But wouldn't government intervention be a slippery slope? Why bail out GM and not Circuit City? Well, perhaps because the closing of Circuit City leaves an empty place at the mall, while the collapse of the American auto industry would leave entire regions of the country in crisis. It is the job of a president -- on issues from military intervention to economic policy -- to keep his footing on unavoidably slippery slopes.
The coming bailout will be a major challenge for Obama. If he caves in to the auto unions that helped elect him and merely shores up a failing industry, he will start his presidency on a note of weakness. If he insists on a serious restructuring that creates sustainable companies -- including large pay and benefit cuts, and massive downsizing -- he could gain a reputation for toughness similar to Ronald Reagan's after his early firing of striking air traffic controllers in 1981.
Republicans also face a challenge. Some Republican congressional leaders seem to get an ideological thrill from the prospect of failing auto companies -- cheering on the "creative destruction" of an economic demolition derby. "Companies fail every day and others take their place," explains Sen. Richard Shelby of Alabama. But the American auto industry does not fail every day. And it is hard to imagine any successful program of Republican political reconstruction that begins with the further decimation of the Rust Belt and the resentment of millions of unemployed workers.
Billy Durant would understand the current travails of GM. After being fired from the company for financial mismanagement, Durant lost his fortune in the crashing stock market. In 1936, he filed for personal bankruptcy and later opened North Flint Recreation, a bowling alley. That is the risk inherent in capitalism. But the sudden collapse of the company he founded would risk too much.