It appears that political momentum is building for a federal government loan to General Motors Corp., Ford Motor Co. and Chrysler LLC on terms far more favorable than they could realize in the marketplace. The numbers circulating in Washington suggest $400 billion at 4 percent would be just about right to prop up the struggling portion of the U.S. auto industry.

There is no reference to the rest of the U.S. auto industry, which also is struggling but is not on life support like the Big Three Detroit-area automakers. Did you think only Europeans picked winners and losers? Some observers have estimated that the 4-percent rate would substitute for 12-plus percent—if the funds could be found in the market at any price.

The rationale underlying this social engineering is that the federal government has imposed ever-more-stringent corporate average fuel...