Doomsday prognostications revisted
Thursday, August 26th, 2010
By: Dick Polman
dpolman@whyy.org
Given our sour national mood, I know it's very uncool to highlight an Obama success story (actually, it's an Obama-Bush success story). But let's live dangerously, if only for a day. Let's take a look at what has happened to the domestic auto industry since the federal government stepped in with bailout bucks and strict directives – and compare today's realities with the prognostications that were circulated by the naysayers.
GM and Chrysler have emerged from bankruptcy; both are now operating at a profit. GM repaid its government loans back in April, five years ahead of the loan maturity date. Its board has been restructured, at the Obama regime's insistence but with minimal White House guidance; even conservative talking head Steve Forbes admits he's pleased: "GM's management is using solid, conservative, free-market management principles to get the company back back to long-term profitability." Most importantly, this crucial element of the Rustbelt economy has added 76,000 jobs during the past 13 months. The automakers have posted roughly half the gains; the suppliers, who are dependent on the automakers, posted the rest.
The threatened loss of a core domestic manufacturing sector was enough to propel President Bush to action in late 2008, despite his free-market tenets. He championed the initial bailout; President Obama upped the ante in '09, with new money and scared-straight restructuring requirements. Given the results of their efforts, who today can persuasively argue that it would have been preferable to practice laissez faire and allow the industry and its jobs to die?
Federal interventions of this kind should indeed be rare. But if a similar national economy emergency does occur in the future, and the two parties engage in the usual debate about "big government," it may be worth remembering what the obstructionist chorus was singing in late 2008 and 2009, when the federal rescue efforts were underway. Before these lyrics slip down the memory hole forever, let us behold the Republicans in full cry.
Senator Richard Shelby: "I wouldn't loan them any money…It's a General Motors that is headed down this road to oblivion. Should we intervene to slow it down, knowing it's going to happen? I say no, not for the American taxpayer."
Senator Jim DeMint: If we rescue the automakers, "we're going to have riots. There are already people rioting because they're losing their jobs when somebody else is being bailed out."
House GOP leader John Boehner: The rescue effort "guarantees failure at taxpayer expense. It will keep the industry dependent on taxpayer money instead of giving auto workers the security of a viable industry that is back on its feet and ready to compete."
Senate GOP leader Mitch McConnell: "A government big enough to give us everything we want is a government big enough to take everything we have…We simply cannot ask the American taxpayer to subsidize failure."
House GOP Whip Eric Cantor: "The bailout of a failed model is not what we owe the taxpayers…I know that I don’t want Speaker Pelosi and Harry Reid designing the car that I drive, and I don’t think any American does, either. Washington, the president, Congress – none has any business running that car company. They’ll run it into the ground."
John Kyl: The auto rescue effort "doesn’t change anything. It just puts off for six months or so the day of reckoning."
Ex-House Speaker Newt Gingrich, predicting that young people will rise up against the rescue effort: If "those 20-year-olds and 30-year-olds start to figure out they're going to pay the (bailout) taxes, I think you might find a lot of dissatisfaction by next summer."
GOP chairman Michael Steele: The GM rescue effort is "further proof that President Obama's economic experiments are wrong for America."
Top Republican activist Grover Norquist: On the scale of disasters, Obama's decision to force a restructuring at GM "is somewhere in between Baghdad and fixing the flood in Louisiana. Obama has decided to take this over. He now owns it."
Indeed, he does – happily so. But Republicans have yet to own up to their doomsday rhetoric. Will they cede error, perchance? Or will they take refuge in the fact that anything uttered beyond yesterday is generally forgotten? We know the answer already.
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I'll be away tomorrow, but the brass will be a posting a message of welcome to all blog readers – with lots of information about the commenting process and some guidelines that are designed to ensure that everybody makes nice. Have a great weekend and see you on the flip side.
Yo polman, wanna snuggle later?
I hope Polman writes the same kind of column when Obama gives his Iraq victory speech to the nation, recounting all the doomsday comments from Democrats about the surge supposed failure to come.
But the big question remains….will Talvenada, and his evil twin Alvenada, migrate over to this new site? Can still_independent live with no more Haiku?
In the summer I write baseball Haiku's. See in late October!
Tom, Alvenada is already here. He's part of a multiple personality group of one.
thanks to HA's program, I've been Haiku free since pitchers and catchers reported. I do kind of miss it though…. While Ford has made a nice turnaround, please don't pretend they weren't also begging for money from congress in November 2008, because they were. They just didn't get any at the time. On the plus side, their setting up the VEBA to cover retiree benefits was a great move. On the minus side, they've sold off some marquee brands (Jaguar and Land Rover), lost $14.6B in 2008, and traded a lot of debt for a lot of equity in the company. Overall, I give them credit, but they were looking for government money
Still- what is VEBA?
GM is going to lose tons of money on the Volt, but hey, never mind about that. Shouldn't there also be a mention of the one US automaker who did not take any money from the Feds? Ford on July 23rd posted a profit of $2.6 billion for the quarter, making it five straight profitable quarters and saying they would have more cash-on-hand than debt at the end of 2011. Yet, they took no federal money. Who is the real automaker success story? Meanwhile, won't it be neat to see the UAW negotiate with itself on new GM worker contracts? And isn't it great that GM is building extensions to one of its plants, in Mexico?
I assume all of those touting the success of GM have contacted their brokers and placed huge buy orders in anticipation of GM's upcoming IPO. Don't worry about the billions GM still owes the government, that is what the IPO is for. Don't worry about their enormous and unsustainable pension obligations. Don't worry about their destructive labor agreements. Don't worry about the dependency of their profits on gas-guzzling pickup trucks and SUVs. Don't worry that GM is losing market share. Don't worry at all, just buy it at any cost folks, for that is how to make it an American success story.
