Power Line Wants to Buy Detroit and Drown It In Lake Michigan

The good folks at Power Line have come to the obvious conclusion that if we accept the current market capitization of the US auto Big Three, we could buy the whole batch for about $7 billion, thus, they imply, obviating the need for a $25 billion or so rescue. Really?

Why can’t Congress see the obvious brilliance of this observation?

Well, perhaps it’s because if the US actually bought three near-bankrupt (or worse) auto companies for $7 billion, then the US would now own . . . three near-bankrupt (or worse) auto companies. Now what, Power Thinkers?

The decision whether to provide an additional $25 billion or so to Detroit’s automakers has less to do with the current market capitalization than with the strategic question of whether the United States would like to maintain a domestically-owned and located manufacturing base. A long time ago, a wiser Administration asked Detroit to build hundreds of thousands of airplanes, tanks, APCs etc. to stop Hitler, Mussolini and Tojo — and they did, because everyone back then understood this national security fundamental.

Of course, given what the Bush Administration has done to US strategic interests and the condition of our armed forces, it’s a lesson some on the other side would prefer to sweep under the rug. They don’t seem to mind the likely result of the Chinese owning the heart of our industrial base.

But let’s follow through with this Power Investment strategy and buy Detroit’s trio for $7 billion. Are we done? Nope. If we actually care about sustaining this strategic manufacturing asset in US hands, we’d still have to spend $25 billion or so now as a necessary bridge to help that industrial capacity survive George Bush’s "Best Recession Ever." We’d have to cover the financing of all the parts suppliers and dealers, pay the workers, cover their health care (or fund the system the unions agreed to, to get GM et al off the hook).

If we didn’t do that through decent paying jobs, we’d have to pay for the same ex-workers’ unemployment, while covering their health care, retirement, retraining, etc, along with the costs of all of the other secondary adverse impacts on the rest of the auto-related industry. Price: How about $200 billion in government costs for starters.

So, if Power Line wants to push the economic brilliance of just buying Detroit, and washing the union’s blood off their hands, ’cause maybe they think that’s the easiest way to get rid of GM management and the union, let them explain next how well the US would perform as the new owners of three auto companies whose survival was deemed vital to national and economic security.

I’m really curious about that one, because I thought these Power guys were convinced that the government couldn’t manage squat, that it was best to leave management oversight to boards of directors and shareholders, but I guess I just don’t understand the logic of drowning American’s industrial base in the bathtub just to prove that your side really does deserve 40 years in the wilderness.