I can't imagine that GM would be alloed to fail by the government. I read that the total jobs at risk in the auto industry are around 3m. That would shoot us up to the 8% range for unemployment, which would be disastrous!
I have definitely noticed less people driving as of late to save money. There are more walking and train taking folks than I have ever seen before in most major metros. I have been talking to lots of friends across the country and they are seeing the same thing.