Auto Industry Bailout Discussion

[GhostWriter16]

I thought it was the right move in the first place. The only other decent suggestion I saw was by a friend to sectionalize and auction off everything at non-firesale prices to smaller firms that could later reconstitute a better auto industry and things remerged. Take down the Lego castle and build a new one, just a better one.

I think I'm sold on your friend's idea

Yeah, that is in no way, shape, or form, what happened. If you try to govern as if you live in a fantasy world, you destroy the real lives of real people. This is not a game. This is the real lives of real people you would destroy. This is a real country that you would impoverish and cripple.

You do not have any right to hurt people like that just for your own personal misguided self-righteousness.

Wow, you're even more aggressive in your posting style than I am. You know full well I am posting what I believe is right (Whether you agree or not) yet you claim I want to destroy the country. As if I contain a fraction of a percent of enough power to do so.

You are proposing for taxpayers to pay to keep wealthy companies afloat. Yes, it would save jobs, but when you do that, you have no right to complain (As you have) that conservative politics redistributes from the poor to the rich. You are too. You are also punishing all of the other businesses that provided a better product and so did not nearly go bankrupt.

Finally, I'm not suggesting we *DO* anything. My suggestion was to do nothing and let the market fall where it may (Although admittedly Hygro's friend's proposal is better IMO) not to destroy lives.

This is more akin to building a road. You're making sure things are in place so everyone benefits.

By all means, carry your Ayn Rand individualistic bondage fetish to the extreme and complain about this, but I expect to never see you using anything intended for the public good.

I'm not quite as anti-government as Ayn Rand, but even if I were, I'm STILL paying taxes towards that stuff. Unless I were actually NOT paying taxes towards government stuff I can still use that stuff. If I were to use a private option I'd still be paying for the public one, so I'm paying twice.

Honestly, I'm not convinced the government should be the ones building roads. I definitely think using tax money to build roads and then charging tolls on those same roads is wrong. I don't necessarily have a strong opinion on which option should win out. Either way though, I'm paying the taxes for public roads regardless.

 

[RobAnybody]

I was completely against TARP, the Auto bailouts, just bailouts in general when they happened. I was 180% wrong, in hindsight.

I am also completely unashamed to admit that HBO's Too Big To Fail had a lot to do with that. In particular, Eric Forman from That 70's Show's explanaton of what happened in layman's terms, really changed my mind. I'm not even kidding. That 2 minute bit from an HBO movie was the best explanation I've heard.

Here it is, just a link, because it contains some naughty words, so click at your own risk:

http://www.youtube.com/watch?v=Aqf97p1Rdm0

Has anything been done since the bail-outs to ensure that next time the companies are in trouble, they'll be able to fail?

This is my concern. It seems like Too Big To Fail still exists. I vaguely remember when Reagan (et al) broke up AT&T, much like I remember Sesame Street & The Electric Company (hey you guys!!!!!), meaning not really at all, but I was alive for it.

I wonder how that would go over now? Can you even imagine the poopstorm that would happen if Obama proposed breaking up Bank of America, JP Morgan, Citigroup, etc. because they were Too Big To Fail?

 

[Hygro]

I think I'm sold on your friend's idea

I mean it's not that different then what actually happened in the sense that the whole thing was re-constituted by business-and-economically smart people. My friend's suggestion had a nice ring to it but its grounding is a bit too neoclassical for me to have taken it frontline-seriously without working some data.

 

[innonimatu]

I maintain all I said about it. And the problem was not fixed. Incomes continue stagnated, so does consumption. Down the japanese path we go..

 

[hobbsyoyo]

You are proposing for taxpayers to pay to keep wealthy companies afloat. Yes, it would save jobs, but when you do that, you have no right to complain (As you have) that conservative politics redistributes from the poor to the rich. You are too. You are also punishing all of the other businesses that provided a better product and so did not nearly go bankrupt.

There were much bigger forces at play than just 'this company put out a better product so it should survive while others shouldn't'. That was a part of it, but there was a much bigger picture about access to credit and a very large recession gutting previously-solid companies.

Our government does not and should not intervene in anything but the most dire of circumstances. That is exactly what happened - the most dire of circumstances came to pass and either something would be done to fix the problem or it would be allowed to spiral out of control.

If the auto industry had been allowed to fail as you suggest, not only would those direct employees lose there jobs, but so would everyone who is tangentially related to the industry. That would have turned a downward spiral into an endless job sink that would have turned the great recession into another great depression. The difference between those two situations is vast and it is clearly worth the government intervention that happened to avoid it.

It's also a source of national pride, prestige and economic prowess that we still have world-class auto manufacturing capability. I'm not willing to cede that ability to China, India, South Korea and Japan.

Finally, I'm not suggesting we *DO* anything. My suggestion was to do nothing and let the market fall where it may (Although admittedly Hygro's friend's proposal is better IMO) not to destroy lives.

