Automobile Industry

Rescue Packages & the Automobile Industry (II)

Last week, I questioned the wisdom of Congress making investments investors are unwilling to make in the automobile industry. Responding to similar arguments by smarter people, Jonathan Cohn suggested (citing a report showing productivity improvements in Big 3 factories) that the Big 3 are in the process of turning around, and that the bailout would help these companies complete the transition to profitability. Jim Manzi has posted a fairly devastating rebuttal to Cohn’s arguments. Here is an excerpt from Manzi’s response:

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Rescue Packages & the Automobile Industry

Smart takes from Manzi and McArdle. A question: I understand the political argument for an automobile industry bail-out. Unions are a valued Democratic constituency, and many of the potentially affected employees and suppliers live in swing states.

But is there a good argument for the bail-out on policy grounds? If GM can’t convince investors to buy additional equity or debt in the corporation, why should the U.S. government tax other companies (struggling in the same economy) to make an investment the market is unwilling to make? Is Congress better at spotting good investments?

Update I: See also Ryan’s comment on the National Money Hole” thread.

Update II: Blackadder has a good post up about the administration of the bailout.

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