The famous Daily News headline, "Ford to City: Drop Dead," ran on Oct. 30, 1975.

    New York was on the verge of bankruptcy, and President Ford (who never actually said "drop dead") had made it clear, after listening to conservative hard-liners both inside and outside of his administration, that he planned to veto any federal rescue plan.

    It was yet another case of the worshippers of abstract economic notions (let the markets run their infallible courses) ignoring the potential consequences of their smug certainties.

    Felix Rohatyn, the financier who played such a large role in the city's economic recovery, has told me many times of the economic summit near Paris in November 1975 in which President Valéry Giscard d'Estaing of France and Chancellor Helmut Schmidt of West Germany explained to Mr. Ford that allowing New York to go bankrupt might well light the fuse to an international financial crisis and would foster the idea that America itself was no longer creditworthy.

    Mr. Ford was persuaded that the cascading effects of a bankruptcy were potentially catastrophic and could not be risked. He relented. Loan guarantees were made; the city went through the long ordeal of getting its financial house in order; the loans were repaid; and New York not only recovered but thrived.

    The city's fiscal crisis of the 1970s was in no way comparable in scale to the myriad crises facing the country right now. But it's still instructive. The ideological hard-liners have now cast their collectively jaundiced eye on Detroit's automakers. Their response to the very real danger that General Motors might crumble into bankruptcy is: C'est la vie.

    Unlike President Ford, Senator Richard Shelby, a Republican of Alabama - to cite just one example - is not troubled by thoughts of cascading effects, such as the toll of domino-like business failures and swelling unemployment moving like a toxic virus through an economy that is already ill.

    "The financial situation facing the Big Three is not a national problem, but their own problem," he said.

    Whoa!

    I can agree that it's impossible to make a positive case for the backward, self-destructive practices of the auto industry over many years. (Just as it was difficult to defend the practices that led to New York's fiscal crisis.) But in the current environment, allowing one or more of the Big Three to go bankrupt would be like offering up your nose to Sweeney Todd to spite your face.

    It's not just General Motors or Chrysler or Ford. The U.S. auto industry is the cornerstone of American manufacturing. It supports millions of jobs, directly or indirectly, in a vast array of businesses.

    Start with the thousands of parts in each vehicle. They are produced by suppliers across the country, from one coast to the other. Those supplies have to be manufactured, packaged and transported. Truck drivers, railway systems and shipping companies are involved.

    And, of course, there are dealers everywhere. And the auto repair industry. And the insurance industry. And vast systems of advertising supporting every kind of job you can imagine, from messengers to accountants to filmmakers and beyond. All of that advertising funnels absolutely crucial revenues to television, magazines, newspapers - you name it.

    If G.M., which is on life support, or Ford or Chrysler were to go bankrupt, the reverberations would kill the jobs of entire armies of American workers. It would undermine the standard of living of hundreds of thousands of families and shutter the entrances of untold numbers of small and intermediate businesses.

    Senator Shelby might want to do some homework before embarrassing himself again with the absurd comment that the crisis facing the Big Three is not a national problem.

    Gov. Jennifer Granholm of Michigan, a state that is already writhing in pain from the auto industry's troubles, would tell Mr. Shelby that the industry "supports 1 in every 10 jobs in the country."

    It's easy to demonize the American auto industry. It has behaved with the foresight of a crack addict for years. But even when people set their own houses on fire, we still dial 9-1-1, hoping to save lives, salvage what we can and protect the rest of the neighborhood.

    This whole matter needs some intensive thought. At the moment, Washington has tremendous leverage over the failing auto industry. The government should craft a rescue plan that is both tough and very, very smart. That means dragging the industry (kicking and screaming, no doubt) into the 21st century by insisting on ironclad commitments to design and develop vehicles that make sense economically and that serve the nation's long-term energy security requirements.

    What I would like to see is creative thinking on both ends of the bargain. Let the smartest minds design a bailout that sparks a creative revolution in the industry. Think of it as project synergy.