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No Bailout Please, Part 2
Submitted by kmorrison on Tue, 12/09/2008 - 21:05
Yesterday's article Oppose the Auto Bailout was not intended to be anti-union or anti-auto company, it's simply the opinion of an old fashion cheapskate. If the government is going to spend taxpayer dollars they need to ensure that those funds are not being wasted. There has been little effort to explain why pumping money into failed businesses will fix that failed business model. Voters should contact their lawmakers and let them know they will hold them responsible if they give automakers billions of taxpayer dollars only to see those business collapse in the future.
Similar sentiments we're expressed by Senator Mitch McConnell (R - KY).
U.S. Senate Republican Leader Mitch McConnell made the following remarks on the Senate floor Tuesday regarding proposed auto legislation: “The auto industry is vitally important to our nation’s economy and it is vitally important to my home state of Kentucky. This is not in dispute. The question before us is how to reverse the decline of some of these auto manufacturers after decades of complicity between management and labor. “I understand congressional Democrats sent a revised proposal to the White House late last night. We will reserve our judgment until we see the latest text. But the proposal we saw yesterday afternoon fails to achieve our goal of securing the long-term viability of ailing auto companies. “I want to support a bill that revives this industry. But I will not support a bill that revives the patient with taxpayer dollars yet doesn’t secure a commitment that the patient will change its ways so future help isn’t needed. “To do so would be a betrayal of the millions of hardworking taxpayers who are not at fault for the troubles in the auto industry. And it would be unfair to the millions of Americans who depend on these companies.
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Comments
umm... it probably won't.
The point is at this point in time we can't afford to let them go bankrupt, and no one has credit to buy them out. So we do partial solutions, and hope we can keep them afloat long enough that we can let them go bankrupt. (see what bonddad has to say about this)
Yes we can (and should) let GM go chapter 11
The point is at this point in time we can't afford to let them go bankrupt
Yes, we can. Its cheaper than not. The people hurt in a chapter 11 are the stockholders and bondholders ... oh, and UAW and a few others will have to tighten their belts.
You are ignorant of chapter 11 if you think bankruptcy means liquidation or and end to the business. Fact is, airlines have gone through it and survived as corporate entities and so would GM. Chapter 11 would actually be good for GM long-term because it would enable a clean break from the anchor of retirement health benefits, too many dealerships, too much given to unions in benefits and too much debt. A clean sheet and a clean start is what is needed and a bold strategy to implement it.
The Democrats are now in the mode of raiding the treasury for every bailout hardluck case possible. This is a huge mistake and the phrase "Moral Hazard" comes to mind again and again. A recession forces us to discard uneconomic behaviors and activities and bailouts just prevent the application of that hard medicine, in the process lengthening the recovery - look to japan 1990s for why that is not good. Privatize gains and socialize losses is a fine way to send USA into bankruptcy - and there wont be chapter 11 for us, just chapter 7.
If America goes bankrupt, there will be war.
well, maybe not with Geithner in charge. (I'm not a total pessimist, really!)
If you force a lot of people out of work (which you would, in order to make the companies profitable again), you'll increase unemployment. Remember that 70% of America's GDP comes from consumers. Making people poor (retirees as well) during a recession is a great way to turn it into a deflationary period.
Nobody likes the autobailout, not even Krugman. But I sincerely believe that it has to be done. (note that bonddad is saying that auto bankruptcy could send America into a brief recession all by itself. I don't know about that, but he's a pretty sharp card)
Stopping drilling cost a hundred thousand jobs
If you force a lot of people out of work
Again, you are ignorant of chapter 11. The company still operates. The decisions that GM has to make business-wise will be the same.
Want more jobs? instead of bailing out GM, just say yes to drilling offshore and in AWNR and you will create/save hundreds of thousands of jobs. Say yes to a tax holiday, to fixing Sarbanes Oxley, to ending the threat of job-killing CO2 regulations, to ending the threat of job-killing healthcare mandates. say yes to making the Bush tax cuts permanent.
