Without gov't interference, quite a few of the huge multinational companies you are referring to would have collapsed in the last couple years. More efficient companies could have taken their place in the marketplace, and the tangible assets of these multinationals would not have evaporated. In other words, yes the market would have corrected and solved the problem of the big multinational. The way I see it, the banks etc. should absolutely not have been bailed out. GM? Well, the gov't interfered recently with the bailout, but they also gave the UAW the power to begin with that caused GMs cash flow powers; GM would have stayed competitive if they had not had so much cash per vehicle diverted to pay for UAW expenses. On the other hand, if GM *had* been allowed to fold (instead of restructuring), I'm quite confident that their signficant assets would have gone to good use.
Mountainbiker it's good to see there's another good libertarian on here!"they have demonstrated they are running the company efficiently by not needing a bailout,"
This was partly a lucky gamble. Ford would actually have run out of cash around the same time GM did, but they mortgaged absolutely everything – buildings, office equipment, even production line equipment and stuff like the “blue oval” logo – to raise $23 billion, in 2006. They didn’t receive a bailout because when bailout time came, they had all this cash on hand. They planned to spend $17 billion through 2009 on restructuring. Apparently it did work, they are profitable now and paying down their debts – but it was a serious gamble, if it had not worked they would not only have gone broke like GM but would have not had any assets to auction off, since they were mortgaged already.
That's one thing GM's changed recently -- Cadillac CTS, Buick Regal, and so on, they have a lot more Opel (European) and Holden (Australian) based cars within the last 5 years than they did in the past, I think they are recognizing that using the best from the WHOLE company makes more sense than ignoring designs because they originally "weren't made" for the US market.“But there’s a difference between laws to protect the preyed upon from the predators and the use of tax dollars to bail out a failed company.”
I don’t think it had so much to do with GM as keeping people in the Midwest employed. Would you be happier paying unemployment for the tens of thousands of unemployed in the auto industry, their suppliers, and service businesses in those areas? GM didn’t and does not operate in a vacuum. Sure, the assets may have been purchased by someone else, but then again maybe not. And in this case GM was a bystander to the banking debacle. Wouldn’t that make them prey of a sort?
A good libertarian would not stand for the corporate form as we know it. I still cannot figure out for the life of me how today’s so-called libertarians of the world, and those of similar ilk, will loudly reject enormously concentrated power and wealth when they actually have a vote (the state) and love on or ignore enormously concentrated hierarchical social power when a vote has to be purchased (corporate).
All of the libertarians I have ever met know the difference between living in a market economy and corporate capitalism. Corporate capitalism IS NOT a market economy in the classical sense and it is completely incompatible with any serious libertarianism. Being in a corporate capitalist rather than market economy, trying to behave toward the state as a libertarian is an exercise in pure fantasy land.
Nothing entertains me more than stuff like this! Watching the “take what you can, every man for himself, maximize profits at all costs, what’s good for my boss is good for me, overly patriotic (or nationalistic?) type capitalist kool-aid drinkers” try to rationalize to themselves why sometimes money has to be spent by the state for the public good. It really brings out their delusional cold-war paranoia about the socialist boogey man coming to destroy their way of life. If confused, panic stricken, tea party type chicken littles ever take control we are in big trouble!
“I totally agree about healthcare. While people were having their legitimate healthcare claims rejected, and weren’t being covered for preexisting conditions, the Republicans controlled both houses of Congress and the Whitehouse, but they sat on their hands and did nothing to solve these problems.”
Whitey, I think you and I may be the only people (hope I’m wrong) who think that solving our healthcare woes is a key to “full” employment (whatever acceptable % that is).
I’ve worked in and with enough small business owners to conclude that until that monkey has been taken off their back (not by govt. necessarily) employment opportunity will have a direct tie to a businesses ability to deal with the financial burden. Get out of employer based health care, get it into the not for profit realm and watch us compete on the world market. I would trust outfits like the Red Cross,my local church and consortiums to handle my health care before “for profits.”
What frightens me is that there are folks who want to apply the business model that didn’t work for GM or Chrysler to public education. GM thrived in the 1950’s when automobile men like Ed Cole and Bunky Knudsen were in charge. I think that the GM downfall started when an accountant named Roger Smith ran the company. Chrysler had its problems when an accountant named Lynn Townsend ran the company back in the early 1960’s.
It scares me to think of what the business types will do to education.
