There is a famous saying, “What’s good for General Motors is good for the country.” Those words were never truer than they are today. A lot of folks think declaring bankruptcy would be good for General Motors. A dose of the same medicine might be good for the country.
Bankruptcy smacks of failure, of being a loser. But what if I used the phrase “a fresh start” instead? Has kind of a nice ring to it, doesn’t it? How much of the American dream can be summed up in those words? And yet, bankruptcy is nothing more or less than a fresh start, a chance to begin again and maybe do better this time.
To grossly oversimplify, General Motors suffers from two basic problems. First, it is losing money at a spectacular rate. Somebody thought it would be a good idea to keep producing big ol’ gas guzzlers when the market had clearly moved to more fuel efficient vehicles. So now GM must borrow millions of dollars each day just to stay afloat, money it now gets mostly from the Federal government.
On top of that, GM is burdened with high costs for health care and retirement benefits for its employees. These costs go into the price it must charge for its products. Newer companies have lower costs in these areas and can therefore charge less for their cars.
Now let’s look at the United States government. It is losing money at a spectacular rate. Somebody thought it would be a good idea to cut taxes, wage a couple of wars and dramatically increase domestic spending. So now the government must borrow billions of dollars each day just to stay afloat, money it now gets mostly from foreign governments.
On top of that, the economy is burdened by the most expensive health care system in the world. Our retirement plan, otherwise known as Social Security, is about to be swamped by an enormous influx of new retirees. All these costs make it harder for American goods to compete in the world markets.
General Motors needs to hit the reset button. Bankruptcy provides a way to do this in a way that government bailouts do not. The goal is to end up with a company more suitably sized to its revenues, a company that has reduced the cost of providing health care and retirement benefits to its employees.
President Obama aims to do the same thing, starting with bringing expenditures more into line with revenues. This means cutting expenses and restoring some tax rates to pre-Bush levels. The president wants to begin the process of making health care more affordable for businesses and citizens alike. He intends to restart the debate on reforming Social Security. The goal is to end up with a government more suitably sized to its revenues, a government that has reduced the cost of providing health care and retirement benefits to its citizens.
Restructuring General Motors and the Federal government will take time and will require very painful choices. Call it bankruptcy. Call it a fresh start. Either way, what’s good for General Motors could still be good for the country.
