Posts Tagged ‘GM’

The American Automotive Industry

January 22, 2012

I watched a segment on “CBS Sunday Morning” today. It was on the recovery of the American automotive industry since their bottoming out in 2009. In short, GM has regained its leadership position in worldwide auto sales.

The turnaround in the automotive industry is, in part, due to normal capitalistic economic forces. Being in a stronger fiscal position, Ford managed its recovery without government help. A significant part of the credit for the recovery of the automotive industry, most notably for General Motors, is due to the government decision to inject capital into the failing industry.

Philosophically, I share concerns with the Republican party about the direct involvement of the government in private industry. I don’t know where Obama stands on that philosophy, but based on other policy decisions, I suspect his view is similar to mine. However, in times of crisis, leaders make pragmatic decisions that are targeted to ameliorate real, urgent problems.

It turns out that the policy decisions of the Obama Administration, like most other policy decisions of this administration, turned out to be the correct one – one based on analysis and not ideology.

The Republicans continue to espouse their fundamentalist policy, even in the face of the facts. They would have let the industry die. [1] Umm, “creative destruction”, I think Mitt calls it. According to conservatives, government can’t create jobs. It appears, however, targeted government action can save jobs…

… more than 1,140,000 of them in 2009 and another 314,000 jobs in 2010.[2]

According to the Wall Street Journal – you know, part of the liberal media – reported that more than a million jobs were saved by the action taken by the Obama Administration. That’s the same administration referenced by current GOP candidates on the campaign trail as the “job killing Obama Administration.”

Mitt Romney claims that America needs a CEO to lead it. With the Obama Administration’s proven track record of success – this just being one of them – I think I will stick with the community organizer.

 

[1] http://pa-magazine.com/industry-news/gop-presidential-candidates-criticize-auto-bailout/

[2] http://blogs.wsj.com/deals/2010/11/17/gm-ipo-auto-bailout-saved-more-than-1-million-jobs-study-says/

 

 

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The Non-Existent Obama

December 31, 2009

We Americans have the great misfortune of living in a time a great political polarization. Pundits and bloggers from both ends of the political spectrum have tried to create a marketing version of President Obama that suits their taste.

From the right, we see this strange homunculus intended to be a strawman for their ideological fodder. One is the “socialist president.” Those on the right claiming such should first consult a dictionary. Merriam-Webster defines socialism as “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.

If Obama was an advocate of socialism, the first thing he would have done upon taking office would have been to nationalize the banks. At that time, we were in a serious banking crisis and it’s likely that a partial or complete takeover of the banking system could have been accomplished. Instead, he extended the policy started by the Bush Administration. He listened to the advice of Ben Bernanke and Tim Geithner and keep the flawed TARP program in place. Bernanke and Geither are capitalists with a capital “C”. That move angered those on the left and right and in spite of its numerous flaws seems to have been the right thing to do. I am not an economist, but I have studied what happened in the fall of 2008, what led up to it, and the experiences learned from the Great Depression. I am confident that it was the right move. The banks are starting to pay back TARP (probably prematurely) at a profit for our treasury, so they can be left unencumbered by the accompanying regulations. That sounds a lot like capitalism to me.

The Obama Administration infused a lot of capital into General Motors. Some of that was likely motivated by political activism by trade unions, but it was also motivated by the realization that GM had a systemic influence on the economy. In addition to the direct unemployment ripple, there are a lot of small businesses that supply GM that would have been affected. GM is also a player in the weakened financial sector. Socialism implies that the government would have taken over GM. Instead, the bulk of the direction is left to capitalist businessmen. Given the GM stock now owned by the government, I would have liked to have seen a little more influence interjected. Specifically, I would have liked to have seen a couple of government employees on the Board of Directors as any investment capitalist would have done. Instead, government control is relatively minor within GM [1]. Socialist, my ass.

Another attribution is the spendthrift president. Apparently those on the right have forgotten that we had a national debt before January 29, 2009. Statistics can be faceted to tell the desired story [2][3], but a few things are clear, looking at our history. First, not all debt is created equal. In our personal lives, mortgage debt is better than automobile debt, which is better than credit card debt. There are a few justifiable reasons for governments should deficit spend. One is for a necessary war. World War II was such a reason. Iraq was definitely not. The depth of our involvement in Afghanistan, in my opinion, is not. The second reason for short-term deficit spending is economic stimulus. The Reagan Administration deficit spent, initially for economic stimulus in 1981-1982, and later for tax breaks, largely for the wealthy. The G.W. Bush Administration deficit budgets were spent largely for tax breaks for the wealthy. It is true that the Obama Administration has set new highs in deficit spending rates. If this is short-term and limited to economic stimulus, then it is analogous to the spending during the Great Depression. Obama has stated that goal and if we ensure that he sticks to that, we can sustain this short-term. The directive from the administration that health care reform should be budget-neutral is a good sign.

Obama the narcissist is another charge I have seen from the right. Webster lists it as a synonym for egocentrism, which is “concerned with the individual rather than society.” Such a person in the office of the presidency would consider themselves to be… well… you know… like “the decider”. Obama gave direction, but largely delegated health care reform to the Congress, where it most belongs. Narcissists don’t delegate. They seek control.

Upon hearing the news of the Nobel Prize award, Obama stated he was “surprised and deeply humbled” and viewed it as a “call to action” more than a recognition of his own accomplishments [4]. Narcissist? Really?

Of course, the collection of extremists on the right aren’t the only ones creating a false representation of the President. Those on the left have done a good job of irrational expectations that have obviously not been met. After all, it’s a tall order to be a savior. More on that tomorrow.

[1] http://www.gm.com/corporate/about/board.jsp

[2] http://zfacts.com/p/318.html

[3] http://en.wikipedia.org/wiki/United_States_public_debt

[4] http://www.cnn.com/2009/WORLD/europe/10/09/nobel.peace.prize/index.html