President Obama often takes credit for President Bush’s worst policies while also averring that the economy hasn’t resurged yet because of his predecessor’s bad policies. I’m happy to blame both of them for the bad policies and bad results.
While campaigning in Ohio recently, Obama said we should pick him in November because he didn’t “let Detroit go bankrupt.”
Financial writer Steve Conover points out that the car-czar idea started with Bush in the frantic last months of his administration. Also that the choice for dealing with troubled auto firms “in 2008-2009 was not bankruptcy versus no bankruptcy [but] between precedent-driven bankruptcy and White House-driven bankruptcy — rule-of-law versus rule-of-czar.”
Not every car company was going bankrupt back then and being “rescued” by the elephantine intercession of the federal government. GM and Chrysler were the special beneficiaries of that galumphing guidance. As were the auto unions at whose behest the usual bankruptcy procedures were bypassed.
Better-managed firms like Ford and Honda had circumvented the abyss. The reward for their hard work and foresight? Government-subsidized competition. Conover’s most basic point is that the only resource that can (and should) “save” any company from failing in the marketplace is “a sufficient number of buying customers.” The auto industry would have continued minus GM and Chrysler. People who wanted to buy cars would simply have bought cars elsewhere — from companies better able to supply their demand. And auto jobs would have moved accordingly.
This is Common Sense. I’m Paul Jacob.
10 replies on “Bipartisan Blame for Auto Wreckage”
Common sense? Not really. I support the bailouts. The financial crisis was caused by the proliferation of derivatives which were allowed by Bush, Cheney, McCain, Phil Gramm and Alan Greenspan who all opposed any regulation of derivatives. The derivatives problem still exists and dwarfs other financial problems.
So he “saved” Detroit and it only cost the US taxpayers, what, $36 billion dollars, if the stock that we subsumed were sold today at all that it would bring. We could have bought the whole company AFTER bancruptcy for half that, and be shed of the uncompetitive union contracts. The only thing that got saved at GM was the union bosses jobs. And Crysler, after we ploughed all those tax dollars into it, still got sold off to Fiat. The same result that might have happened if we had stayed out of it, except it wouldn’t have cost us the extra billions.
One big difference, if we HADN’T come through with all the bailout money, we wouldn’t have GM now still pushing the uncompetitive $40,000 a car, Volt,that is still managing to cost taxpayers for each one that is sold. Of course if the cost were accurately amortized, the actual cost of the Volt would be several hundred thousand of cost to taxpayers for each one sold. But that’s just being mean-spirited and a hater.
Re derivatives: A derivative is NOT an asset. It’s an imaginary security of no tangible value that banks/ financial institutions trade as a bet on the value of future risk or securities. In other words, whether someone will default or not. The financial institutions had run up over $1.4 quadrillion worth of betting on this.
The awareness of this as a serious problem actually surfaced during that pleasant economic expansion that Clinton presided over when the Repub Congress wouldn’t do any of the tax and spending he wanted. But he could have done something about the derivatives, at the risk of crashing the whole system. He let it ride so that we inherited it, while he looked good.
WashPo, didn’t used to be just shiling for the government and actually reported on the seriousness of the problem and the lady who tried to sttop it.
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/25/AR2009052502108.html
But no one did anything.
Jim: Feel free to support bailouts with your own money. Don’t try to convince me it’s in my interest as a taxpayer.
Jim the destruction of the economy by government intervention is general. If derivatives are a problem then those who play with fire should be allowed, and should, suffer the burns and full consequences. We do not need regulation to “prevent” that, we need to allow market forces cause that to happen.
The bail outs saved no jobs. Bankruptcy would have allowed true organizational reform in the auto industry. The best plants, lines, designs and engineering would have survived under fresh management and ownership.
All of Washington’s elected residents claim to support the free market, but very, very few of them have sufficient faith in it to allow it to act.
The bailouts supported Coward and Piven’s goals.
Cloward
I’m sure that Drip and Pick supported the Afghanistan and Iraq wars and the 2 trillion on tax cuts for the wealthy. President Cheney got a new Lexus every year with the tax cuts and benefited even more with the no-bid contracts awarded to Haliburton. But you
I’m sure that Drip and Pick supported the Afghanistan and Iraq wars and the 2 trillion in tax cuts for the wealthy. I didn’t have any choice with my money on that. Two wars instigated by two war-dodgers–one a drunken coke head and the other a draft dodger. President Cheney got a new Lexus every year with the tax cuts and benefited even more with the no-bid contracts awarded to Haliburton. But you REPUBLIOKOOKS keep drinking the KOOKAID.
Had GM and Chrysler not been bailed out, the companies would not have disappeared, but their union contracts would have been subject to court modification, perhaps voided, perhaps not, and the corporations, themselves, would have been reorganized, not liquidated. The whole bailout operation was the govenment doing favors for influencial entities, both the companies and their unions.
[…] Democracy and socialism are not interdependent concepts. They are not only different, but opposing philosophies. Is it consistent with democracy to institute the most meddlesome, all-encompassing and restrictive government, provided that it be publicly chosen and that it act in the name of the people? Would the result not be tyranny, under the guise of legitimate government and, by appropriating this legitimacy assuring to itself the power and omnipotence which it would otherwise assuredly lack? Democracy extends the sphere of personal independence; socialism confines it. Democracy values each man at his highest; socialism makes of each man an agent, an instrument, a number. Democracy and socialism have but one thing in common—equality. But note well the difference. Democracy aims at equality in liberty. Socialism desires equality in constraint and in servitude.Source: thisiscommonsense.com […]