OK, I entirely agree. We don’t know, and we can’t know, and even if GM invited everyone on this board to go through their books we wouldn’t know. All I can think is that part got paid back, part didn’t, and maybe our grandchildren might know the whole truth if in the meantime the gov’t doesn’t put WikiLeaks out of business.
Why should you be concerned with education? don’t you already have yours? Perhaps you have a viewpoint on how others should be educated. I had an English Professor that submitted the viewpoint that “young people” today are not capable of dismissing the unreasonable expectations about their bodies that the “glamour” type magazines present. I have more confidience in people dismissing what are clearly advertising techniques.My viewpoint is not help by all, in fact the majority of the class affirmed the Professors view, that they were incapable of avoiding being harmed by advertising.
Why should you be concerned with education? don’t you already have yours?
For the same reason that I have an education, or more appropriately, a foundation for learning, is why I would like to see others have the opportunity for an education. I have been teaching since the fall of 1962. I haven’t seen any differences in the students I had then than the students I have now. If a student comes to my class without the prerequisite skills, I do my best to make certain he attains these skills before the class is over.
What bothers me is that we have business people who want the students trained for a specific job. I would rather see the students educated so that they are prepared for many different jobs. The problem I see today is that in many states there is an over reaction to performance on state wide tests. We suddenly have all schools teaching specific knowledge so that students will hopefully do well on these tests and suddenly all schools are teaching the same thing.
When I was in junior high school, I attended a country school and all seventh grade boys had to take agriculture. We didn’t live on a farm–we had a small acreage in the country. Did taking agriculture hurt me? No Did taking agriculture help me? Yes. I was transfered to a university laboratory school for high school. The study of fertilizer made chemistry more meaningful in my high school chemistry course. Our study of inherited characteristics in farm animals in the agriculture class made the study of genetics more understandable in my high school biology course.
Now I am certain that the statewide tests in my state for junior high students don’t have a section on agriculture. In fact, agriculture isn’t even taught in the school district where I went to school. It was deemed more important to prepare students for the tests, even though the school district still has many engaged in farming.
I tell the students that I have lowered my standards. I used to tell students that if they knew only as much about the subject as I do when they complete a class I am teaching, that they will not get a passing grade. I now tell them that only knowing as much as I do will be sufficient only for a “C” grade. If a student wants a higher grade, he or she must demonstrate that they know more than I do. While I am not completely serious, how will society ever grow if the future generations don’t learn more than the previous generations? I have had students go on to achieve great things and I have every confidence that my present cop of students will do the same.
I used to worry about the sad state of public education, until I realized I would someday be competing with young people for jobs. Now I am not so concerned.
When I started teaching as a graduate assistant back in the fall of 1962, I had colleagues that complained about how poorly prepared the students were that took our classes. I hear the same complaint from many of my colleagues today. I don’t see much difference over almost half a century in this field. I have always given the students credit for being able to make up the gaps they may have had in their preparation.
Never in history have students had such a great resourse availble to them (the internet) and they squandered this resource, this is the difference in students. They have this resource that can answer just about any question but don’t do any better than students with one resource. I went to write a term paper a while back and I was simply overwhelmed with the amount of information from credible sources literaly at my finger tips.
The predictions of the Internet helping make better students should have become truth, but it did not. Complaints about mandated testing hurting students are very hard to deciper because the people making the complaints either have something to gain or lose from the situation. Students will be helped too cheat on standardized tests because this brings bonus money to educators but then people complain that too much time is being spent on preparing students for standardized tests,so what is it? are they cheating or studying too much?
I saw some 17" tires in the old days and they actually looked like 17" tires. They would go through snow very well. I used to get those 15" tires for $55 too. Fill the 26 gallon tank three times on $55 too. Mail a letter for a nickel. Buy a carton of cigarettes for $3.25. I quit smoking and it pays for my tires, gasoline, mailing and the computer. I call it my bailout.
The good students today are every bit as good as the good students from the earlier generations. My experience has been that in this information age, many of the students can’t translate this information into knowledge. Helping students make useful knowledge of this information should be our job as faculty.
At the Commumity College I attend the percentage of people who “finish what they start” sits at 24.8% and this is not so much worse than other Community Colleges. I never failed a class and my load was always 12 units or more and it will take me 10 full semesters (thats 5 years) and one class in my 11th semester for my "2 year degree’. My point is, the taxpayers are getting taken for a ride with the Community College system as it is so heavily designed to provide jobs for Administrators and Educators.