What others are telling you is that your *DO* nothing approach would destroy lives, wreck the economy and hurt everyone, yourself included. No one is claiming that you directly destroy lives. But your approach to this situation would for all the reasons that have been laid out.

As I've pointed out, there is are much bigger forces at play than simple winner-take-all free market capitalism. This was a situation about total economic collapse. I understand why you would be against government intervention, but if you still think this intervention was absolutely wrong (especially in light of how things turned out) then you have 0 credibility in any economics discussion.

It's one thing to stand by your principles. It's quite another when you don't understand or even acknowledge when your principles don't mesh with the reality that's being discussed and then refuse to even concede that other approaches worked.

 

[Formaldehyde]

Most people seem to overlook the primary factor that caused the crisis in the first place. GM and Chrysler could no longer get loans from banks and other financial institutions so they could provide auto loans. Hardly anybody pays cash for autos.

This was a direct result of the failure of the banking and brokerage industries. Not "bailing them out" in the same way the banks were helped was largely nothing but partisan politics from those who think unions are "evil".

 

[Leoreth]

Valid to who? You? You're a Canadian whose tax money wasn't used to bail out GM in USA. Me? I'd like to see the government not lose money on the stock if possible. To ME, that's a valid concern.

Did you actually read his post? He said that with your taxpayers' money in mind: all he said was that it is useless to sit on stocks if you can get more out of investing their current worth elsewhere.

So while you're interested in not losing money on the stock, you might lose money in the form of opportunity costs.

 

[bhsup]

Did you actually read his post? He said that with your taxpayers' money in mind: all he said was that it is useless to sit on stocks if you can get more out of investing their current worth elsewhere.

The government shouldn't be re-investing this money. They don't usually just go around buying stocks. This was done to save GM and once that stock is sold, that money should be going back into the general treasury I imagine.

 

[hobbsyoyo]

The government shouldn't be re-investing this money. They don't usually just go around buying stocks. This was done to save GM and once that stock is sold, that money should be going back into the general treasury I imagine.

At a profit, to boot. Another reason why the auto bailouts were a great idea.

 

[Leoreth]

The government shouldn't be re-investing this money. They don't usually just go around buying stocks. This was done to save GM and once that stock is sold, that money should be going back into the general treasury I imagine.

It wouldn't need to be traditional investment. You could consider putting the money to use in the education sector as a form of "investment" too. The point is, sitting on the money while hoping to regain "losses" might cost you more than it looks like on paper.

 

[Zelig]

The government shouldn't be re-investing this money. They don't usually just go around buying stocks. This was done to save GM and once that stock is sold, that money should be going back into the general treasury I imagine.

What if you could save more money in interest by applying the money to the debt than you could make by keeping the stock?

 

[bhsup]

Okay, you got me on that one. If that's the case, sell it then I guess. is that the case?

 

[Zelig]

Okay, you got me on that one. If that's the case, sell it then I guess. is that the case?

I doubt it, but there are other alternative investments to paying off debt or keeping the GM stock, and it should be the government's job to investigate these possibilities.

 

[amadeus]

Ask me in 17 more years when Chrysler is once agani due for its bidecennial bailout.

Or, I don't like it when the government supports anticompetitive business practices. I'm sure everyone here who supports the bailout would be thrilled by an administration that propped up competitors in the industries they work in, right?

 

[JohnRM]

In principle, I do not support bailouts, but I would be lying if I said that I wouldn't have agreed to this one in particular. The alternative was too terrible to contemplate. I would like to say that they should be broken up, but I don't know how that would work, given economy of scale issues and other factors. I am just not as smart as a lot of people are when it comes to that stuff, but I believe it when the majority said that to let the auto-makers fall would be a catalyst that would drive the country into a second great depression. My love for this country comes first, before my political principles.

 

[Azale]

Ask me in 17 more years when Chrysler is once agani due for its bidecennial bailout.

Or, I don't like it when the government supports anticompetitive business practices. I'm sure everyone here who supports the bailout would be thrilled by an administration that propped up competitors in the industries they work in, right?

Worked for South Korea. I don't know enough yet to extrapolate their case to the US, but I can't assume fostering competition is always the best thing to do.

 

[JohnRM]

I think its important to note that all businesses are anti-competitive by nature. Nobody like having competitors. But, that is the kind of economic system that we have and the result is the diversity of goods and services that are available to us.

 

[hobbsyoyo]

I think its important to note that all businesses are anti-competitive by nature. Nobody like having competitors. But, that is the kind of economic system that we have and the result is the diversity of goods and services that are available to us.

And lower cost to consumers.

 

[JohnRM]

And lower cost to consumers.

Indeed.

 

[Hygro]

Ask me in 17 more years when Chrysler is once agani due for its bidecennial bailout.

Or, I don't like it when the government supports anticompetitive business practices. I'm sure everyone here who supports the bailout would be thrilled by an administration that propped up competitors in the industries they work in, right?

Too bad reality doesn't conform to neoclassical economic models and things like bailouts can make good economic human-wellbeing sense.