Save GM and Save Ourselves
Posted: Saturday, November 15, 2008
by Tex Norman
I remember once an uncle had this $100 bill and he handed it to my toddler son. My son tore the paper into two pieces. Everyone was so upset. Had the paper been a $100 piece of Monopoly Game money, no one would have raised an eyebrow. This was a barely walking, non-talking child who did not know the difference between a paper $100 bill and Monopoly Money. After all, Monopoly Money is just a symbol of value. Someone pointed out that it is a Federal crime to destroy money. But isn't a USA $100 bill just a symbol of value too. Most money is not real stuff; money is just a medium of exchange. Money has value because we place value on it. We can actually turn ordinary paper into value if it is a check, or a Government Bond, or some kinds of contracts.
But when there is a ripple in the economy, when there are no jobs, when there is less income then we buy less stuff and oops-a-doodle, we are economically screwed.
Question: Are you saying we should save the auto-industry because it is something real that is made in
Answer:
1. We should save the auto-industry because the consequences of their poor decisions will not be experienced just by them, but by all of us.
In fact, it is more likely that the people who made these poor decisions will not suffer at all. The CEOs and nose-bleed high management folk have golden parachutes. The people who made the bad decisions will just bail out and leave the workers to flounder. The loss of the industry will result in millions of jobs being lost. When millions more jobs are lost, and lost all at once, we will have a set-back that will set us back to times worse than those Great Depression-like times. The loss of jobs won't be in Detroit
2. In World War II the auto-industry was able to retool and shift into making jeeps, and tanks.
Should the need come again for a fast shift into war production are we going to ask Japan
Question: But they can just go bankrupt and reorganize, can't they? Let them do that?
Answer:
Maybe. But the loss of money is going so fast that it is more than likely that the companies will not be able to reorganize, but will actually shut down. But even if they do attempt to reorganize the chance that they might go all the way under is there. Are you going to buy a car from a company that may go out of existence in less than a year? Where will you get parts? Where will you get it repaired? Who will stand behind the product if the company is gone? This is a very human reaction, but if we all react this way it will guarantee that the reorganization efforts of GM would be doomed to failure. The only way the reorganization efforts can work is if they can eventually sell more cars. If we ain't buyin' then they'll be uh dyin'.
Question: Aren't you advocating the throwing of good money after bad?
Answer:
No. I am advocating that there be a loan combined with a temporary hybrid management system to be established. The industry must be saved, but the management and the regulations must be controlled by the Federal Government as the loan givers. New management must be brought in, and standards must be set so that the products manufactured will be products needed and wanted by drivers. Mileage standards, and energy sources, and safety must be part of the loan deal.
Question: Aren't you advocating deficit spending and a form of socialism? In capitalism shouldn't the companies that can't make it go under?
Answer:
My answer is yes, sort of, and temporarily. What conservatives tend to say is that government must function with a balanced budget, and spend what they have, and if they don't have it, stop spending.
While this sounds true, in actual real life, at least in my real life, it is not the truth. Throughout my life I have had a fluctuating income. At one time, 15 years ago my wife and I earned almost $80,000 a year, and I had a company car, a company credit card, a training allowance, and an expense account. Now, since our car accident, my wife earns nothing, and I earn $30,000 a year. When my income has gone down, some of my needs have actually gone up. Often this has been medical stuff.
What do I do when I don't earn enough money to provide my wife with medical care? What do I do when the heating unit on my house dies and I don't have enough money to replace it? Sometimes the needs have to be met when there is not enough income to meet the needs. What I did is borrow money. I went into debt. I was spending more than I earned and accumulating debt, because I had an emergency to solve. That is exactly what the country can do and must do when we have emergencies. We deficit spend. We borrow money. We accumulate debt to address the emergency.
But that is not all I did. When I have had to deficit spend, when I have had to go into debt to meet medical and emergency needs I also made a plan of how I might pay off the debt. I sold my house to pay off debt. It was a horrible time to sell my house. It once appraised for $289,00 and I sold it for $176,000 and I still had a good sized mortgage on the home so I didn't make much off the deal, but I did what I had to do to address the debt I had accumulated during my emergency. I moved from a 4 bedroom house to a 2 bedroom apartment, and my standard of living is tight, but I got through my emergency, and I am slowly rebuilding my life-style. American must do the same.
In times like these, deficit spending is not irresponsible, it is pragmatic.
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Top-level comments on this article: (1 total)Tex, good article, yes 2nd world war a great example. Does anyone really think we can do that now, really?Thanks Robert. I continue to want the auto industry saved, but the more I think about it the more I feel there have to be strings attached to the help -- maybe chains. I don't want money thrown down a sleazy hole.I hate to say it, but there may need to be some roll back on the union contracts. We need upper management that is not paid 300 to 800 times more than the guys on the line. I want cars that look neat and people want them again. I don't want to reward the car folk for the SUVs.For a liberal democrat I sometimes don't sound much like one. I wish gas had stayed high because when gas goes down people think, "Oh, no problem. Lets drive." If people weren't losing their jobs they would be driving like crazy right now. But gas IS running out, and will go back up, and we need our cars to be less dependent on gas.I feel we have to save the car industry, but we have to save it with conditions.Anyway, I rant too much. Thanks for reading. I share your concern about another world war and manufacturing our needs, should that happen.Peace: texYes Tex you got it nailed down. We do need the auto industry and really all industry. The sad part is I don't see it happening and if it does I don't think it can be saved. I continue to say the fatted calf is dead based on our industrial capability. Why, it just isn't feasible any longer and the ramifications go way beyond any bailout.
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