General Motors and the other big Detroit carmakers have been pushing for immediate cash infusions from the federal government. The ruling Democrats, riding high from their capture of the presidency and increased majorities in both the House and the Senate, have decided this is a very good -- and needed -- idea.
The Bush administration remains much more hesitant, kicking the dirt and saying it doesn't have the authority to implement the bailout. But this argument is unlikely to prove credible. The Democrats will simply push through the necessary legislation in next week's lame-duck session of the outgoing 110th Congress, approve the necessary legislation in a rush and then dare Bush -- the most veto-averse president in modern American history -- to veto it. He more likely than not will quietly fold and sign it into law.
There appears almost no doubt that President-elect Barack Obama will deliver for GM. The state of Michigan proved crucial to his decisive election victory on Nov. 4. Michigan was one of the four decisive battleground states, and it was the first of them to swing decisively to Obama during the campaign. His Republican rival, Sen. John McCain of Arizona, was so demoralized, he folded his Michigan clamoring far sooner than he should have, setting off a chain reaction in Ohio and Pennsylvania as well.
Speaker of the House Nancy Pelosi, D-Calif., is pushing an immediate $25 billion loan for GM. An already passed measure on another $25 billion in loans is for long-term projects and could not help the current crisis.
Pelosi says next week's lame-duck session could be used to pass such a measure and give the White House the authority it says it lacks. And with bailout figures that seem to start at $100 billion, $25 billion doesn't even seem like that much. After all, Bush and his treasury secretary, Henry "Hank" Paulson, demanded -- and received -- congressional approval for a $700 billion financial bailout of the remains of the big Wall Street financial centers.
Carmakers contend they are so central to the U.S. economy that if they fail some 10 percent of the country's workforce would be affected. With the overall U.S. economy on such shaky ground, neither Bush nor Obama dares to call that bluff.
Will there be more recipients at the corporate breadline to follow GM? Quite probably. But again, so far the figures involved are, in fact, far smaller than the enormous sums that Bush and Paulson already have cavalierly approved for Wall Street.
Nevertheless, the GM bailout will be a significant extension of financial aid from banks and insurance companies -- where the rationale is to keep the credit flowing so the whole economic system doesn't freeze up -- to subsidizing the operations of particular industries. It will put the government back in the position of picking winners and losers. But since Wall Street investors have invested spectacularly in so many losers themselves before coming hollering for federal aid, that argument is unlikely to hold water as well.
The real issue to be decided in the GM bailout affair is not whether a rescue package will be created -- that can be acknowledged as a done deal -- it is what kind of rescue package it is going to be.
For GM itself and its old antagonist, the United Auto Workers union, are in full agreement that they want business to continue much as before. The old Democratic establishment on Capitol Hill, spearheaded by Michigan's powerful congressmen and senators, has always taken this line in the past and won't want to change it now.
Reformers, however, like Paul Ingrassia writing in The Wall Street Journal Monday, have argued forcefully that the federal government insist the current GM executive and board be swept clean, as they were directly responsible for the fiasco in the first place.
Critics also want GM -- and the UAW -- to be pulled kicking and screaming into the world of energy-efficient autos so that it is finally forced to invest big in gasoline-diesel hybrids and other gasoline-saving variants. Remaining neoconservative true believers are likely to try to slip their discredited corn ethanol, flex-fuel nostrum into the package.
Obama, who featured energy independence and alternative energy investment so prominently in his election campaign, is sure to want a sensible clean and alternative energy emphasis in GM. But the lame-duck 110th Congress Dems therefore may want to rush through a more old-fashioned, no-strings-attached rescue package for Bush to sign before Obama even takes office.
GM's top management losers invested big in the great SUV boom when everyone knew that the growth of China, India and other emerging economies eventually would raise oil and metal prices. It was just a matter of time, but Detroit made no provision for it. The question facing Obama and the Democratic leaders in Congress now is whether they will let that disastrous Old Guard stay in power or purge them from the boardroom and insist on very different policies. Free-market purists and traditional conservatives have long claimed that the free market makes the best choices. But the choices of GM and its fellow automaking giants have been consistently disastrous for decades. Could intervention by the incoming Obama administration possibly be worse?