So GM should have been left to fail and take down the economy with it? What would those of you who have been hammering everything both the Bush and Obama administrations been screaming if we had 25 per cent unemployment and the failure of most of the manufacturing industries in the country?
Let me try one more time. Somebody maybe lying and somebody may not know what they are talking about but I don't think that person is named Mike. Google "Chrysler Tarp loan" from the different articles it looks like Chrysler has gotten almost $20 Billion
See reply to your post below.
What's up with the layout of this blog? Its a mess!
"Let's live dangerously"
With the money coming back (either all or mostly all), the results point to a success started by Bush & completed by Obama. I believe one thing that has helped the speed of the turnaround is completely outside of politics. During this time frame, the Big Gun, Toyota, has had a slew of problems showing that the quality of their products did not match the perception of that quality. In their defense, they are handling it as well as can be expected. We'll have to see if in the next 2 years if they don't regain the market share they lost to the Americans.
Rich- you said " So, Mike, you just casually admit that you lied in your previous post? And you expect people to take you seriously?"……….
Huh? The discrepancy is over the bailout vs loan….. mmmm? And you're counting this as a lie? You're not very good at the game of gotcha
swmike – I don't think you lied. You were incorrect, but to lie you would have had to known that it wasn't true and still said it anyway. I often disagree with you, but on topics other than global warming, you don't intentionally lie
However, it wasn't a case of "bailout vs loan". The government didn't even loan them money. They backed the loan. There was some risk to the government, obviously, if Chrysler had defaulted. But they didn't, and the government never paid anything, even temporarily. Even if you squint at it real hard, it's kinda tough to call that a bailout.
I'll try again. The government didn't loan them any money. Then maybe you want to explain this? http://www.examiner.com/american-autos-in-national/chrysler-pays-back-1-9-billion-of-government-loans or this http://www.leftlanenews.com/chrysler-gm-line-up-for-more-government-loans.html
I believe they were discussing the Chrysler situation from 1979 where the government essentially acted as a co-signer to the loans Chrysler needed to remain afloat.
Nice smiley face. Good use of the blog features. LOL
Some of the GM payback was made with govt. money from a different source – so they're not out of the red completely yet. The bigger issue is that even though there's a degree of success, you don't want to trust a bunch of mid level Washington types to be in the driver's seat on too many of these decisions. They don't do government well – they're not likely to be running business well.
Jim, usually I mostly agree with you, but I would just offer this observation. You think government bureaucrats can't be trusted to make business decisions, a popular truism, but just how brilliant have the business decision makers been the last decade or so? I don't think business leaders have any more sense than government bureaucrats, with a few rare exceptions. My experience in the business world is that most executives are idiots.
Rich, I heartily agree with you on executives (they got us into this mess) but the answer is in keeping a balance. Let the market (generally) maintain business and have government patrol against the rogues and cheats. I'm just conerned that the lifelong paper pushers in some DC office can make some pretty dangerous decisions that no one has to answer for and we have to pay to fix.
It's Chrysler's 2nd go round with a bailout. Any business can survive if the government is will to pump billions of dollars to keep them afloat. Hardly a sucess story. Most cars are now assembled in America. GM and Chryslers loss would have been Fords, Toyota , Honda, and Nissan's gain. Most of thos mfgs have plants right here in America too. Considering the legacy costs of Chrysler and GM and a continuation of their pensions I would say they'll probably be back asking for another bailout in the future.
Swede, about that first Chrysler bailout, it never happened. No federal money was ever transferred to Chrysler; instead, the Feds gave a loan guarantee so Chrysler could borrow money. They did so, regained profitability, and repaid the loans. Didn't cost the taxpayer a penny.
Chris looks like your just a little off. Part of the CNN 2009 headline "$4 billion bridge loan and $3.2 billion in bankruptcy financing won't be paid back by Chrysler following bankruptcy." http://money.cnn.com/2009/05/05/news/companies/chrysler_loans/ Earlier is year the treasury agreed to take $1.9 billion for the $4 billion bridge loan. All together Chrysler has paid $3.9 billion of the $14.3 billion bail out loan from the government. So as of now they owe only $10.4 billion. But don't worry the government it quite happy with that because they didn't expect to get any of the money of that back. http://www.examiner.com/american-autos-in-national/chrysler-pays-back-1-9-billion-of-government-loans
You are correct. This time it was a bailout. When they're back at the trough 20 years from what would you do?
So, Mike, you just casually admit that you lied in your previous post? And you expect people to take you seriously? This is why we don't.
Rich, being incorrect about something does not make it a lie.
People who fight the future tend to forget the past.
Well, you certainly picked a lineup of all the top Republican geniuses to quote from there. The accuracy quotient of the predictions then make me wonder how accurate their current predictions about how they are going to take over the House and Senate in November will turn out to be.
It is a little early to proclaim GM a success story: GM still owes the government (taxpayers) upwards of $40 billion; GM still has astounding pension obligations that need to be met; GM continues to lose market share; and GM remains heavily dependent on the sale of politically-incorrect large trucks and SUVs. All though we can never know, who's to say that going through the traditional bankruptcy procedures and being reorganized accordingly wouldn't have yield a similar, or perhaps even superior result than the federal bailout?
I agree. Give them 40 billion and they show you a 2 billion profit. I could do that.
Where are the usual comments?