Sunday, May 31, 2009

GM: A warning for California and the U.S.

Tomorrow morning, General Motors is very likely to file bankruptcy. I'm so happy we poured tens of billions of taxpayer dollars into them to prevent something they have to do anyway. It turns out that if you have massive, unsustainable legacy costs, you can't just dump more money on the problem and hope those costs will disappear. You actually have to do something about the underlying problem.

A parallel comes to mind. It doesn't matter if we pour tens of billions of taxpayer dollars into California's sucking black hole of a government. We have massive, unsustainable legacy costs and continued irresponsible spending. We'll actually have to do something about them, not just pour more money on the problem and hope the costs disappear.

There's an obvious pattern here, so I'll continue it. The U.S. is now doing precisely the same things GM and California have done to end up in their current catastrophic economic situations. As a country, we need to finally stop spending and do something about our legacy costs, or we will eventually reach the inevitable result we'll see with GM tomorrow and with California in a matter of weeks or months. Oh, and about health care? It's really not as hard to solve as people like to claim it is.

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