It would seem that conventional wisdom on the left concerning a bail-out for the automakers is that under normal circumstances we should absolutely let whichever of them is about to fail, fail, but these aren’t normal circumstances. Given the fragility of the current economic situation, we can’t risk the potential bad effects of the increase in unemployment, the loss of consumer confidence, and the impact on financial markets.

Let me say two things about this. First, if that is to be the approach here, then we should learn a lesson from the execution of the TARP and be very, very clear about what the goals of the policy are. If it is merely to buy time for the automakers, in the hopes that they can right themselves or fail properly at a more economically certain time, then let’s be very clear about what our definitions of things like “more economically certain time” are. We don’t want to find ourselves in an AIG-like situation, where the money we’ve already spent prevents officials from turning off the tap at a later time.

If instead we are going all in and trying to shepherd these firms to success, then let’s please set some very specific metrics, and let’s please set a threshold beyond which we will place no more taxpayer dollars on the line. In other words, whatever a bail-out may be, let’s not let it be open ended.

And secondly, it seems that a number of defenders of the bail-out are arguing that a rescue is necessary because GM may find itself in Chapter 7 bankruptcy rather than Chapter 11, and facing forced liquidation, which would be bad, rather than orderly reorganization. But this seems like a very simple thing to fix. If Congress can pass a special, tailor-made rescue bill for the automakers, then certainly it can also pass a special, tailor-made bankruptcy bill for them.

I guess I just don’t see why, if times are desperate enough that the government is taking big stakes in huge financial companies and, potentially, automakers, then times aren’t also desperate enough that the government might take some unconventional steps in order to arrive at the first best solution. Or to reframe–when TARP was first proposed, many economists complained that something was necessary, TARP wasn’t the right something, but it was better than nothing. They then later fretted, when Paulson finally began doing what they’d wanted him to do in the first place–purchase equity stakes–that valuable time had been wasted.

Well in this case, something is necessary, a bail-out isn’t the right something, but it’s better than nothing. So why aren’t those same economists urging us to make a daring, but preferable policy move this time around? Especially when it looks like a bail-out may not pass in the lame duck session?