Paul Krugman takes on George Will on This Week about the very serious consequences to our economy if GM is allowed to go into bankruptcy.
Stephanopoulos: Let's move now to the economy. The other big issue of the week and Paul Krugman let me bring you in and get you to respond to McCain's defense of not rescuing the auto companies. He's saying basically until they change their ways and the way they do business we shouldn't be stepping in.
Krugman: The problem is time. The problem is yeah we ought to have, and I think a lot of people are talking about structuring something where we're calling it a structured bankruptcy, maybe it won't be called that, but a reform, get current management down, abrogate a lot of the contracts, probably a lot of the benefits to retirees where one way or another it could be shuffled off to the tax payers. All of this stuff to keep those companies going with but ah you know a lot of give backs, but it can't be done over night and the problem is these companies are on the verge of disappearing over night. This was, everything he said was an argument for why you should give them a short term bridge loan but nothing more than that and we can do the right thing.
But you can't expect them to come up with a plan before Christmas that's going to do everything he's saying and they should have done it years ago but they didn't and that's where we are now. Are you prepared to let probably a million plus jobs disappear in the middle of the worst recession since the nineteen thirties.
Stephanopoulos: So isn't it a sad policy the times demand it?
Krugman: It's a question of the policy giving you a little bit of time to work out the good policy. It's you know, this is, these are not normal times.
Will: Paul refers to the companies and all three are in the same boat in a sense but this is all about General Motors. Ford is not asking for money now. It only wants access to a line of credit in case there is what it calls a major industry event which means the bankruptcy of the, well the failure, General Motors is bankrupt but that is General Motors not being able to pay its bills to the three thousand parts suppliers in this country to which the three companies today owe thirteen billion dollars which is one billion dollars short of the fourteen billion dollars they're asking for.
Krugman: But that's exactly the point. We have an industry that's highly interdependent. These are not stand-alone integrated companies. They draw on the same network of suppliers. If any one of them goes down, and in particular General Motors goes down, all three go down. And so the point is, we need to work this thing out. We can't do it before… before January 20th. Um, are you prepared to make the awesome decision to allow the core of the traditional US auto industry to disappear because you weren't prepared to - you know, you wanted everything on your plate all at once - or are you prepared to pay all the …
Will: (crosstalk) But it won't …
Krugman: … It will. The suppliers will disappear. The companies will - you know, the plants will disappear, it will be a shell of its former self. We will have and continue to have an industry, the new auto industry.
The lead to the opposition to the bailout was lead by the, ah Senator Corker the Senator from Nissan which has two plants in its national headquarters in Tennessee so we will, it's not the whole industry but it's a very important part of US industrial structure. Do you want to make that decision by default?