Tyler Cowen as a Thug

Tyler Cowen remarkably continues his apologist stance for (selected?) government intervention in the economy. First we had a post by Cowen, which Richard Ebeling responded to.

Now Cowen tweets:

Funny how much it bugs some people to breathe the simple truth that the auto bailout worked better than the fiscal stimulus.

One has to read this as an endorsement of selected government bailouts (especially in the context of Cowen's earlier post), and an endorsement of the General Motors bailout in particular.

The point that Cowen must be hanging his intervention apologist hat on is that General Motors is up and running in some kind of profitable mode and is about to launch an IPO. The question must be asked, though, if a perfectly fine resolution could have been achieved without a government role. The answer is undoubtedly yes.

GM's problem was huge debt overhang ($173 billion in debt and $82 billion in assets), coupled with unrealistic labor contracts. The government crammed a "controlled" bankruptcy deal down creditors throats (forcing creditors under heavy pressure) and handed a chunk of the company to the UAW, all with billions of  tax payer money to grease the Obama favored. This is what Cowen is calling "the auto bailout that worked."

Under a traditional non-interventionist bankruptcy, the court would have determined whether it made business sense to continue running GM or whether the corporation should have been liquidated. Under this scenario, Obama's favored UAW would have most likely received zero and many of the original creditors would have received more than they received under Obama's forced deal. If the court determined that GM could continue as a going concern after debt restructuring  then that is what would have occurred. If the court determined that GM would be unable to continue as a going concern, a trustee would have been appointed and the assets would have been sold off. Note: The assets that had value would have been sold, not thrown on a bonfire.  This is how bankruptcy laws were designed to work. In other words, zero thuggish moves required against creditors and no outrageous handing of chunks of GM to the UAW. Price signals would have been used to determine what should have done with the firm and its assets.
Yet, in typical D.C. type thinking, we have Cowen come along draw all his diagrams and either forget or ignore how some creditors were screwed and not treated the way they would in a normal bankruptcy, ignore how for no legitimate reason the UAW was handed a chunk of GM, and ignore how taxpayer money was used to  bailout Obama's favored ones. He then amazingly declares this mugging of creditors and taxpayers "the simple truth that the auto bailout worked..," as though a traditional bankruptcy resolution could not have worked, and further implying that Obama coercion was necessary.

In person, Cowen is a polite and mild mannered. If he was accosted on the street by a thug, I would bet on the thug. But, when it is a big time rape and mugging, it appears that Cowen is sometimes wilding with the Big Thugs.