Remember that 70% of America's GDP comes from consumers. Making people poor (retirees as well) during a recession is a great way to turn it into a deflationary period.
Thanks for your expression of economic ignorance. Consumer can only spend money they make, but they can only make money over time if employed PRODUCTIVELY. You are proposing to keep GM employing people whether or not they are needed or helpful to the company. That runs the company INTO THE GROUND. It's not GM's job to be an employment program of people that they dont need and this shows exactly why the Govt bailout could be TOXIC to GM, by meddling in doing what's best for GM profitability. Without a path to profitability, GM is toast. So go Ch11 and get back on that path.
If GM lets people go, they find jobs elsewhere where they will be more productive than if held back in GM. That is the best win for the economy.
The other aspect of your comment that is ignorant is the idea that lettig GM go bankrupt would cause deflation. Deflation is a monetary phenomenon; the Fed has that in hand, not GM.
you can't pull on a string, and we're already
seeing deflation in the CPI. The fed has only certain powers, and cannot stop bullshit from leaking out of the system.
There's plenty of leases that aren't being drilled on right now -- because the bottleneck isn't there, it's production capacity (meaning boats and stuff). Releasing the holdups on drilling won't fix anything in the short term.
Also, can you post some stats on how many jobs we'd save, and on how much food production would be lost in the long term from your profligate wasting of natural resources?
What's your fix to Sarbanes Oxley?
Healthcare mandates allow american businesses to be competitive on a global market.
The ANWR jobs fantasy
Just this morning Exxon's stock got hammered becasue of a new report out saying that crude oil, currently trading at just $44/barrel, could fall below $25/barrel next year.
So, if ANWR were opened up tomorrow, how many companies would rush in, given the economic outlook?
And don't forget - according to George Bush's own Department of Energy, "There is little direct knowledge regarding the petroleum geology of the ANWR region."
So, even if oil were $100 a barrel and ANWR were opened tomorrow, few new jobs would flow becasue first they've got to find where to drill.
We heard that bogus line about ANWR ... in 1998
Oil was low ... and they said "We dont need it" and "We cant use it for 10 years anyway". Well guess what - we could have used ANWR oil in the past 2 years, with it rising and increasing our import costs. Had we opened up ANWR then, our oil prices would have been lower in the past 2 years and our trade deficit less.
Open up ANWR NOW ... so we have the oil in 2015. I can assure you, oil in 2015 will be higher than $40 a barrel!!
OIl is trading this low because of the global recession. it is temporary. Once china and india are back on a growth path, oil will rise again. Dont be shortsighted and foolish. We will need ANWR and its 15 billion barrels (still worth $600 billion in todays terms), as traditional oil supplies get tighter. Why wait for oil to hit $150 again to change this.
Your quote is stupid, there have been surveys done by USGS to confirm the importance of ANWR, and they have made estimates of economically recoverable reserves, which are significant, down to $20/barrel; and second - duh - to get that direct knowledge you need the Govt to allow the exploration to go forward. Estimates are usually under-estimates. And yes, those exploration jobs WOULD happen right away to some extent.
ANWR makes sense for US energy independence long-term so it make sense opening it up now and going forward with it. Opening up offshore and ANWR sends a signal to the oil markets that keeps the price lower and thereby enables us to spend less for oil from overseas.
be conservative.
wait till we can get top dollar for it.
let other people, i.e. our enemies the Sauds sell their oil cheaply. We will profit from their inability to conserve.
Idiot Democrats and Eco-extremists dont get it
Tehy said no when oil was above $100 barrel. In fact, they would say no if gas was $10/gallon - this was proven in the congressional debates. So your comment is dumb because they never change anyway.
Second reason the comment is dumb is that you are repeating the dumb talking point from 1998. We are not drilling all the oil tomorrow so the price of oil in the market tomorrow is irrelevent. Its the price of oil for the next 10,20,30 years.
Well we know that cheap oil is running out so that oil will be higher in 10,20 and 30 years.
