As someone in the minority position in terms of generally supporting the bailout of the automakers, I have to say that Obama’s “tough love” approach to handling this undertaking looks somewhat promising.
Unsurprisingly, the mindless shriekers and innumerable pathological haters of the Fright-wing are having a field day denouncing today’s announcement.
Apparently, they’re outraged (but when aren’t they?) at what they perceive to be a dangerously socialistic intrusion into the fabulous free market. According to dictates drawn from the idealistic, laissez-faire fantasy world of Hayeck and Rand, GM and Chrysler should have been abandoned with Spartan resolve to the wrecking yard. In doing so however, they seem oblivious to fact that simply disposing of them in this way would have effectively flushed all of the billions of dollars of taxpayer loans already provided (most of it provided by the previous administration) down the drain, and effectively destroyed the industrial core of the North American economy to boot. It seems, however, that their burning desire to see their partisan political ENEMIES fail miserably far outweighs any fiscal prudence, ethical decency or common sense.
Now, that’s not to say that there aren’t all kinds of reservations about this latest evolution in the plan to save the struggling automakers and prevent a meltdown in the manufacturing sector. Obviously, there’s any number of questions about the nature and extent of the government’s involvement, but to dismiss it outright for purely partisan motives or from some sense of ideological Puritanism seems petty, reckless and self-serving.
Obama has taken a beating over the last four weeks for the financial collapse that he inherited from the previous administration and now it seems that it’s time to excoriate him over the demise of the manufacturing sector. In both cases, it’s reasonable to be skeptical about the government’s efforts to salvage something viable from the wreckage, but there’s a huge difference between cautious reserve and blind, knee-jerk denunciation.
We keep coming back to the issue of the government bailout of the North American automakers because it seems so symbolic of the challenges now being confronted as the economy tanks and different ideological views of how best to solve the problem are hashed out…
Last month, in advance of the most recent budget from the deficit-busting “Conservative” government, Buzz Hargrove, former head of the Canadian Auto Worker’s Union, pled the case of the Canadian automakers to the panel of entrepreneurs (“Dragons”) from the CBC’s venture-capitalist program (yes, the irony is ripe indeed) as to why the auto sector deserved help.
Given a fictional amount of $20 billion to disperse in order to boost the Canadian economy, the “Dragons” gave precisely ZERO to the auto sector. Unsurprisingly, anarcho-Capitalist Dragon Kevin O’Leary called the Big 3 “losers” that should just be allowed to fail.
The saga continues… This is the first part (there’s an embedded link at the end to the second part) of a fascinating interview between Paul Jay and York University professor and former CAW research director Sam Gindin about the sorry state of the American (and Canadian) automakers and some of the factors that have contributed to their demise.
After dithering about it for more than a week, President Bush has decided to bailout the Detroit Three automakers after all with a $17.4 billion rescue package of bridge loans to give the struggling companies a little more breathing room to restructure and to avoid a collapse that some had warned could come early next year if they received no help.
Bush explained that the “orderly” bankruptcy the White House had been toying with in recent days might send the auto makers into an unstoppable death spiral because of their weakened state and likely increased consumer unwillingness to buy their products.
“My economic advisers believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis,” he said. “It could send our suffering economy into a deeper and longer recession.”
There are strings attached. Among them, firms must: provide warrants for non-voting stock; accept limits on executive compensation and eliminate perks such as corporate jets; allow the government to examine their books and records; report and the government has the power to block any large transactions (> $100 M); comply with applicable Federal fuel efficiency and emissions requirements; and, not issue new dividends while they owe government debt. Additionally, debt owed to the government will be senior to other debts, to the extent permitted by law.
The facts that this “bail out” is overwhelmingly opposed by the American people, was killed in the Senate, and that the TARP funds were allocated for an entirely different purpose were apparently not major factors in Bush’s decision.
Update: The furious blowback from the “limited government” crowd begins… And a rather surprisingly restrained (dare I say moderate) response from Hugh Hewitt. I’m truly shocked.
Update2: Video replaced with a better/longer one from TPM.
Some general musings on the incompetence of the Bush administration during its waning days and the unlikelihood that a good resolution will come from an auto bailout brought to you by the same team responsible for the grotesque mismanagement of affairs subsequent to Hurricane Katrina.
I believe that’s how former Labor Secretary Robert Reich has described the battle being played out over the fate of the “big three” automakers. In this brief report, Al Jazeera’s English news service takes a look at the non-unionized, southern-based foreign automakers (so-called “transplants”) and how they’re faring in contrast to rival domestic manufacturers.
It’s more than a little simplistic to characterize it in such a way, but there are definite cultural aspects involved with this struggle as well as purely economic considerations.
The putative “bail out” (or “bridge loan” if you prefer) that was defeated in the U.S. Senate the other day, largely at the behest of the opposition from senators of southern states that are home to the “transplant” automakers, was driven not only by partisan political motivations, but a strong union-busting animus and supposed “free-market” imperative. The only thing is that it completely overlooks is the fact that these plants have been generously subsidized by state governments with lavish, multi-billion dollar tax incentives and other forms of corporate welfare that attracted them to locate there in the first place.
It’s interesting to view the dubious business practices of the automakers through the prism of the pending bail-out, err, “bridge loan” in the offing from taxpayers. In this case CBC News highlights the increasing trend of gouging people with exorbitant “repair” costs when leased vehicles are returned to the dealership.
Speaking of the bail-out, some Republicans aren’t happy about it…
While here in the Great White North we were all transfixed by our little “constitutional crisis” and parliamentary “psychodrama” there was actually news taking place in the good ol’ US of A today (there’s a switch, huh?).
That should throw more than a few spanners into the Conservatives’ thinking about the economy. Um, that’s what they’re going to be doing over the next six weeks, right? Or will they just be campaigning for re-election?