Yesterday, the the White House was talking about bankrutpcy for the Big Three, too, but it seems that GWB doesn’t want to let that happen on his watch. If bankruptcy is the course, he’s going to force Obama’s hand. I posted Don Boudreaux’s WSJ editorial, “Bankruptcy Doesn’t Equal Death, about the Big Three, and the possibilities of bankruptcy in lieu of bailout, on my Facebook page. I was particularly fond of Boudreaux’s comment, and quoted it:

A government bailout of the Big Three keeps huge amounts of productive inputs in firms that can’t use them efficiently

This is the unseen that most people never consider. Yes, there are people working for these companies that will truly suffer under bankruptcy. But the flip-side, is that some of these people can be re-employed in a restructured auto industry, others will find work in other arenas, etc. We tend to overlook the resource allocation, though. Now, no matter what happens, GM, Ford, and Chrysler are not locking the doors tomorrow, but if they did, there would follow a greatly reduced demand for steel, machine parts, machine tools, rubber components, etc. There are industries and businesses which do not yet exist, because their input costs are higher than they could be.

In response to my post, my friend Shawn commented:

That quote may be true, but Michigan may look like a third-world country before “the market” can recover on its own. Rampant job loss is NOT the lesser of two evils.

…What if the Bailout does allow the automotive companies to restructure without the IMMEDIATE pressure of failure?

…I would rather risk the POSSIBILITY of a bailout working versus the CERTAINTY of immediate, massive job loss here in Michigan.

I told him that 300 million people had the opportunity to bet on the Big Three, by purchasing their stocks at $3/share. And 300 million people apparently disagree. This is reason enough to suggest that bailing out the auto industry is a bad idea. But I don’t want to appeal to popularity. There is no more certainty in a short-term bailout than there is to suggest bankruptcy will inevitably lead to total collaps of the industry.

What if it doesn’t work? There is, after all, a non-zero chance that even with $17.4B worth of TARP funds, the Big Three are doomed to fail. At some point in time, failure reaches a critical mass that *can’t* be propped up, no amount of money or effort, no matter how Herculean, can save the company(s). It’s possible that we’re living this right now, and if this is true, any diversion of public funds towards assisting this industry is merely throwing good money after bad, and serves to exacerbate and prolong our suffering.