Bailout lag

Auto executives flew into Washington in private jets, and before long there was congressional stalemate on what they wanted, not just because of the unfortunate symbolism, but because widespread discussion had successfully blunted sharp assertions.

Despite what some contended, it became ever less certain that the $25 billion federal bailout sought by the executives would save the auto industry, that a declaration of bankruptcy would kill it or that industry demise would wound the country grievously.

The best you could say was that a bailout would give the industry a brief reprieve from the mess that mismanagement, regulatory folly and runaway unionism have wrought. It would not necessarily prevent future failure and repeated pleas for help by managers incapable of mustering even a one-time show of austerity.

It’s true that the Democrats pushing hardest for this bailout said they would demand a new beginning with all kinds of reforms, but Washington doesn’t know beans about running any business, and even with experts lending a hand, you can figure the politicians and bureaucrats would bollix things up but good.

Washington is already responsible for some of the industry’s woes — its fuel-emission standards are part of Detroit’s problems, and with other observers we can assume there would be more anti-efficiency demands in a restructuring.

Bankruptcy would itself provide billions in relief — the government would pay off union pensions and many other creditors would be out of luck — while signaling to managers that if they do not finally start putting their experience to work, if they don’t get tough and smart, if they don’t innovate and slim down and show their stuff, they’ll be done in with just one word to describe their performance: disgraceful.

The cry is that Americans would not then buy cars from these companies, fearing they would go out of business and not be able to provide parts or otherwise keep the bargain assumed when a car is purchased. But that’s a guess, and it’s an equally justifiable guess that people considering the purchase of a car would feel the same way if there were a bailout.

Similarly, President-elect Barack Obama and others in his party say that, in these particularly troublesome times, the industry might find it impossible after a bankruptcy to borrow funds sufficient to carry on. But the debt relief would be a major help in the short term, and it’s hardly a given that credit would come rolling in after a government loan that assures no one of anything in the long term.

What happens if neither alternative works? What happens if Detroit goes kaboom, wiping out jobs in the industry itself, as well as millions more in businesses that support the industry? The answer, I think, is that it doesn’t have to be a total disaster and that a worse disaster could be a weakening of the free market.

One positive possibility is that the American operations of foreign auto companies would step up production and make up the difference, and another is that if the old companies do not reinvent themselves, new companies could emerge.

Stay out of the way, government, and what occurs next could be something big and transformative. Get in the way and what occurs could be something stale and timid and ultimately self-defeating. Remember that time and again entrepreneurship has proven itself better than misbegotten interventionism, and that the descent of some enterprises has repeatedly been met by the ascent of others.

The auto executives may have been empty-handed as they flew home in the comfort of their jets, but they did not have to be empty-headed, and if they were, it just might be that some innovators will eventually thrive where they fell short.


(Jay Ambrose, formerly Washington director of editorial policy for Scripps Howard newspapers and the editor of dailies in El Paso, Texas, and Denver, is a columnist living in Colorado. He can be reached at SpeaktoJay(at)