Corporate welfare

[Louis Jeansonne]

Although I'm baffled by it, I'll honor Brandon's request to abandon ideology (??) and speak in purely pragmatic terms.

 

First of all, the idea that this plan will make money is laughable.  That's exactly the same thing that they say about EVERY government program.  Everything's an "investment" that will "pay for itself."   Yet there is a 10 trillion dollar debt.  We can't afford any more investments.  The fact that the Chrysler loan was paid back with interest is nothing more than a lucky fluke.  If the Big 3 bailout is going to be a money-making venture, then they should make it into a mutual fund and I will happily invest in it.  The truth is, they have no freaking idea whether it will work or not.  If they did, then Harry Reid would be the CEO of GM.

And Scott, I never said that I believed the market would take care of things.  I believe the market is going to do what it's going to do, and nothing can stop it.  The government MIGHT be able to prolong the inevitable and spread the misery out over a longer span of time.  This might be a good idea if we knew for sure that there was only going to be one recession or depression in all of history, but right now we are feeling the overlapping combined effects of dozens of past miseries that they attempted to prolong, which works out to be the same as if we had just let them happen one at a time.  You can't legislate prosperity.  You can't even smooth out the bumps in the cycle, because the government's judgement and reaction time are so poor that they end up exaggerating the bumps, like a drunk trying to steer a car out of a skid.  That's a large part of what got us into this mess in the first place.

 

Again, 10 trillion dollar national debt.  At some point we've got to say "no" to something.

 

 

On Thu, Nov 20, 2008 at 10:23 PM, Brandon Downey <bdo...@gmail.com> wrote:

On Thu, Nov 20, 2008 at 5:22 PM, Chris Macaluso <cma...@hotmail.com> wrote:

> Just some food for thought... why, if maintaining big industry that employs
> a lot of people at relatively high salaries is so important to the economic
> survival of this country, why has this country decided to make the oil and

I don't think anyone here has said this.

What has been said that the sudden evaporation of a million jobs, the
debt owed by the big three, and the web of contracts and dependencies
in the supply chains used by these companies, might very well be too
much for the economy to handle at this point.  That means while it
would be great to have another industry just as big as the auto
industry that takes its place, what we're concerned about is the
effect _right now_ of suddenly and dramatically losing the above.

Whether or not this will come to pass is both a question for economic
and financial analysis -- fine if you want to argue that you believe
that the country can take another collapse at this point, but pointing
to some hypothetical oil and natural gas renaissance is not going to
fix this problem, today.

> natural gas industry its whipping boy and remove its tax incentives and rope
> off areas where it could expand? Could that not help parts of this country
> with good paying jobs similar to the ones being lost in the auto industry?
>

See above why as a general plan, turning to gas and oil are not what's
going to fix the immediate risk of collapse.

There are longer term issues why this is not such a great foundation
for an economy:

(1) Seen the price of gas and other petroleum based products at the
moment? Thanks to the stiff deflation which is the fruit of several
major financial institutions going belly up, fears over *other*
country's economic state, and a number of other macroeconomic factors,
oil is plunging to dirt cheap levels.

As of today, oil is now trading at $46/barrel (!)
[http://www.msnbc.msn.com/id/12400801/ for an article about this].

It's not a great candidate for economic expansion, particularly since
our recession is going to drive down production in the developing
world that builds things for us.

(2) It's finite, and will eventually cost more and more money to pull
up out of the ground

Let's suppose we could generate a boom by the "drill, baby, drill"
economic plan. How long would it be good for? 5 years? 10? 30? It runs
out eventually, leaving us right back where we started. You might make
a good case for it being a short term stimulus, except...

(3) It would take years to explore & expand our nation's oil industry.
Estimates I've seen indicate that we're talking a minimum of three
years to start producing meaningfully more amounts of oil. Three years
is a little too late.

(4) Oil (and gasoline) have substantial negative externalities
associated with their use.

Oil spills. Pollution from emissions. Global warming.

