5 posts tagged “republican issues”

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The latest company to go to Washington asking for a handout is General Motors, and after the less than auspicious start to the $750 Billion Wall Street/bank bailout, many people, not just "free market" conservatives, are asking, "Why should we bail out the big American auto companies?"  The underlying implication among conservatives is that labor unions are the source of the problem.  Others think, rightly so in my opinion, that the car companies got themselves into this mess by ignoring fuel efficiency and building ever bigger and heavier gas-hogs.  So why not let them go belly up?  That'll teach 'em a lesson!  As is usually the case, it's not that simple.

Jane Hamsher at Firedoglake has an interesting post discussing the impact of a possible GM bankruptcy on the development of the greatly anticipated Volt electric car:

So maybe the people who seem to know even less about auto manufacturing than they do about economics should consider that GM is in the forefront of green engineering with the Chevy Volt.  From US News:

The prototype Volt that GM has been showing off is a sporty four-seater with futuristic touches meant to draw in mainstream gearheads. The dashboard controls are touch-sensitive and set in a white console reminiscent of an iPod. Instead of standard gauges for speed and RPMs, there's a digital display that looks like the screen of a Sony PSP. Wind-tunnel engineering has made the Volt even more aerodynamic than a Corvette, critical for milking the most mileage possible out of the battery. GM says that recharging the car at home, through an ordinary household outlet, will cost less than $1 per day and drain less power than it takes to run a refrigerator.

But before you put the Volt on your 2010 wish list, consider that sending GM into bankruptcy would do more than just break the UAW -- it could condemn the Volt from ever reaching the market:

Ever since Ronald Reagan fired all the striking air-traffic controllers in his first year in office (a strikingly irresponsible thing to do), conservatives have fantisized about ridding the country of labor unions.  Never mind that labor unions were largely responsible for the rise of the middle class in American in the mid-twentieth century.  As Hamsher points out:

In fact, in their last contract the UAW made deep concessions that put GM wages at a par with their non-union counterparts in the US.  But this isn't about facts, this is a religious crusade where "free-marketeers" want to impose Shock Doctrine tactics for philosophical reasons with little regard for the consequences.

The president of GM once famously said "What's good for GM is good for America."  Most of us would probably take exception to that these days.  But there is a kernel of truth there: letting GM fail could be disastrous for America, especially now with the economy, after eight years of the Bush administration, careening like a football bouncing down a staircase.  Bush's own suggestion is particularly poor (who would've guessed...).

George Bush is in favor of helping GM.  But he wants to take the $25 billion in loans to automakers from the 2007 Energy Bill and repurpose them, he doesn't want to use funds from the $700 billion Wall Street bailout (which Harry Reid and Nancy Pelosi have indicated they would like to do).

Congress approved the funds for a Department of Energy program that would help the automakers to develop fuel-efficient vehicles.  

Got that?   George Bush wants to kill the program that would build more fuel-efficient vehicles.

There are some other ideas floating around that make a lot of sense in the long run, like this one via Atrios:

As Josh says, if we're throwing around billions and trillions of dollars we might as well get something good. Instead of writing a big check to the auto companies or loaning them money we could, you know, enroll all their employees in the new national health insurance system.

The point has been made repeatedly that the cost of healthcare is one of the big factors that makes it difficult for U.S. automakers to compete effectively with companies in countries that have some form of national health insurance (that would be ALL of them, except the U.S.).  So, what an elegant solution it would be to remove the financial burden of providing health insurance from the car companies as part of a universal health insurance program.  Makes sense to me.

UPDATE: Digby has more on this here.  Regarding the role of unions in all this:

You simply can't wipe out a million jobs or more as we are just going into a terrible worldwide recession. It's like telling someone they have to go on a diet when they are in the middle of a heart attack. There has to be a bailout.

But there is something else going on, which I mentioned last week in this post --- the Republicans' reflexive political response is to take the opportunity to break the unions...

