democrats are pushing so hard for a Detroit bailout. Not so much to save GM, but rather to save the UAW and to seize control over operations and use this to make Detroit environmentalist. He further suggests that if the government takes control, GM should be renamed Trabant, after the extremely low quality East German car. Considering how low quality these green cars mandated by Obama and Pelosi are likely to be, Trabant will be a very appropriate name.

Meanwhile, Martin Feldstein argues the case for why chapter 11 bankruptcy is the solution to GM's problems because it will enable them to do away with the excessive wage and benefit levels in current union contracts. He further adds that any bailout should be coupled with demands for radical reductions in labor costs. But since one of the major points for the Democrats is to avoid that, they will be very reluctant to agree to that. They will likely only agree to that if they fail to lure over enough Republican votes to gain a filibuster proof majority in the Senate before GM goes bankrupt. If GM were able to avoid that until January when the Democratic majority till increase from 51-49 to at least 57-43 and maybe even as much as 60-40 (but probably somewhere in between) then that will be easy. But it will likely be a lot more difficult before that.


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