Dartblog

Nancy Pelosi fouled my home several hours ago when she came on the radio and said something amounting to “bankruptcy is not an option for the Detroit horseless carriage manufacturers.” Since Mrs. Pelosi was saying not two weeks ago that bankruptcy was an option—that the companies may not deserve a loan from the taxpayers, I wondered what had changed. Then I read Ford’s business plan, which was written over Thanksgiving week and spends nearly as much space discussing why this new debt serviced by taxpayers mustn’t be granted most-senior status as it does discussing how to retool the 105-year-old global firm and its 90,000 people to undo the systemic errata that has caked upon its gears for the last few decades. Mrs. Pelosi could not have been favorably impressed with this plan if she had read it; her sudden change of heart makes clear that her intent was always to push for a rescue loan, even on bad terms; she required only a mechanism for distributing blame. With these hasty-pudding plans, she has one.

And what is even sweeter, she must be thinking, is that the plans put the screws to the small minority of taxpayers who pay for a majority of the federal government (10% pay 75%); there’s even a psychological thrill, because these disparate souls actually know the importance, in these circumstances, of being most-preferred lenders.

The last point to make about Mrs. Pelosi is this one. It does not by any torture of logic follow that bankruptcy is not an option. Mrs. Pelosi is relying on her constituency to be as dim as they’d have to be to elect her. Bankruptcy, she imagines her adoring public thinks, is death. It’s the end. Declare bankruptcy, and a sceptered skeleton comes to take you away, because you have failed. Bankruptcy, and Ford, GM, and Chrysler go away. Those companies, incidentally, embrace that heuristic, too; because bankruptcy would be disruptive for the present regimes there.

In point of fact, GM, Ford, and Chrysler have a greater likelihood of dying and of fading away if they are given a sweetheart loan now and allowed to run free. They have a far smaller chance of going away if they declare bankruptcy—a routinized process for the renegotiation of obligations—and then painstakingly rebuild from the ground up. If you insist that Impalas and 500s not be replaced by Camrys and Accords, your natural position ought to be in favor of bankruptcy, following perhaps by a taxpayer loan. But the Democrats in Congress have promised their union thug-army money and gifts, which is why Mrs. Pelosi, upon discovering this brilliant turnaround plan, has shifted gears, and has begun scaring the public about the instant death that is bankruptcy. If there’s one entity that wants this auto bailout to go the wrong way, it’s the UAW. If there are two, they are the UAW and Congressional Democrats.