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The travails of Government Motors

This is a long-term story; time for a review.

In 2009, General Motors made itself the fourth-largest Chapter 11 re-org in U.S. history. The U.S. Treasury was heavily involved with bailout money. President Obama made speeches and saw to it that the terms were harsh for people who had supported GM by loaning or investing their money, and not-so-harsh for labor unions and GM retirees (who can vote).

The new GM repaid government loans ahead of schedule – after shuffling around some bailout monies. But it all still cost the taxpayer at least $10 billion in the end (Treasury direct losses on GM stock as they re-privatized the company).

I would argue that the intangible costs go beyond $10 billion. GM bailout advocates like to emphasize the many jobs “saved”. But if the government had stayed out (doing nothing), the jobs would exist – at more efficient companies. GM’s productive assets would have been re-organized in bankruptcy anyway; probably taken over by startup companies or other competitors who are more efficient.

So, cars would still be manufactured in America – on better terms for the consumer. It’s a general principle that doing it the government-backed way is cronyism and always rewards incompetence on some level (at the expense of consumers, investors & taxpayers). There is no reason to consider GM an exception.

Which brings us to GM’s scandal with faulty ignition switches, which have caused at least 13 deaths.

The problem goes back for years. GM, which became a famously bureaucratic company under decades of Big Government backing, has been slow to react:

GM first learned of a problem with its ignition switches on Chevrolet Cobalts, Saturn Ions and other models in 2001, documents have shown, but took no steps to recall any cars until this past February.

Lawmakers are investigating why GM and regulators missed or ignored numerous red flags that faulty ignition switches could unexpectedly turn off engines during operation and leave airbags, power steering and power brakes inoperable.

The unflappable [GM CEO] Barra…announced that GM had retained Kenneth Feinberg, who recently oversaw the BP oil spill fund, as a consultant…

The drama inside the packed hearing room – named the “John D. Dingell” room after the Michigan Democrat with a long history of advocating for GM – was heightened by photos of victims, which were displayed against one of the walls.

Your crony capitalism/ Venture Socialism at work, folks.

By the way:

  • Did those famous Government Regulators help the problem? No, although they have plenty of excuses. (Prediction: the Left will surely claim that the solution is…more regulators.)
  • Did CEO Barra just tell Congress the truth, when she claimed to have only learned about the ignition switch problem recently (Jan 31)? No again.
  • Did GM commit fraud, when it didn’t reveal the problem *during its bankruptcy* proceedings? Was escaping liability one of the motives for doing the 2009 bankruptcy? Perhaps, yes.

Which is why the new, refreshed, taxpayer-revived GM now faces multiple criminal probes.

Views of Edward Snowden

Hillary thinks he’s a traitor. She recently said:

When he emerged and when he absconded with all that material, I was puzzled because we have all these protections for whistle-blowers. If he were concerned and wanted to be part of the American debate, he could have been…It’s sort of odd that he would flee…I don’t understand why he couldn’t have been part of the debate here at home. He could have quit, he could have taken whistleblower protection…

But to high school kids, he’s a hero:

[GWU admissions officer] Freitag skimmed the extracurriculars, read the first essay, rated it good. GW also asks students to list a role model and two words to describe themselves. As for herself, Freitag said, she would list “Martha Stewart/Tina Fey” and “sassy/classy.” This year, she’s seeing a lot of Edward Snowden citations.

So whose view is right? Hillary’s, or the schoolkids’?

I must say this much: I don’t believe Hillary for one second when she talks about “whistleblower protections”, like she always honors them. I think that Snowden may have been right to fear for his life (not only his freedom), if should stay in the U.S. and try to play that game. And after seeing the U.S. government grow hideously out-of-control in the last 6-8 years, I would rather know about the NSA spying, than not.

So, on present information, I think it’s possible for Snowden to be both traitor (on foreign payroll?) and hero.

UPDATE: Meant to blog on these items sooner. They speak to the losses of liberty and privacy that we have suffered, in the last few years.

Obama, pretending he hasn’t been President all this time

With splendid “Who, me?” innocence, President Obama declared on April 16:

The good news is our economy is growing again, our businesses are creating jobs…

Here’s the challenge, and a lot of folks here know it. A lot of people don’t feel that progress in their own lives yet. So, the stock market’s doing great. Corporate profits are soaring. Folks at the very, very top are doing better than ever. But too many Americans, if they’re lucky enough to have a job, are working harder and harder just to get by, much less to get ahead.

For too many middle class Americans, it feels as if the same trends that have been going on for decades are continuing. They’re working hard, but wages flatline, incomes flatline, cost of everything else going up.

(For video – and hat tip to Peter Schiff – click here.)

As I mention often (in GP categories such as Economy or Occupy Wall Street), President Obama’s own policies are the cause of the rising inequality, stagnation and poor employment, inflation and rising costs that he decries.

The way he denounces the economy, you’d never know he’s been President for five and a half years.