The administration's belief that saving GM from the bankruptcy it so richly deserves is essential to saving the rest of the economy symbolizes how it misunderstood the crisis from the start.
When credit markets seized in mid-September, the government acted as if the problem were the collapsing market price of non-performing loans held by money-center banks. Nonsense. The real problem was the collapsing market price of performing loans held by everyone else.
That is, the true crisis was not that companies that richly deserved to go under couldn't raise cash at favorable rates, but that otherwise good companies were (and still are) imperiled because they can't raise money at reasonable rates. The problem today is not that a sensible market doesn't want GM bonds, but that a panicked market doesn't want anyone's bonds.
As long as the government continues to conceive its job as saving bad companies from their just deserts - rather than getting the trillions of dollars of credit destroyed by the panic back out to the productive economy - the bailout will continue to expand and continue to fail.
Really what's happening is that Bush doesn't want this to happen at the tail end of his presidency so he's trying to push it down the road to someone else, same thing for the Republicans in congress. Politicians engage in this kind of thinking all the time, but nonetheless, from an economic perspective this piece hits the nail on the head: the reaction of many of the other politicians with their bailouts and whatnot is exactly opposite of what actually needs to be done.