I enjoy jousting with you as well. I am pointing out that when you make statements as polarizing as this…

Furthermore, governments are certainly NOT supposed to provide economic security. They are not capable of doing so, and it has failed every time it has been tried. There is NO SUCH THING as economic security. None, zero, nada. Trying to create it will DESTROY an economy. Please point out where you think that actually worked.

…that it is pretty clear that enter the discussion with a highly specific political agenda that shapes your interpretation of the issue before you’ve even begun to assess it.

Essentially, you’ve already stated that you are adamantly against any sort of bailout on principle. So of course you would oppose this one, no matter what the facts were, because your philosophy doesn’t allow for you to ever see them as having any merit.

A clear analysis would require one to take the facts and review them in context with one another, before reaching a conclusion based upon those results. If you are going to come to the table with a predetermined, hardened belief that regards all bailouts as unacceptable forms of governmental intervention, irrespective of the circumstances, then it’s obviously not possible for you to take a more neutral approach.

As per Stephan’s suggestion, I am dropping the argument. I am sure; however, that some Libertarian out there will find your remarks insulting. Having found out that I am not a Libertarian, I can only take umbrage at your mislabeling me as one.

I have made remarks that I have come to regret, and having learned a lesson, let me share it with everyone. Telling someone their idea comes from a [insert label here] belief system is possibly insulting them while doing nothing to counter their idea.

I enjoy discussions with you, PCH, and am not going to stop enjoying them because of this thread, but I think you went of the track a while back on this one.

It’s not a function of “name calling”, but of pointing out that your assessment is driven by your personal morality, not by facts and data.

Ideologically, I take no position on bailouts. My view of them is strictly self-serving — if one occasionally helps the country, then I can support that odd event, even if I’m not particularly thrilled about it.

Your approach to this is remarkably devoid of any sense of self-interest or a willingness to assess individual circumstances. Instead of performing a cost-benefit analysis, you instead leap to this morality/ Libertarian-uber-alles position, as if all of us are supposed to embrace this worldview just because it works for you.

On the whole, I find Libertarian ideology to be horribly naive, a sort of political religion which is easy to cite as gospel because there is zero chance of putting it to a real world test. There is a reason why this theory doesn’t make it into practice — because on the whole, no matter how well-meaning it may be, it just doesn’t work.

You are likely right, it has gone on a while hasn’t it?

First, I live in a Libertarian fantasy world, and then a Monarchy of Morality? Which is it?

None of this name calling and categorizing is a refutation at all is it? And what kind of bunk is this:

“The role of our government is not to prop up your version of morality, but to balance the needs and interests of its constituents.”

The first part is just spite, the second part plain wrong.

Is it your belief that it IS the governments role to pick winners and losers in the market? Because that is the contrary to my position which is that it is NOT the role of the government to pick winners and losers in the market. You may not think it is stealing for the government to do so, but it is still wrong.

Lastly, is it your position that the intervention addressed a “need” or “interest” of the American people? Both? There are three possible answers unless you want to retract or reclarify your statement.

Fortunately, most of us reading this live in the United States of America, not Landcrusher’s Monarchy of Morality. The role of our government is not to prop up your version of morality, but to balance the needs and interests of its constituents.

In 1980 the Big Four WERE the domestic automobile industry. Now we have the transplants increasing their administrative, engineering and production presence in the United States, so the argument to save Chrysler becomes less compelling.

This is very much on point. Not only is the industry and job base within the US more diversified today than they once were, but so are the investors and creditors. Instead of dragging down the US banking system, defaults would hurt multinationals, which would distribute the pain globally and less of it within the US itself. Since these bailouts are about self-preservation, not charity, it’s of lesser benefit to us to help the automakers today than it would have been in the past.

In 1980 the Big Four WERE the domestic automobile industry. Now we have the transplants increasing their administrative, engineering and production presence in the United States, so the argument to save Chrysler becomes less compelling.

