Backwards Argument
13 December 2008
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
To the Editor:
You rightly dismiss the argument that a government bailout of GM, Ford, and Chrysler is justified by the concern that people won't buy cars from companies in Chapter 11 ("Mitch McConnell's Finest Hour," December 13).
People will indeed not buy cars from companies that might be gone in a few years. But this fact argues against, not for, a bailout. Precisely because - unlike Chapter 11 - a bailout postpones the need for these companies to restructure themselves into more-competitive producers, it makes their long-term survival much less likely than would Chapter 11.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
To the Editor:
You rightly dismiss the argument that a government bailout of GM, Ford, and Chrysler is justified by the concern that people won't buy cars from companies in Chapter 11 ("Mitch McConnell's Finest Hour," December 13).
People will indeed not buy cars from companies that might be gone in a few years. But this fact argues against, not for, a bailout. Precisely because - unlike Chapter 11 - a bailout postpones the need for these companies to restructure themselves into more-competitive producers, it makes their long-term survival much less likely than would Chapter 11.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Wednesday May 13, 2009 at 9:49am