One More on the Pile

We’ve had talk of a federal bailout for the auto industry that didn’t make sense, and also talk of a GM-Chrysler merger that didn’t make sense. The current thinking, it seems, is that we should try to do both:

The Bush administration is examining a range of options for providing emergency financial help to spur a merger between General Motors and Chrysler, according to government officials. [...]

G.M. and the parent of Chrysler, Cerberus Capital Management, are in talks to possibly merge the two companies, which are losing sales and hemorrhaging cash. People close to the talks said G.M. needs between $5 billion and $10 billion in assistance, mainly to cover G.M.’s own needs between now and the time of the merger.

It would make a lot more sense, in my view, to take however many tens of billions we’re considering spending on the auto industry and instead spend that money on direct assistance to people working in the industry and in Michigan more generally. Let the bankrupt firms go bankrupt, and let their assets be liquidated and redeployed in a more efficient way or under better management. The collapse of the US auto industry would be bad for a lot of people. Trying to help people is a good impulse. But trying to help people by propping up failing firms is an inefficient and ultimately unpromising way of doing so. Just help the people and let the firms die.