An op-ed in today’s Times from Steve Rattner, who served as lead advisor on the 2009 Auto Task Force. He is, however, a Democrat so my conservative friends are free to disagree with every word.
Without government financing — initiated by President George W. Bush in December 2008 — the two companies would not have been able to pursue Chapter 11 reorganization. Instead they would have been forced to cease production, close their doors and lay off virtually all workers once their coffers ran dry.
Those shutdowns would have reverberated through the entire auto sector, causing innumerable suppliers almost immediately to stop operating too.
Despite the relative health of its balance sheet, even Ford would have been forced to close temporarily, because critical parts would have become unavailable. And service providers — trucking companies, restaurants and more — would have been severely affected.
More than a million jobs would have been lost, at least for a time. Michigan and the entire industrial Midwest would have been devastated. . . .
I consider myself an ardent capitalist, and well recognize the risks of government intervention, particularly the “moral hazard” of rewarding failure and the scary prospect of politics’ entering private sector decision-making.
But when markets fail, as they did for both autos and banks in 2008, government should have the ability — in fact, the obligation — to step in.
You can have wealth concentrated in the hands of a few, or democracy. But you cannot have both.
Whatever Works 
I still recall a conversation with a friend who is on a city council. He was against the auto bailouts, so I asked “what if a major auto employer was in his town?” … His answer is priceless – “I guess I would singing a different tune.”
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Telling, isn’t it. I have a brother who rails all the time against frivolous lawsuits (he’s a LImbaugh conservative), which is amusing since he’s filed a number of ‘damages’ suits in his day. I, liberal that I am, have never filed one. But I’ll be you knew that Frank!
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Ah ha … one’s actions always trumps their words.
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Frank, I just plucked this comment from you – and another one other from you – out of the WordPress spam filter. Genuinely odd since the one above this came through normally. Had this happen the other day with a few from pino too. Have you experienced it?
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On my site, no – but it happens to me on many first visits. A definite pain. Thanks for letting me know.
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United States of America, a capitalist country that bails out bad businesses. Hmmm, Im not so sure that qualifies as capitalism. I think the citizens that are worried about socialism taking over are a little late in their observations.
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Hard to decide what would have been the better course to follow…but in hindsight the bailout worked and that’s a good thing. Hard to think about millions of people in this industry and all the supporting industries out of work…what would the ramifications of that have been.
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I guess you will have to define “worked”, in the sense that life is cosier for people in the now, I would agree. Considering what the grandchildren and great grandchildren will have to pony up I would say nope, not so much.
As a society most of us have changed from “short term pain for long term gain” to “short term gain for long term pain” 😦
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“Cosier’ is an interesting choice of words . . .
Capitalism is defined differently by different people, but Adam Smith – the grandfather himself – warned against unfettered (i.e., unregulated) capitalism. That way, he warned, lay oligarchy.
Utimately, titfortat (note I didn’t shorten your name to ‘tit’ – you get the full appelation! 🙂 ), the bottom line must not be how we define capitalism but how we want it to work for the benefit and security of the nation. And loss of an entire industery pluss millions of jobs and hte attendant costs that would put on us would extract a terrible price from us all. We’d pay more welfare and unemployment while losing all the tax revenue that comes from working people, cities would suffer devastating loss of tax renenue which would lead to even more layoffs and even fewer taxpayers.
Capitalism is defined different ways around the world, there are many models – some work and some don’t. No one could say that Germany is not a capitalist country and yet it weaves in elements of socialism. China is a socialist country weaving in elements of capitalism.
Each nation adopts what’s right for them. Saving our auto industry was one of the best htings we ever did. Most of it will be paid back meanwhile we are a majority shareholder of the companies and we didn’t interrupt the tax revenue. I see a win-win.
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Utimately, titfortat (note I didn’t shorten your name to ‘tit’ – you get the full appelation! 🙂 ),
I like t4t.
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Well that is settled then – t4t it shall be!
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I jokingly say its the wife’s Tit, Im Tat. 😉
The truth is if there wasnt a bailout you would not have lost all the jobs. Someone else(corporation) would come in to pick up the slack. Obviously it would be an extremley painful time for many but the fact is the world would still turn and the sun would come up tomorrow. If you honestly think your country is going to be able to pay back all your debt, well, I have some special land up for sale. 🙂
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I have never denied that our debt is dangerous, nor do most people I read and hear. But we can’t solve a long term problem in the short term. Right now, the last thing we need to do is deprive ourselves of tax revenue by turning today’s taxpayers into tomorrow’s unemployed living on government assistance.
