With the economy in tatters and a very bad holiday season upon us for retailers, how can we actually let the auto industry go out of business? Yes, ma
November 17, 2008

With the economy in tatters and a very bad holiday season upon us for retailers, how can we actually let the auto industry go out of business? Yes, many people will come with their hands out now after the bailout, but we really have to look at it as pragmatically as we can. Let's keep the knee-jerk reactions to the downtrodden Conservatives who would rather see millions of more jobs lost. Sure, they dug themselves into a ditch, but it's too important to just reject it out of hand.

Jonathan Cohn writes a very good piece on the situation:

That's why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation. The company would close its doors, immediately throwing more than 100,000 people out of work. And, according to experts, the damage would spread quickly. Automobile parts suppliers in the United States rely disproportionately on GM's business to stay afloat. If GM shut down, many if not all of the suppliers would soon follow. Without parts, Chrysler, Ford, and eventually foreign-owned factories in the United States would have to cease operations. From Toledo to Tuscaloosa, the nation's assembly lines could go silent, sending a chill through their local economies as the idled workers stopped spending money. Restaurants, gas stations, hospitals, and then cities, counties, and states -- all of them would feel pressure on their bottom lines.

A study just published by the Michigan-based Center for Automotive Research (CAR) predicted that three million people would lose their jobs in the first year after such a Big Three meltdown, swelling the ranks of the unemployed by nearly one-third nationally and leading to hundreds of billions of dollars in lost income. The Midwest would feel the effects disproportionately, but the effect would reach into every community with a parts supplier or factory -- and, to a lesser extent, into every town and city with a dealership. In short, virtually every community in the country would be touched. ... Read on.

Read the whole piece and let me know what you think. It's times like these that good government needs to step up.

Krugman writes that Obama should not be afraid to spend:

The economic lesson is the importance of doing enough. F.D.R. thought he was being prudent by reining in his spending plans; in reality, he was taking big risks with the economy and with his legacy. My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It’s much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little.

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