As we predicted, General Motors and Chrysler need more money. One of the Bush administration’s last acts was to tap the Troubled Asset Relief Program (TARP) for loans in the amount of $13.4 billion for GM and $4 billion for Chrysler. The administration instructed the automakers to return in February with restructuring plans to ensure their long-term viability. The companies have now submitted those plans, admitting that they haven’t solved their problems and asking the government for more cash.

Chrysler’s plan is laughable. The company announced that it would scale back production capacity by a mere 100,000 vehicles (a more realistic number would be closer to one million). It also appears ready to throw a Hail-Mary pass by allying itself with Fiat, though the Italian automaker has made the deal contingent on Chrysler’s ability to secure an additional $3 billion in federal loans. On top of that, Chrysler says it will need another $2 billion due to declining sales, upping its total request to $5 billion — which would more than double its total debt to the government.

GM says it needs another $16.4 billion to stave off bankruptcy. The company’s restructuring plan looks dramatic — an additional five plant closures, the elimination of 47,000 more jobs — but the changes are not nearly adequate to the scope of GM’s problems. Of more pressing concern are the debt it can’t repay to its bondholders and the benefits it can’t pay to its union workforce.

It should surprise no one that GM still has not worked out a deal with either its bondholders or the United Auto Workers: Why should any of these stakeholders make tough concessions when the government appears willing to keep GM on life support indefinitely? Using highly unrealistic estimates of job losses and other economic effects, the Detroit automakers have convinced policymakers that bankruptcy for any one of them would be catastrophic. If policymakers are willing to believe these doomsday scenarios today, why shouldn’t they believe them tomorrow?

GM’s plan estimates that bankruptcy would cost 1.5 million to 3 million jobs, but the lower figure is reached only by assuming that the bankruptcy of one company drags down the other two, as well as the entire network of suppliers and dealerships. To reach the higher figure, the studies assume that the foreign transplants — factories in the United States operated by companies such Honda, Nissan, and Volkswagen — also collapse, and that auto production in the U.S. ceases altogether.

This is far-fetched. A pre-packaged bankruptcy, in which the companies reach agreements with all their major stakeholders beforehand, would allow the automakers to continue operating and to emerge stronger and more competitive than before. If the Bush administration had forced this alternative instead of offering the companies an open-ended backstop, it is possible that this would already be behind us. Their claims that nobody wants to buy a car from a bankrupt auto company would be moot: Soon they would no longer be bankrupt auto companies — which is what they are now, whether they are willing to admit it or not.

The public is not fooled by the companies’ pretense of solvency, and months of groveling before Congress have probably damaged their reputations more than a painful-but-necessary restructuring in bankruptcy court would have. Yet the companies are loath to accept that alternative, because it would force their stakeholders to make tough concessions. Continuous government support is a much better deal for managers, bondholders, and unions. Executives get to stay in their jobs, while bondholders and unions can defer hard choices and hope the economy improves in time for them to get a better deal.

It is clear that negotiations will remain deadlocked as long as the government keeps the money flowing. The Bush administration set the precedent that the automakers could receive TARP money, so Congress is out of the loop. The only question is whether the Obama administration will run out of patience.

Some have taken the appointment of Ron Bloom to the administration’s automobile task force to be a good sign. Bloom, a former investment banker and adviser to the steelworkers’ union, has a reputation for forcing stakeholders in similar disputes to make unpalatable concessions and bridge yawning divides. But ultimately, the man who signs the checks will have to call the automakers’ bluff, and so far we’ve seen no indications that President Obama has the fortitude to stiff big Democratic constituencies. Unfortunately, they don’t come much bigger than organized labor.