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In a bit of a flashback, the government bailed out GM to the tune of about $20 billion dollars. Despite shoveling this much cash into the dying company, it still died. Or rather died a financial death on the form of bankruptcy. Now the state owes 60% of GM, a company that has a rather impressive negative net worth. Or unworth, to borrow a bit from the notion of the undead. Of course, that is something of an apt term-just as the undead are formerly living beings that continue to move around after death, GM is a formerly profitable company that continues to move around after its financial death.
While people are calling GM “Government Motors” and getting fired up with rhetoric about socialism, I am going to bypass all that for now. Instead, I’ll do a bit of math.
The logic behind dumping about $20 billion into GM was that it would help save jobs and save the economy. Now, if we just took $20 billion and hired people at $40,000 a year, we could hire 500,000 people for one year. Or hire 50,000 for ten years. Or, …well, you can do the math. Alternatively, we could have put that money into starting up new businesses and, in all probability, created many viable new companies that would hire people.
While I do believe that the state has an obligation to protect the citizens, this should be done in an effective manner. That is, the action taken should get the most for our tax dollars. This has clearly not been the case with the Bush and Obama administrations’ handling of the crisis.
But the money wasn’t spent that way. Rather it was spent to try to save GM, which failed anyway. Of course, the folks in the government are trying to put a positive spin on it: GM will shed its bad components and re-emerge as a leaner and profitable company. However, this is something of a serious gamble. GM’s track record has been one of more or less unrelenting failure and bad decisions for years. Pouring money into a company with that sort of track record seems to be a rather bad risk. If GM fails to arise like a phoenix from its ashes, then we (the taxpayers) will be, to use the technical term, screwed once again.
But, suppose that GM does rise out of the ashes like a mighty fire bird? What will that do for the taxpayers? Will we get a slice of the profits? Will we each get a new car? Will we sell off GM for a small percentage of its worth to some friend of who ever happens to be in office when that happens? Whatever might be said now, we have to wonder what we will get out of this. The more cynical might say “screwed again.” Perhaps.
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It would have been cheaper to let it die. The tax ramifications are staggering. All of the extra government waste in managing its interest, managing taxes incurred over the next ? years…etc etc. Not to mention the government telling GM what to build. I hope they can sell what Obama will be pushing. If Ford can avoid this fate then I will reward them by buying their products. Just wondering what the government will do in order to make Ford’s life miserable if they don’t give up their shares also. This seems like a conflict of interest in so many ways by the government. You don’t see this?
Yes, our ownership of GM will probably cost us a great deal more in the long run. While the recent meltdown shows that the private sector can mismanage in truly epic ways, I think we can expect GM to be a bit like the post office. I suspect that it will continue to lose money until it bleeds to death.
The government tampered with the way banks did business giving Fannie and Freddie special privileges of less regulation. The same will happen with the government sponsored car companies. How many times do we have to learn these lessons? The Democrat Senator from North Dakota just wrote a book called ‘Reckless’. It talks about how the Federal Government is hugely to blame for allowing the economic crisis to happen. Mark my words-“This is very bad for our economy.”
It is all about the symbolism and psychology. GM is an iconic U.S. company. It is being kept on life support as a confidence building measure.
That could be. I’d say in my own case that GM stopped being an icon long ago. I do have some vague fond thoughts about the company that once was, but I am not happy about this use of my tax dollars. Now, if buying GM was inspirational and had a significant impact, than that would be fine. I’m still waiting to see how it pans out.
This is pretty funny:
CARACAS (Reuters) – Venezuela’s President Hugo Chavez said on Tuesday that he and Cuban ally Fidel Castro risk being more conservative than U.S. President Barack Obama as Washington prepares to take control of General Motors Corp.
During one of Chavez’s customary lectures on the “curse” of capitalism and the bonanzas of socialism, the Venezuelan leader made reference to GM’s bankruptcy filing, which is expected to give the U.S. government a 60 percent stake in the 100-year-old former symbol of American might.
“Hey, Obama has just nationalized nothing more and nothing less than General Motors. Comrade Obama! Fidel, careful or we are going to end up to his right,” Chavez joked on a live television broadcast.
Yes we are becoming the big joke of the world. Even the Pravda knows where we are heading.
http://theconservativepost.com/WordPress/?p=1790
It is a spectacular bit of irony.