Pat Buchanan and failure

I agree completely with Grant Bosse – nice link.

There's another way to look at this from the micro perspective. The bailout of GM, Ford, and Chrysler will, in part, be financed by the taxes of Americans who work here for Toyota, Honda, etc. I'd like to see an interview with one of those workers – "Why should I be taxed to bail out my company's competition?"

But I'm afraid that the politicians will do something to "help" the Big 3 because they feel they have to be seen as doing something.

The entire debate over GM rests on a huge False Choice fallacy that both sides seem to want to assume. Either taxpayers must finance every contractual commitment GM ever made to anyone, or the company must cease to exist altogether along with all of its output, all of its jobs and all of its other resources. Countless organizational alternatives to these extremes obviously exist.

For-profit organizations occasionally make unprofitable commitments. If these commitments are long term, then over time, their cumulative cost makes any profitable organization of the company's resources inconceivable. At this point, the company must break some commitments. It needn't break every commitment, only enough commitments to return to profitability. That's what bankruptcy courts are for.

If a company's factors may simply promise themselves the moon and expect taxpayers always to fulfill the commitments, they'll soon promise themselves the sun as well. I would. It's inevitable.

Pat B.

When he's good, he's pretty good, but when he's bad, he's very bad.

Are the car companies claiming they can't sell because people can't get financing? I don't think so. Why should a bank credit crunch affect their ability to raise capital in the capital markets? Doesn't the money have to go somewhere? Have I missed sometihng?

Note that taxing income instead of consumption necessarily means subsidizing failure.

1. X consumes C0 resources and receives R0 revenues, where R0 > C0, yielding income I0 which is taxed by (for the sake of argument) a minimalist state which uses the revenues exclusively for contract enforcement.
2. Y consumes C1 resources and receives R1 revenues, where C1 > R1, yielding a loss, which is not taxed and may even trigger a refund of taxes previously collected.
3. Ergo, Y enjoys contract enforcement services paid for by taxes on X's income: failure is subsidized.

Stop subsidizing failure. Support a change in tax base.

The Big 3 defenders on tv I have seen are blaming the credit crunch for their troubles. Their argument is that they were cutting costs and developing cars people would buy until the credit problems caused people to stop buying.

Of course that would apply to most businesses. And the car companies and the UAW seem delusional when they talk about how their costs are competitive with the imports except for the fact they have to pay for their employee's medical insurance.

Chapter 11 is the most sensible path to correcting their cost structures. If they want the taxpayers to bail them out we should be able to do the same thing as a bankruptcy judge and adjust their costs as needed.

I doubt the UAW would be happy with the results.