Jim Manzi tries to imagine it. There's no way to know for sure what would have happened, but one thing we do know is it wouldn't have been Obama's apocalyptic scenario:
First, in the event of a bankruptcy, you don't burn down the factories, erase all the source code on all the hard disks, make it illegal to use the brand name Chevrolet, and execute all of the employees. Others take ownership of the assets, and the employees go on with their lives. Some of these assets will be put to use generating revenues, profits and taxes, and some of these former employees will get jobs or start businesses, and generate revenues, profits and taxes. In order to measure the effect of the bailout over, say, five or ten years, you have to compare the actual taxes collected to what would happened over this same period in the counterfactual case where the bankruptcy was allowed to proceed. What owners would have bought the factories and IP assets, and what would they have done with them? What businesses would the former employees have started? Who would have moved to Arizona and retired? What new industry clusters will evolve in Arizona because of this transfer of people?
Second. some of the profit GM makes today would have been made by other companies that picked up some of the slack if the company lost market share after a bankruptcy. They would pay taxes on these profits, and as far as government receipts are concerned, money is money. How would auto industry structure evolve over time given whatever changes happened to the assets currently owned by the legal entity GM, or the employees currently paid by it?
Anybody who tells you they can answer these question reliably is full of it.
And that doesn't even start to get to the really long-run considerations of what effects this has on rule of law and moral hazard (or if you want to make the case for the bailout, social solidarity and degradation of the working class).
These considerations are why it's correct to say, as Sen. Richard Shelby did, that "using taxpayer money to reward failure in private markets is a failure by definition."
That being said, there are well-managed failures and poorly-managed failures. The Obama administration's handling of the automakers falls under the second category. And yet Obama wants to make the issue a major talking point for his 2012 campaign.
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