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And, in the big scheme things, I think we can all agree that well paid, secure employees make for a stable society. The problem with the Big Three has far less to do with their employees than it does with their management --- and a capitalistic ethos that requires a myopic obsession with quarterly profits over long term investment. The union members just make the cars they're told to make. It's not their fault if Americans insisted on buying behemoth gas guzzlers and the auto executives insisted on giving them to them knowing full well a day of reckoning was coming.

Those of you who've read my scribblings know that I often cite Paul Krugman, particularly with regard to economic matters.  In case you missed it, he was recently awarded a Nobel Prize in Economics, so add that to his bona fides in this area. In his column today he discusses why the massive bailout passed by Congress is not having the intended effect:

It was good news when Mr. Paulson finally agreed to funnel capital into the banking system in return for partial ownership. But ... the U.S. Treasury’s bank rescue plan ... contains no safeguards against the possibility that banks will simply sit on the money. “Unlike the British government, which is mandating lending requirements in return for capital injections, our government seems afraid to do anything except plead.” And sure enough, the banks seem to be hoarding the cash.

There’s also bizarre stuff going on with regard to the mortgage market ... and as a result, markets are still treating [Fannie Mae and Freddie Mac's] debt as a risky asset, driving mortgage rates up at a time when they should be going down.

What’s happening, I suspect, is that the Bush administration’s anti-government ideology still stands in the way of effective action. Events have forced Mr. Paulson into a partial nationalization of the financial system — but he refuses to use the power that comes with ownership.

If, like me, economic discussions tend to make your eyes glaze over, Annonymous Liberal has a great analogy for what's going on that makes the point in a way a regular "Joe" can understand:

The analogy to sports betting is apt. When you bet on who's going to win the Super Bowl, you're not investing in anything. You're just placing a bet that is tied to an external event. That's what the derivatives market is. And for the financial industry, the bursting of the housing bubble was the equivalent of the Giants beating the Patriots in last year's Super Bowl, an unexpected outcome that caused a lot of people to lose money.

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The saddest part of the whole story, though, is that the event that brought the whole house of cards down really wasn't unexpected; it wasn't the equivalent of the Giants beating the Patriots. That was a genuine upset. Not too many people placed large bets on the Giants winning that game. But lots of people saw the collapse of the housing market coming. There were numerous scholarly papers written on the subject. And there were lots of investors who were willing to bet big on the impending collapse. Those people are all billionaires now. And the companies who took their bets--venerable institutions like Bear Stearns, Lehman Brothers, and AIG--are bankrupt.

Many of the devotees of unfettered free markets, notably Alan Greenspan, now are having second thoughts about the ability of the magic of the market to overcome basic human greed.  Others, like Krugman, never bought that idea to begin with.  America, and the rest of the world, needs a major change in economic policy thinking that will not come from John McCain and the Republicans.

I've been trying to get my head around the financial crisis/bailout, given that I'm as much of an economist as Sarah Palin is a NEW-CLEAR physicist.  So I pretty much have to depend on knowledgeable commentators who have earned my trust in the past.  One such authority is New York Times columnist and Princeton economics professor, Paul Krugman.  His explanations have been invaluable to my understanding, such as it is, of the situation, and he has proved to be consistently prescient.  In addition to his op-ed columns that regularly appear Mondays and Fridays, professor Krugman also has a blog, which is a great source of information.  It's can still be complex reading for those of us who are not conversant in the ways of Wall Street, but it's less complicated than figuring out the NBA playoff schedule. Here's an example from this morning:

There’s a reason Paulson et al had such a hard time communicating the case for their plan — they didn’t have a very good case. To this day they’ve never been able to explain clearly why buying up bad mortgage assets at market prices will solve the credit crunch. The Wise Men, as far as I can tell, have never had a clear idea of what they’re doing.

My view, which I think is now shared by many economists, is that Paulson grabbed hold of the wrong end of the stick — he should have been seeking to expand bank capital, taking an ownership share in compensation, rather than trying to push up the value of toxic paper. In the end, that’s what we’ll probably do.