The oil industry in the US as it exists today is not on the hook for
the costs of these externalities. If they were actually forced to bear
even a fraction of the costs to fix the damage done by these fuels, it
is unlikely they would be seen as profit centers.

-

Oh yeah, and if you're wondering why oil companies are viewed as
'whipping boys', it probably doesn't help that they spend lots of $$
lobbying Congress to toss subsidies to their industry, or all the
money they've poured into junk science dedicated to climate change
denial.

> Until we next think that the "Left" is doing anything more than helping out
> its pocket liners,

I'm sort of puzzled why you're attacking the left on this issue, when
it appears the divide in Congress is more between the congressmen who
live in states who benefit from the auto industry and those who do
not. I think they may be a convenient scapegoat in your particular
worldview, but it's important to realize that the right seems just as
eager to offer bailouts to the corporations which they are politically
tied (such as the financial industry).

From an article today [http://biz.yahoo.com/ap/081120/congress_autos.html]

"Until they show us the plan, we cannot show them the money," Speaker
Nancy Pelosi, D-Calif., said at a hastily called news conference in
the Capitol."

[...]

"But with GM warning it could go under before year's end, Democratic
leaders were unwilling to close up shop for the year and appear to
turn a deaf ear to the industry. They called for a Big Three viability
plan by Dec. 2, scheduled hearings that week on the report, and said a
vote on a bailout could come the week of Dec. 8."

[...]

The White House criticized the delay, saying the plan to let the
automakers tap the fuel-efficiency loans for their short-term cash
needs should be considered.


*

Bottom line: Pointing to the oil industry as a panacea, or even a
quick fix for our economic problems is a fairy tale. The idea that
there is a secret left wing agenda to hand out money to the Big Three
is questionable.


- Brandon

>
> Sincerely,
>
> Cmac
>
>> Date: Thu, 20 Nov 2008 13:49:36 -0500
>> From: scoot...@gmail.com
>> To: hol...@googlegroups.com
>> Subject: [Holiday's] Re: detroit and the big 3
>>
>>
>> Lou, two points:
>>
>> 1) Your fundamental misunderstanding is in the following line:
>>
>> > So the only factor is the loss of jobs, which would exist
>> > regardless of the type of industry we were talking about.
>>
>> As pointed out by Chris, autoworkers have lifestyles that are adjusted
>> to $100K per year incomes. In terms of paying their mortages, car
>> notes, kids' tuition, etc., losing one job and replacing it with
>> another (say for example, Wal-mart greeter at $20K per year) is not a
>> one-for-one exchange. Such an impact on hundreds of thousands of
>> people would result in a shock to the consumer market (in Detroit and
>> surrounding areas in particular) such that thousands of completely
>> unrelated businesses would fail simply because their customer base was
>> gone. Further deepening the unemployment problem.
>>
>> In other words, the [auto worker --> Wal-mart greeter] transformation
>> puts pottery stores out of business; whereas the [pottery-store worker
>> --> Wal-mart greeter] transformation does not put auto companies out
>> of business. This is why the entire society should be concerned.
>>
>> 2) You say
>>
>> >> A low interest loan is just another way of giving money away (the
>> >> interest money they're not collecting).
>>
>> In fact, much less money is being given away, and in come cases none
>> is given away in the long run at all.
>>
>> In the event of a collapse of the company, the government can take
>> over significant assets and sell it off. This has happened before
>> (but I do not at the moment have the time to do the appropriate
>> research). Second, the government has made these kinds of loans to
>> Chrysler before (I believe) in the early 1980s. Every dollar was
>> paid off including the interest and since high-paying jobs were
>> preserved, the government made money on the transactions in light of
>> the extra taxes paid by those high-income workers.
>>
>> Until next we finally point out that obviously it is in our national
>> interest because we really do have friends and family who are hurting
>> pretty bad right now, and even though the "invisible hand of the
>> market" can sort this out over the next 20-50 years, it actually is a
>> good idea to help people along right now,
>> Scott
>>
>> >
>

--
Louis Jeansonne
L...@Jeansonne.com
225-572-9791