Your comment is dumb in another level. Time value of money dictates that the asset is worth less the longer we wait. Drill now, gain the benefit then reinvest away from needing oil. Wait 30 years and we have thrown away a trillion dollars and given it to the Saudi's.... so when we figure out post-oil energy, we will find that the saudi's will own those companies, because we gave them the money, instead of keeping it home with ANWR and offshore oil. DUMB!
oil companies will not cease to be oil companies
until their major investors have convinced rubes to buy all their stocks. giving them money in oil enables them to make higher profits, and will make more poor people when they inevitably crash after all of the oil magnates have gotten their money into smarter companies.
Do not expect corporations to be non-corrupt. Do expect them to act in the stock holders' best interest... some of the time.
wait until the oil is not going to cars
but is going to healthcare or food production. That's my position, because people will pay a lot more when oil is a lot rarer. Maybe you want to open it now, maybe you want to open it in a hundred years. But do it when it is close to the last easily available oil on earth. Then you'll get top dollar. I think we can afford it.
any chemist will tell you how stupid it is to BURN oil.
(also, won't opening ANWR be a good choice to keep jobs, rather than make them, at some latter date?)
I'm not saying don't open up ANWR
I'm refuting your idea that doing so will create a huge number of jobs in time to offset the loss of GM.
Fair enough
... but also please go and debunk the idea that a govt construction spending bill will give auto workers jobs, when they are neither oil drillers NOR construction workers.
ANWR and offshore drilling WILL add incremental jobs to the economy. The important thing to note is that its a govt action that costs NO MONEY so it has zero economic downside. Further, the price signal impact on oil price will be immediate and that will act like a small tax cut for the economy.
so no downside to actig now to open up ANWR.
Every day I view a large construction project
Everyday, twice a day, for the last six months, I sit in two traffic lights and view a very large road/rail/outbuildings construction project. I don't see much that those guys are doing that a former auto worker couldn't be trained to do in 15 minutes.
As for your other points - with the price of oil plummeting there aren't going to be any oilfied jobs opening up. Maybe a few exploratory things, but thats it. I'm all in favor of making the case for domestic oil production but when you erroneously tout it as a job creation machine for the near term you are harming, not helping, the case. Similarly, spouting pdeudo-clever stuff like "price signal impact" is also counterproductive when the price of oil might be headed for $25.
The case for domestic production is national security and energy independence, and that is it. There is no short-term economic case whatsoever.
probably better to go with electric cars then.
easier to get more coal than more oil out of america. like it or not, if we were cut off from Venezuela, we'd have serious problems. And whose conducting training exercises there? (correct answer: Russia. and that's our fault).
What they need to say...
is how these funds would keep the companies affloat. So far the plan doesn't address any of the inherent problems with their business model. I agree with FT that chapter 11 makes sense. If the main reason for giving the auto industry money is because we don't want layoffs, then this bill has to show itself as something more than a temporary delay of those layoffs. The only change or accountability they are offerring is a 'car czar'. I don't find that comforting at all. Besides being doubtful that that is really a role for government; who will that one all powerful 'car czar' be? What will be their role? And are we really going to bank that one person can singlehandedly turn the auto industry around?
the bailouts wont fix GM
The Govt is actually making it worse, because they are going to load up on these feel-good-ism directives - build electric cars, keep payrolls fat, etc. - that will get in the way of a laser-like focus on profitability, which is what GM should be all about.
GM's business model is broken and their cost structure is inherently uncompetitive. They cant fix it properly without some tough medicine.
Agreed,
though I'm willing to give them the benefit of the doubt and hear out any plan. However, it doesn't appear than there is any sort of plan other than to hand out money. Bankruptcy would be a better answer. If they want to avoid that then they at minimum have to explain how money alone will fix a broken business model.
it won't. but the big 3 don't turn on a dime.
and even the process of designing new vehicles takes a while. the volt isn't even done yet! maybe it's the wave of the future, I don't know.
I think it's mainly republicans pressing for "no holds lending" -- I'd rather see a public stake for all of the money lended, and get our money back when the stock goes up. which it will if they don't go bankrupt.