Should Congress design our cars?

In the final hours of the session Saturday, Senate Democrats failed to cobble together the 60 votes necessary to advance $14 billion in emergency government loans to distressed U.S. automakers.

Officers of General Motors and Chrysler warn that falling sales revenues may force them to seek bankruptcy protection within weeks without a federal handout.

Ford Motor Co. said it didn't need an immediate loan, but its future would be tied to that of its competitors and their suppliers.

The bailout failed in the Senate thanks to the principled opposition of Republican senators, led by Nevada's own John Ensign, who properly point out such handouts would only delay the inevitable unless the deal contained some step toward reducing the Big Three's exorbitant labor costs.

Union contracts which oblige the American carmakers to finance handsome benefit packages for retired workers mean they currently pay the equivalent of $73 an hour for each worker on their assembly lines, as opposed to a figure closer to $44 for Japanese carmakers for their cars manufactured in this country.

GOP senators refused to go along with the deal unless it contained a timetable for making U.S. automakers' labor costs comparable to those of foreign competitors. The deal collapsed when the United Auto Workers refused to commit to the lower labor costs.

Ironically, the huge loan was designed to stave off bankruptcy precisely as a favor to the UAW, whose members would be likely to take one of the biggest hits under any reorganization.

The White House said Saturday the bailout was not dead, President Bush reportedly considering other, even less constitutional means to shift tax dollars to the automakers in order to avoid what The Associated Press called "the possibility of a disorderly bankruptcy of any of the Big Three."

In fact, because bankruptcy law is well settled -- having worked fine to pare away unsustainable debt and reallocate the assets of railroads and airlines in their turn -- Chapter 11 would be a far more "orderly" and predictable course than the current cobbled-together parade of ad hoc bailouts, which have virtually frozen investor confidence and the credit markets.

It should also not be forgotten that the proposed intervention from Washington would turn over de facto management of the auto companies to Congress -- even if through some kind of appointed "car czar."

John Lott, author of the book "Freedomnomics" and a senior research scientist at the University of Maryland, dealt with that prospect in a commentary posted by Fox News Monday.

"The irony is that General Motors will probably be better off going bankrupt and it is probably better to do so sooner than later," writes Mr. Lott. "For example, while Toyota has fewer than 1,500 dealers, GM has almost 7,000, but it can't terminate dealers because of state regulations. Bankruptcy would also allow GM to get out of many contractual obligations to unions, such as the notorious 'jobs bank' program where laid-off union workers are paid not to work."

Studies consistently find that even partial government ownership reduces profitability, Mr. Lott reports. An all-too-typical example involves Airbus, the giant European aircraft manufacturer. Germany, France, and the United Kingdom all own shares in the company. That means its manufacturing plants and jobs are distributed not in ways that make the most sense economically, but instead to ensure each country gets its "fair share" of tax-subsidized jobs.

For instance, the wings of the new Airbus 380 are manufactured in Broughton, England. But that means "each completed set of wings has to make a remarkable journey to the final assembly site in France by way of container ship, river barge and specially adapted road trailer," the New Zealand Herald reported this week -- while the main fuselage has to travel there from Germany and the tail fin from Spain.

"Putting the wing factory next door to where the fuselage was made would have saved a lot of money," Mr. Lott points out. But once the politicians take over an industry, delivering what consumers want at a reasonable cost falls way down the list of priorities.

The scheme rejected in Congress this weekend -- in part because the new crop of leftist Democratic senators don't take their seats for another month -- would have turned over Detroit to the system that designed and built the Space Shuttle.

Democratic Rep. Steve Kagen of Wisconsin, for example, voted "no" on the bailout because he wanted Cerberus Capital, the majority owner of Chrysler, to sell two paper mills that it owned in his congressional district, Mr. Lott points out.

If you think you've already seen waste, favoritism and mismanagement, go ahead: Put the politicians in charge of the auto industry.