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Moe
Youre assuming that the companies would go under. Rarely do businesses stay under if they are viable. The people running them might go away but there is always someone else waiting in the shadows. 😉
The problem with the bailouts is the fact that for the majority of the businesses the leadership stayed relatively intact, and that is not a good thing.
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We haven’t had ‘pure’ capitalism, or democracy for that matter…ever.
Real democracy would create a government that’s responsive to the common man’s needs. You know, the majority. Real capitalism would end with just a handful of mega-companies that control all goods and services.
The libertarian dream would be a nightmare if it were to become true.
Americans have always wanted government to intervene on their behalf. That is, unless your particular group doesn’t stand to benefit from the intervention.
I wonder if we could find any examples of autoworkers who do not think it was correct to have government help? I’ve never heard anyone but those who are working and doing well that have any objection to the government helping.
Same old selfishness: I’ve got mine – screw you!
Conservatives want to be pro-business, unless democrats help business, then it’s socialism.
I’m still not keen on helping big banks. They don’t produce goods/jobs like factories.
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Remember the old line Kansas – what we really do – and have done forever in this country – is “privatize the profits, socialize the losses’.
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Real democracy would create a government that’s responsive to the common man’s needs. You know, the majority.
Hmm, we purposefully don’t like that. America was create specifically to protect the rights of the minority FROM the tyranny of the majority.
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All of you Liberals give President Obama credit for the wrong thing in the auto bailouts . What killed the US auto industry in the first place was the out of control pension and healthcare costs that put them at a cost disadvantage to their rivals . Obama got the UAW to give concessions that reduced costs . He was perhaps the only one who could have done that .
It is the same with the Postal Service. Yes they have other problems, but it is their pension liabilities that are the real killer .
We can argue socialism verses capitalism verses bailouts all day . You have to stay focused on the underlying issues .
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[What killed the US auto industry in the first place was the out of control pension and healthcare costs that put them at a cost disadvantage to their rivals ]
Alan, I won’t argue that overpromises on pensions for both have created a huge problem. Glad to see you give Obama credit where it’s due. He got rid of the top management who made the mess and got the unions to give on stuff they’d never agreed to before.
But what killed the US auto industry frankly was crappy cars.
As for the Postal Service, the pension thing isn’t as significant in thieir case as loss of core business to internet and failure to adapt and downsize.
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Well, if we’re going to focus on the underlying issue, then perhaps some changes to the capitalist system might in fact be needed. If success demands cutting costs so that people don’t have good pensions and healthcare coverage, then the system isn’t working.
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Like I said upstream brat, capitalism can be whatever we decide it should be. Unhappily for us, in the last 30 years we chose to embrace the most destructive form. And yet, there they are out there, my fellow citizens, defending a system that is tearing their world apart.
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They will be the ones screwed over by it and they don’t even seem to realize it. I guess the propaganda is doing its job.
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eurobrat,
The socialist model in Greece did the same thing . Understand, if you are going to promise the moon to people 30 years out, the underlying businesses ‘ have ‘ to remain ‘ profitable ‘. That is why 401k type plans are better . They are not tied to the health of the company . Hint, hint , hint Social Security and private accounts , hint, hint .
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Alan, the models in Germany and Holland also offer good pensions and they are not collapsing that I’m aware of.
Also I’m not talking about promising “the moon”. Just a basic, decent pension–nothing out of the ordinary about that.
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Moe …..
Give’M Hell !
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Eurobrat ,
I’m not up on Holland. Germany some years back reset their union wages in order to compete better . I don’t know about their pensions, but they cannot be as out of line as Detroit was or they would not be able to sell what they make .
The current pension and health plans could have and should have been done years ago in Detroit . The UAW got the US taxpayer to pay the costs of what they easily should have done years ago . The last so many years too many thousands of dollars of cost to cover retirees built was into every vehicle Detroit put out . Which is why they preferred the big gas guzzler trucks and SUVs, because it was easier to cover than in the low margin kiddy cars you Liberals want the rest of us to drive while you cruise in your limos . The competitors of Detroit can make a profit because they were not burdened with the same costs .