I teach at a midsized university and I think our degree completion rate (students who complete the degree in 6 years or less) is 52%. I would hope that those who do not finish the degree at least gained something from the courses that they took.
I know a lot of intelligent, self-educated people who never attended college and never earned a degree. I am the dumb one–I had to have professors pounding knowledge into my head through three degrees.
Ok4450…
For clarification purposes, it should be noted that the $133 per share price you refer to was BEFORE GM had a 3 for 1 split (which was still prior to the IPO), so you would have to divide that price by 3 in order to compare it to today’s stock price.
Mixed feelings here. I believe that the US government and the taxpayers are actually better off because of the bailout of GM (Chrysler may end up being a different story), and I do like the fact that it protects some of the US’s manufacturing base (let’s be honest - Honda, Nissan, Hyundai, and especially Toyota aren’t replacing jobs in the US on a 1:1 basis as they rely much more heavily on imports and development that is mostly overseas)… but that doesn’t mean that I like the anti-free market aspects of it.
In terms of the financial aspects of GM’s bailout, let’s look purely at the numbers:
The US Government invested $13.4 billion under Bush (loan with no taxpayer protections), and then an additional $36.1 billion under Obama, which really was just debtor-in-possession financing during bankruptcy. For those unfamiliar with DIP financing, when a company declares Chapter 11 bankruptcy, it often gets a financier to provide funding to keep them going. That investment to keep going generally gives the financier posession of a set of assets to protect their interests, and then the financier’s position is generally transferred to an equity position in the new restructured company.
So net, the government put in $49.5 billion and ended up with 60.8% of the company, a loan of $6.7 billion, and some preferred stock. GM bought back the preferred stock and paid back the loan at a total cost of about $9.5 billion.
So $49.5 billion - $9.5 billion = $40 billion left to recover.
Now GM had their IPO. The government sold about 412 of their 912 million shares in the IPO for a total of $13.5 billion. That means $40-13.5 = $26.5 billion left to recover.
That still seems like an awful lot. However, GM shares are currently selling at $33.92 per share, meaning that remaining equity stake has a value of about $17 billion. The government can’t sell all at once without depressing the price, but they could get out fast if they wanted. Average daily trading volume is about 100 million shares, so dumping 500 million wouldn’t take too long even at a slow pace so as to not upset the price…
So if we have $26.5 billion outstanding and $17 billion in equity remaining, how is that a good deal if we’re looking to lose $9.5 billion based on the current stock price?
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The stock price MIGHT go up. If it goes to $43.50 (the 1 year target estimate average) and the government dumps, that reduces the loss to $4.75 billion from $9.5 billion.
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The government continued to collect tax revenues from people who stayed employed because of the deal. An average household in the middle quintile (40%-60%) earns $64,500 and pays 14.3% in federal taxes, meaning ~$9,200 in taxes each year (source:cbo.gov). That same household would be likely to collect maximum unemployment benefits ($362 per week in Michigan, with the fed paying all that after the first 26 weeks). It has been roughly 19 months since GM’s bankruptcy, so the government has likely collected 19*$9200/12 = ~$14,500 in additional taxes per employee and avoided $362*((52/12)*19-26) = ~$20,400 in unemployment compensation. That’s a $34,900 per job total so far.
So let’s take the $9.5 billion still to recover and divide by the $34,900 per job. That gives 272,206 jobs.
So did the GM bailout keep at least that many people employed during the period since? Most likely, yes. You have about 70,000 direct GM employees, and then all the suppliers and dealers… Most estimates had a Chrysler failure causing a 300,000 job loss, and GM was twice Chrysler’s size.
In other words, the GM bailout has actually likely SAVED the US government somewhere between $5 and $10 billion, assuming they sell their remaining 500 million shares at the current stock price. If the price goes up, so do the savings (the savings also increase for each additional week all those employees stay employed).
So was it anti-free market? YEP.
Was it a bad deal for the US government and taxpayers? Not really. It certainly was no worse than any of the deals given to Toyota/Honda/Hyundai/Kia/Mercedes for their plants in the south, where the taxpayers there shelled out enormous sums in aid and the governments agreed to insanely large tax abatements, simply on the premise that the jobs that they brought would offset those subsidies through additional income taxes and indirect jobs…