On Wednesday, the Big Three American automakers converged upon Congress- with their Christmas List of unjust demands. These would be the terms by which they would continue to produce sub-par merchandise, employ large numbers of Democratic Party loyalists and manage a pension and health care system that no one in their right minds would want to take over as part of a bankruptcy receivership.
The blackmail cost was originally $25Bn, but has now gone $9Bn higher. It will now require $34Bn in emergency funding for The United States of America to pretend it still maintains a viable domestic automotive industry. There were skeptics in the audience. Members of both houses of Congress concerned that they may have to undergo competitive elections in the near to moderate future. These individuals had the gall to ask a few pointed questions. Senator Menendez crowned himself Master of The Obvious™.
“What is the strategy moving forward?” Sen. Robert Menendez asked in an appearance on CNBC television.
A logical economist, operating under the usual assumptions of microeconomics, might suggest these corporations find ways to drink in revenues faster than they piss away expenses. Executives for Walmart have stayed in the Econolodge while inspecting remote retail outlets. Executives from Ford Motor Company have flown into DC by private jet in order to beg for taxpayer money. One of these two corporations has a recent history involving profits instead of colossal losses.
That, however, involves pain beyond the threshold of casual tolerance. Union contracts require shredding. Deadbeats would be cut loose from bloated payrolls. Plants that produce marginal product at too high a cost would become abandoned corpses; symbolic of failed corporate thinking.
Political careers would crash and burn. So would social agendas. In short, the logical universe would welcome a lot of people accustomed to unearned comfort out into the suck. Nancy Pelosi therefore reworked economic theory to avoid the unpleasantness of condign and well-earned misery.
Nancy Pelosi has rewritten the stodgy, boring theory of the firm. Bankruptcy is officially no longer part of the outcome space. No matter how poorly a company executes, no matter how few units of merchandise get moved, no matter how much desperately needed capital gets poured into jobs banks and executive jets, bankruptcy is no longer an option.
She has taken this bold step for several reasons. A full-blown corporate bankruptcy could invalidate labor agreements that favor her political allies. It would also delegitimize claims that traditional centers of manufacturing such as Detroit, Michigan, are the proper leaders for future American endeavors into heavy industry. States like Michigan, Ohio and Pennsylvania could find their industrial bases further eroded as other enterprises leave more rapidly to avoid ending up like General Motors.
Pelosi also has to support her party’s new President Elect, Barack Obama. He has no desire whatsoever to walk into the White House and immediately have to deal with a bankruptcy at Ford, GM or Chrysler. Thus Nancy Pelosi makes the ridiculous claim that the inevitable failure looming before her is not an option.
She thus informs her party in Congress that they will vote to bail out the recalcitrant car companies. Another $34Bn is extracted from the tax base or just printed up by fiat. A crisis is postponed, another extension given to stupidity.
But failure rewarded soon becomes failure repeated. That which is repeated becomes habitual. The day will come when $34Bn is not available and a nation over 60% opposed to the idea of bailing out the least diligent in our midst will rise up to say “no.” Then a bailout will be less important than a shelter for these people to go hide in.
Cross-Posted At:THE MINORITY REPORT