401ks are better for everyone. And yes if you had just stayed in the big bad stock market , the evil capitalists on Wall Street would have been good to you .
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[And yes if you had just stayed in the big bad stock market , the evil capitalists on Wall Street would have been good to you .]
I love hearing that Alan – it assumes of course that everyone can keep their money in the market till it recovers. That they won’t need any of their own capital if they get sick or lose a job. It’s a meaningless argument. SS doesn’t tell new retirees “sorry, we really can’t give you much for a few years, but just hang in there till things get better.”
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Oh, and Moe, I notice you’re not taking a break from blogging like you threatened. Nice to see you still around 🙂
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I thanks ya! Sometimes the energy just goes somewhere to hide.
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I’m in a 401k right now and it’s been going down for a while. I don’t think the capitalists have been all that good to me so far. Everybody keeps saying that the long term trend is up and I certainly hope they’re right, otherwise I’ll feel like a sucker…and my mother, who’s been telling me all these years to take the money out and put it in a savings account, will turn out to have been correct!
Not sure if Holland has cut down its retirements since I left, but when I lived there, people made 100% of their salary after they retired. Would be interesting to look into what they’re doing now, will try to do that when I get some time.
Finally, I should emphasize that I’m not out to make everybody drive a little kiddy car, but wasn’t it the gas prices and looming oil shortage that made people switch to those? And if only I had a limo to cruise in…I don’t drive at all, haha.
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Ms. Holland,
SS is great for you old timers . It may even be great for a near old timer as myself . Anyone younger than me better have a 401k and be fully invested in the evil Wall Street or they will be eating dog food when they are old . We are the future Greece . You don’t have to see the truth. The young do .
You are right. I was able to ride out the correction and even profit from it . Those older sometimes could not . Your blanket condemnation of investing for retirement in favor of relying on a generational ponzi scheme, will not help my children .
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[Your blanket condemnation of investing for retirement in favor of relying on a generational ponzi scheme, will not help my children .]
Alan, once again you assign an astonishingly broad opinion to me that I dont hold. As for SS, it is NOT broken. It needs reform if our politicians can find the political will to fix it. ALSO, and very important, the dire predictions of two workers supporting one retireee (or whatever the hell it is this week) is nonsense – it might (might, not will) apply to the time it takes to get the baby boomer generaton through the system. That will take about 20 years, but after that, we’re fine. It’s been a Republican wet dream since 1933 to destroy SS. But it’s done pretty well for us for 80 years.
By the way, the Scandinavian countries – with the West’s most generous social safeety nets – have much healthier economies than the rest of Europe. They’re even growing. Blaming govt programs for people is a canard.
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Eurobrat,
Since my last comment didn’t post and it was a little long winded anyway, I will just keep it short . What investment choice is your 401k in ? It should not be going down.
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The 401k is through my work and I can dig up the name of the investment firm if that helps. They had the choice of the aggressive/moderate/conservative investment package and I went with moderate. I think the last time I checked it it had gone up slightly, but it had been going down for a couple years before then and I don’t think I have recovered what I lost yet.
Like I said, I hope the predictions about the market’s long-term trend being upwards are true, as I actually am choosing the 401k route at the moment.
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eurobrat,
I’ve been in a 401k since 1994 . I am totally comfortable with stock mutual funds . I can take the bad years because the good years make up for them . I always go as high risk as I can. But in those 18 years my company had us in a few really poor plans where we were not getting the full upside in the good years, while being slammed in the bad years. We had to go to our company and complain to get a better choice of funds.
I assume you are younger than me. You can afford the higher risk of stock growth funds, but spread it between all of the groups. I personally am afraid of bond funds right now. Moderate probably means you have bond funds.in you portfolio. If interest rates ever go up they will get hit .
The more you are willing to learn the better you will do . You have to find out how good your plan is verses the risks you are taking . You should be able to view your plan online and look at what the various packages have done since the market bottomed in March of 2009.
Again the rule is the younger you are the more risk you can take.
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Thanks for the advice, Alan. I do appreciate it. I will analyze my plan for the bond funds you are talking about, and I am hopeful that the long-term outlook will be positive.
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