Bailing out the big three

Out there in the wide world people have taken to referring to the proposed auto industry bailout as 'bailing out Detroit'. I'm here to tell you, Detroit is too far gone to be helped by anything as paltry as a bailout. A friend of mine had never been to the city but assumed that Detroit, like other cities that suffered through deindustrialization, had rebuilt and now faced problems of crowding and gentrification.

Nope.

Responsible liberal opposition to the bailout boils down to a cost/benefit analysis. At the end of the day the big three automakers should be allowed to fail, the argument says, because the cost of allowing them to continue is structural economic inefficiency. But of course that only becomes an argument against the proposed bailout if you think that the cost of the economic inefficiency attributable to the bailout exceeds the cost of the disruption caused by the failure of the big three. And this is the ground on which liberal elites are defending the bailout. They are saying that with the economy this bad, allowing the big three automakers to fail will have large macro-economic effects, making the cost of failure exceed the cost of economic inefficiency.

The striking thing about all of this to me, living where I do in SE Michigan, is how abstract the debate is. For me, this approaches a which side are you on kind of question. At any rate, living here I know that sooner or later it's going to come to that. And I'm not going to pick an abstract macro-economic good over the people in my community.

Which isn't to say that I'm not conflicted. I'm also a unionist, and I'd hate to see an automotive bailout held up as evidence that Obama's debt to labor had been paid, and now there's no need for EFCA. But that's neither here nor there.

Returning to the argument, there's no way for me to adjudicate the disagreement about the macro-economic costs of the bailout, but here's a point about the content of the weighting that we're being asked to do. You have, on one side of the scale, identifiable people and harms which are reasonably easy to predict. What is on the other side? Economic inefficiency. Well, what are the costs of that, and who do they accrue to? Moreover, what other forms of economic inefficiency does government action foster, and how do we make trade-offs between them? Anyone promoting a policy opposed to the real interests of real people bears the burden of answering these questions.