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Megan McArdle:

I confess, I'm impressed that the Obama administration seems willing to seriously contemplate putting the American auto industry into bankruptcy. The auto industry is the symbol of the 1950's-style highly unionized technocratic economy that has soared back into prominence as the public dream of the Democratic party (oh where, oh where have the environmentalists gone?) Bankruptcy will rip the last bastion of Galbraith's New Industrial State thoroughly asunder, shattering union contracts, closing plants, sending Detroit's legacy marks to the scrapyard.

The administration does not want to be the one giving a bottomless pool of money to the automakers. It also does not want to be the one dealing a near death-blow to the UAW. What happens to prosperous unions in bankruptcy is really not pretty--just ask an airline pilot. Contracts are tossed out, slipping pension funds get gutted (though the Big Three funds are in good shape for struggling companies), jobs are slashed. I suspect that the retirees can kiss those expensive, and yet unfunded, health care benefits good bye. The administration seems to be hoping it can avoid doing both of these things, but this doesn't seem possible--either it will prop the companies up, or it will force a radical restructuring on the companies and creditors.