Keith Hennessey has got a new economics blog up. Whether or not you agree with his politics (he’s an ex-Bush WH guy) he’s worth reading for the clear way he lays out the issues surrounding questions of economic policy, with particular emphasis on the political realities of economic policy making. His post on last Thursday’s Chrysler bankruptcy announcement, for instance, is hard on the Obama folks, but sensitive to the “no good options” realities they face.
Fair and Balanced
On the one hand, he writes:
The result may be a firm that survives, but there are serious adverse consequences of this process and dangerous precedents for the broader economy:
- Demagoguery – The President attacked people for asking to be paid back the money they loaned. These “investment firms and hedge funds” have a legal right and a responsibility to the people whose money they invested.
On the other, he concludes:
It is easy to criticize the Administration’s approach and say what they should not have done. It is harder (and more responsible) to say what you would have done instead, and to accept responsibility for the downsides of that choice. If you disagree with what the President did, I challenge you to recommend an alternate path. I will give you five options. To make it hard, please assume the probabilities listed:
- Withhold all additional taxpayer funds. (99% chance Chrysler liquidates by July 1)
- Tell the negotiating team to set a goal (a viable firm without permanent taxpayer subsidies) and a limit on taxpayer funds, and then stay out of the negotiations among private parties. (70% chance Chrysler liquidates by January 1 because the Chapter 11 process drags on and Chrysler’s sales plummet)
- Do what the Obama team did, but don’t use the §363 process to jam creditors and don’t publicly bash those creditors when they dissented. (50% chance Chrysler liquidates by January 1)
- Tell the negotiating team to lead/”help” the negotiations, but strictly instruct them not to pursue non-taxpayer goals (like fuel efficiency), and not to favor UAW over creditors. Use the §363 process if necessary to jam an objecting party, but don’t publicly bash them. (30% chance Chrysler liquidates by January 1)
- Do what the Obama team did, and be willing to add more funds if necessary to keep Chrysler alive. (15% chance Chrysler liquidates by January 1)
Find the whole thing here.