I followed a link the other day to this academic paper purporting to show that the bailout of GM and Chrysler was a success. I was flabbergasted to see that the authors are Austan D. Goolsbee and Alan B. Krueger. WTF? These folks were part of the Obama Administration. This is their own policy they are passing historical judgement on. This is roughly equivalent to a economics journal seeking a paper on the success or failure of Obamacare and having Valerie Jarrett write it. How does this kind of conflict of interest pass any kind of muster?
I only skimmed the paper. I know these are two smart guys but it seems to include exactly the sort of facile analysis you would expect from a political hack, not two smart economists. I can't believe these guys would have accepted many of the assumptions they make here had they not been directly involved. Just to pick two things at random:
- They seem to stick with the assumption that millions of jobs would have simply gone *poof* had the government not intervened. Yes, this happened at Solyndra, but in most cases industries operate almost seamlessly in bankruptcy. The odds are, for example, that you have flown on an airline in Chapter 11 and didn't even know it. They make a specific argument that somehow it would be bad to have both in bankruptcy at the same time, but I can remember several times when there were multiple major airlines in bankruptcy. In fact, if both went bankrupt at the same time, one could argue it would lessen their market share loss since a major competitor was in the same boat. To the extent that the companies would have continued to operate under Chapter 11, which is 99.9% likely, then all the government did was insert itself into the bankruptcy process to overrule laws about who gets what in a bankruptcy to redirect spoils to their favored constituencies
- Yes, GM and Chrysler are doing OK now, but they usually do OK at the top of a business cycle. To my eye though, nothing fundamentally changed about how they are managed and operate. The same structural and cultural problems that existed before exist today. The same under-utilization of talented workers and valuable assets that existed before exists today. No real reckoning occurred -- in fact the bailout looked to me at the time as an exercise to use taxpayer money to avoid a true housecleaning. These companies have done OK, but what would they have done with a more thorough housecleaning?