GM and Bailouts: Have You Noticed a Pattern Yet?

What was the result when enough members of Congress were suckered into voting for the $700 billion bailout? It "surprisingly" turned out not to be enough. What happened when the government gave AIG 85 billion dollars? They had some really nice parties, and then they wanted--and got--more. What do you suspect will happen if a bloated General Motors gets money from the federal government? Here are your multiple choices: (A) It won't be enough, (B) GM will want more, or (C) the taxpayers will get taken to the cleaners yet again?

The correct answer is (D), all of the above.

America's new motto has seemingly become "If it sucks, subsidize it." Are

Here's a novel idea: General Motors...get this...could declare...are you ready...bankruptcy! People who have actually spent some time thinking about it have come to the conclusion that this would be the best economic choice. But then again, maybe it's not a very good idea after all. Because bankruptcy is something that is actually constitutionally permissible!!

there really that few people who understand the result of subsidizing something that sucks? It will suck even more. Always has, always will. America's vault has been sucked dry. GM doesn't deserve a red cent out of my, your, or the Federal Reserve's pocket.

I (mostly) agree with Thomas Friedman about the management of General Motors--they are idiots and should be sacked. He wrote
Last September, I was...watching CNBC...interviewing Bob Nardelli, the C.E.O. of Chrysler, and he was explaining why the auto industry, at that time, needed $25 billion in loan guarantees. It wasn’t a bailout, he said. It was a way to enable the car companies to retool for innovation. I could not help but shout back at the TV screen: “We have to subsidize Detroit so that it will innovate?” If we give you another $25 billion, will you also do accounting?
Friedman seems to be on the right track, that of recognizing that a bailout of GM would be fruitless. But wait...there's more.

How did GM become an obese automaking mastodon? A beached whale?
Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it.
First of all, GM labor union contracts guarantee outrageous wages. Secondly, GM owners wanted to make as much money per car as they could, so they pushed SUVs and refused to make the intelligent decisions that Japanese and European automakers did. If Japan and Germany can figure it out, why should we facilitate the perpetuation of General Motors' stupidity?
...instead of focusing on making money by innovating around fuel efficiency, productivity and design, G.M. threw way too much energy into lobbying and maneuvering to protect its gas guzzlers.
The blame for the travesty, according to Friedman
...not only belongs to the auto executives, but must be shared equally with the entire Michigan delegation in the House and Senate, virtually all of whom, year after year, voted however the Detroit automakers and unions instructed them to vote.
It seems pretty clear that a bailout would be a worse travesty, right? This is where Thomas Friedman gets weak in the knees. After all his chiding of General Motors, he ultimately whimpers:
O.K., now that I have all that off my chest, what do we do? I am as terrified as anyone of the domino effect on industry and workers if G.M. were to collapse.
I am suddenly left to suspect that General Motors subsidizes Friedman's NY Times column. How else to explain the sudden U-turn? I, for one, think there is no entity that is too big to fail, and for a minute I thought Friedman did, too. I'm sick and tired of the wimpish "lesser of two evils" mentality that we have developed as a nation--that Friedman seems to personify.

Quite a few of those news shows you should never watch again, and

America's new motto has seemingly become "If it sucks, subsidize it."

a plethora of politicians who should be thrown out of office are yelling "HURRY! It worked so well for Wall Street!" It's as though all of GM's capital would simply disappear in a puff of smoke we didn't bail them out. If you believed George W. Bush and Hanky Panky Paulson once, you get a pass. If you believe them again, shame on you.

Here's a novel idea! General Motors...get this...could declare...are you ready...bankruptcy! People who have actually spent some time thinking about it have come to the conclusion that this would be the best economic choice. But then again, maybe that's not a very good idea after all. Because bankruptcy is something that is actually constitutionally permissible, and we all know that the Constitution is just a "[blankety-blank] piece of paper".

So, being unconstitutional, maybe a bailout is our only choice...

If that's the case, we really suck.




Comments

  1. So before I clicked on the 'Read more' link, I was thinking in my head... D - all of the above, D - all of the above.

    I couldn't agree more, although I would change the "If it sucks, subsidize it" to "If it sucks really badly and is managed by friends of the politicians, subsidize it."

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  2. Just think. Before long we could end up with the US version of the Trabant, the 'fantastic' car that was produced in the old East Germany for 30 years with pretty much zero innovation during that time.

    Taxpayers will pay for the production of cars that people don't want, incentivized by political whim instead of customer demand, in order to support a shoddy and corrupt economic system.

    "[G]overnment's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." --Ronald Reagan, Aug. 15, 1986

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