With the 2008 election debacle only a week ago, the GOP has a chance to redeem itself by taking a stand for fiscal responsibility and free markets.  House Speaker Nancy Pelosi is calling for a bailout of U.S. automakers.  However, automaker bankruptcies seem likely, with or without an infusion of taxpayer dollars.  Given that prospect, the GOP would do better to fight for a Main Street bailout by assisting displaced workers.

House Speaker Nancy Pelosi is calling for a bailout of U.S. automakers.  Speaker Pelosi has called on Rep. Barney Frank to draft legislation to modify the TARP (aka "Wall Street Bailout") to allow money to go to the struggling automakers.  Auto executives and the United Autoworkers ("UAW", aka "Big Labor") are telling Congress that the $25 billion already given them in government-backed loans (to retool in order to make more fuel-efficient vehicles) is not enough.  They need more to cover cash flow needs and pay for the future healthcare costs of 780,000 retirees.

However, automaker bankruptcies seem likely, with or without an infusion of taxpayer dollars.  The Times of London reports that, even with an infusion of taxpayer billions, that "Even if GM succeeds in averting a bankruptcy, we believe that the company's future path is likely to be bankruptcy-like." Deutsche Bank cut its 12-month price on GM to $0.  Barclays slashed its target price to $1.  Thus, it seems that the requested billions will merely delay the inevitable by mere months.

Delaying bankruptcy is solely a strategy to benefit Big Labor.  Giving taxpayer billions to automakers today (and indirectly paying off millions owed the UAW) will allow the UAW to get paid money that they would unlikely get paid in bankruptcy.  This is because, during bankruptcy, the bankruptcy estate may demand repayment of money paid to Big Labor in the 90 days prior to bankruptcy, as an illegal "preferential transfer". By using taxpayer billions to sufficiently delay bankruptcy after paying off the UAW (and likely others), Big Labor gets to keep its payoff, at taxpayer's expense.  Any equity held by the taxpayers (and other shareholders) is wiped out.

Of course, bankruptcy doesn't mean automaker liquidation (the boogie man being sold to lawmakers and taxpayers).  It more likely means reorganization, including renegotiation of UAW and other contracts.  One analyst reports that "We believe GM has several sources of liquidity it can access to bridge the company to 2010, when it realizes considerable cost cuts".  These include an overfunded pension plan, possible asset sales, capital market transactions, equity injections, and cost cutting.

The GOP would do better to fight for fiscal responsibility and a Main Street bailout by assisting displaced workers, rather than diverting taxpayer dollars to these terribly mismanaged companies.  The time to rebuild the GOP's fiscal responsibility credentials began the day after the election. The time to stand up for those principles is today - not just by saying "no", but by getting out in front of the American people with a winning message.