and they will also paid in taxes if bailed. so GM is going to become a giant money laundering operation for the IRS?
cut out the middleman and put them on unemployment...then they can actually find PRODUCTIVE work
One could argue that it would still be better off in the long term for the government to bite the bullet and pay that unemployment money than to keep the US auto industry afloat; I am partial to that argument myself. But I'm responding to the "why should a waitress at Denny's..." question.
The wage of an auto worker costs from $1200/week to $2920/week (depending on whether you believe the $30/hour number or the $73/hour number floating around).
http://www.michigan.gov/documents/uia/EUC_Fact_Sheet_120_240...
Additionally, auto workers have an incentive to get off unemployment; it pays less than market rate. They have no incentive to stop working for GM, which pays above market rate.
If they go under, then all the money to support laid-off auto workers has to come from the government.
Assume all of the big three are liquidated. What would be the total cost be to the economy? First we'd lose income tax revenues from an estimated 3M people. Let's assume an average pre bankruptcy wage of 50k/yr (a little less than 30$/hr). And let's assume a conservative tax rate of 10%, or 5k/yr. That's 5k * 3M = 15B. Assuming each employee is unemployed (on average) for 6 months, we can assume 7.5B in lost income tax revenue alone. Add in 6 months of unemployment at 362/week = 8688/person * 3M = another 26B. That's 33.5B, and we haven't even factored in all sorts of intangible costs related to the massive unemployment and deflation that would result (crime, medicare, etc...)
There may be other factors I haven't counted, but on the face of it a 25B bailout is the cheaper option. I understand the argument that the same problem will just recur a year later or whatnot, and they'll need another bailout, but there are reasons to hope that at least some of these companies will have a better chance in the future: the Chevy Volt, the release of some of GM's pension obligations in 2010, Ford's 65mph diesel, etc...
I quite understand the "punish them for being stupid" sentiment (and share it), but I think it's somewhat reflexive and not always the most rational approach.