Of course, the best chance of getting a complete picture of a complex situation requires considering multiple sources in trying to form an opinion that's not just hot air.  One term that has come up since the original Bush/Paulson plan was unleashed is "mark to market" which many Republicans are touting as a solution.  Here's Daily Kos writer Hunter:

Of course, we got away from "mark to market" accounting for the very reason that it was so manipulatable, and companies were using it to cook their books, leading us to situations where companies were reporting inflated asset values to investors while in reality being financially quite sick. And that's exactly why it's so wanted now, in the current situation: instead of forcing companies to report an estimated current value for their "toxic assets", we can make this whole problem go away by simply letting the companies report theoretical "future" values for those same assets -- the same as they were doing in years past, leading to this very bubble.

On that same topic, here's Josh Marshall:

But this new push to get rid of 'Mark to Market' strikes me as trying to solve or ameliorate the financial crisis by giving executives more leeway to lie (or perhaps fantasize) about the value of the assets they hold. Sort of like there's nothing about the collapse of the housing bubble that couldn't be solved by bringing in the folks from Arthur Andersen and Enron to give another look at the books.

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I'm inclined to think this is not so black and white as I initially supposed. Certainly this accounting measure didn't 'cause' what's happening. But there appears to be at least some argument that it can be an accelerant -- something that could make a bubble spin even more out of control than necessary. The rub seems to come down to whether you think the spooked markets are dramatically undervaluing these assets -- saying they're worthless because no one wants to buy them even while many continue to have substantial 'intrinsic' value. In any case, the read I'm getting is that it's probably a rotten idea that would only give a patina of accounting respectability to going back into willful denial about the fact that a lot of our biggest financial institutions are sitting on a lot of complete crap. But there's at least some sense, even from people not at all inclined to believing in deregulatory mumbojumbo that the argument isn't completely devoid of merit. In any case, I'm going to leave this one to the economists.

There's more here than I can come close to really understanding.  My gut feeling is that any solution should be a bottom-up one, rather than top-down.  In other words, if you bail out the homeowners who are having trouble paying their mortgages in such a way that those mortgages don't become worthless, then all the fancy financial creations that are based on the mortgages will stablize.  Again, I'm no economist, so sorting this all out can really be a monumental challenge.  I'll keep trying.

This is the kind of thing that gets you labeled a "conspiracy nut" if you even mention it.  Still, it's very disturbing to me. via Glenn Greenwald:

Several bloggers today have pointed to this obviously disturbing article from Army Times, which announces that "beginning Oct. 1 for 12 months, the 1st [Brigade Combat Team] will be under the day-to-day control of U.S. Army North" -- "the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities."

Why is that a big deal, you say?

For more than 100 years -- since the end of the Civil War -- deployment of the U.S. military inside the U.S. has been prohibited under The Posse Comitatus Act (the only exceptions being that the National Guard and Coast Guard are exempted, and use of the military on an emergency ad hoc basis is permitted, such as what happened after Hurricane Katrina).

Greenwald quotes James Bovard, writing in The American Conservative about Section 1076 of the John Warner National Defense Authorization Act for Fiscal Year 2007 the legislation that made this move possible:

"Martial law" is a euphemism for military dictatorship. When foreign democracies are overthrown and a junta establishes martial law, Americans usually recognize that a fundamental change has occurred. . . . Section 1076 is Enabling Act-type legislation—something that purports to preserve law-and-order while formally empowering the president to rule by decree.

I've not taken seriously suggestions that the Bush administration might do something like "allow" some kind of terrorist attack to happen and use it as an excuse to declare martial law.  I couldn't believe even they would do something so heinous.  This story is very disquieting.

It's really hard to cut through the noise around the election, especially on TV.  Here's Barack Obama offering an outline of his proposals for dealing with the economy. 

If you've had enough of lipstick and moose hunting and would like to know what the actual policy positions are that Obama has put out in writing so you can compare them to what's being said about them, and so you can compare them to those of John McCain and the Republicans,  here are Obama's actual position on various issues. I'm still working my way through them.  There's a lot of stuff there. You may also want to check out the Democratic Party Platform.