Belmont Club

Bailouts and corporate immortality

The Democrats want GWB to support a bailout of Detroit, twitching aside the outgoing President’s effort to trade it in exchange for support of a free trade deal with Colombia. The NYT reports that “Mr. Obama went into his post-election meeting with Mr. Bush on Monday primed to urge him to support emergency aid to the auto industry, advisers to Mr. Obama said. But Democrats also indicate that neither Mr. Obama nor Congressional leaders are inclined to concede the Colombia pact to Mr. Bush, and may decide to wait until Mr. Obama assumes power on Jan. 20.”

Mr. Obama has been far more receptive than Mr. Bush to having the government intervene to rescue another major sector of the economy. He called automakers “the backbone of American manufacturing” in his first post-election press conference last Friday, and many thousands of their employees belong to unions that are part of the Democratic Party’s base.

But Mr. Obama’s stance raises the question, with the country in a worsening economic situation, where would the Democrat draw the line as president?

In the heavens. The corporate heavens, that is. David Brooks suggests that the biggest change in attitudes between the old America and the new one is a widespread belief in the virtues of corporate immortality.

Not so long ago, corporate giants with names like PanAm, ITT and Montgomery Ward roamed the earth. They faded and were replaced by new companies with names like Microsoft, Southwest Airlines and Target. The U.S. became famous for this pattern of decay and new growth. Over time, American government built a bigger safety net so workers could survive the vicissitudes of this creative destruction — with unemployment insurance and soon, one hopes, health care security. But the government has generally not interfered in the dynamic process itself, which is the source of the country’s prosperity.

But this, apparently, is about to change. Democrats from Barack Obama to Nancy Pelosi want to grant immortality to General Motors, Chrysler and Ford. They have decided to follow an earlier $25 billion loan with a $50 billion bailout, which would inevitably be followed by more billions later, because if these companies are not permitted to go bankrupt now, they never will be. …

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line.

The impulse to confer eternal financial life is not confined to the Democrats. The Republicans have their fair share of healers. The desire to lay hands upon the taxpayer’s money is a catholic, in the sense of universal, impulse.