Ford is making the changes necessary for long-term survival NOW, because of the threat of bankruptcy, which, ironically enough, makes it a better candidate for some sort of government aid. I just hope that it doesn’t come to that. The company has escaped death twice before – in the immediate post-World War II years, and once again in 1980-82 – so I hope that it pulls through for the third time…vehicles like the Verve and the Flex give me hope.

I happen to agree with you. There IS a cost. This was your best argument:

“If it is free, then where is mine? Where is my loan guarantee? If it has no cost to the government to supply it, we should all be getting it, no?”

The way we did it, it could also be expressed as an assumption of risk. A careful one, to be sure, but this could have had an ugly outcome. We were lucky and, last time I checked, you can’t put lucky in the bank.

Why would those workers not be able to find other manufacturing jobs? First, the demand for autos did not dissappear, nor did the demand for parts. The real losers would be middle managers and professionals, not labor. Those people simply move away and start again, they do not go hungry.

Those who decide to rot cannot be helped. I say that is a small percentage. I don’t believe they are as incapable of growth as you do, but if they were, why would you want to create another generation of people like that? So the left could stay in power?

Seriously, what kindness are you showing to these people if you move the problem from them to their children? How about all the other laborers who should have gotten the message and raised their children with more skills? You just taught them not to worry. Their kids can get a better job than a college graduate down at the factory, and the government will ensure it keeps going and going. That is the message.

Many of them might have ended up working for the American car company that is number one and growing, the one that did not grow out of Chrysler’s ashes. We can’t point to it because it was aborted by the intervention.

Lastly, this is not a case of monetary policy. Nice try, no cigar. Completely different, sorry. When you pick winners and losers (outside the currency game) you are no longer talking about monetary policy. We certainly are not talking about monarchies.

You cannot have the benefits of capitalism and remove the pain. The pain is part of what makes it capitalism. If you remove too much of the negative outcome, you destroy capitalism. The cost of the “insurance” against pain has past the point of it being a good cost benefit ratio.

Are we really just arguing about how low we should set the safety net? I can see from your perspective how the intervention was simply brilliant. It was a bargain of a safety net.

Let’s say that you think the net should be at point A. Also, you predict the net would reach point B by 2025. If I told you we could get the net twice as high by 2025 if we lowered it today by 50%, would you take that deal? You think I am crazy with my ideology. Wait till you hear this. By the end of this century, people will no longer need to do manual labor.

It did work in the case of Chrysler back in the ’70’s. The inherent risk minimizes the use of these bailouts, there is no broad portfolio of government-sponsored corporate bailouts at which you can point. Clearly, it’s seen as a last-chance occasional stop-gap measure, not as a standard practice.

So now it’s just a matter of priority?

Yep. It’s actually a breath of fresh air to see the feds formulate priorities that have some grounding in reality, instead of some twisted political ideology that corrupts clear thinking.

Ah, so you agree there are costs to the bail out? What were they please?

The primary cost was the opportunity cost — the time and effort invested in it could have been otherwise allocated. But in this case, the return was positive and probably one of the wiser uses of the feds’ time at that time, so the bailout made sense, given the payoff to the treasury and the US economy.

Here are some of the benefits: Most workers will get better jobs (even if they do not pay better)

No, they won’t. The workers who were raised to work on an assembly line will not leap headlong into some wonderful alternative trade. Most of those individuals will see a decline in their compensation, and limited opportunities thereafter.

In any case, you seem to miss that one of the prime beneficiaries of the bailout were the banks. If the automakers evaporate, so do their previous loans, which creates widespread pain through the economy.

I suppose that we could follow the example of Herbert Hoover, whose failure to intervene led to a deepening of the Great Depression, or of the French monarchy prior to the revolution, whose hubris led to the loss of their heads. But I would prefer that we learn from the past, and appreciate that hyperbole that equates management of the monetary system with Hitler and Stalin is more than a bit off the mark.

Right, so long as you are prescient. The reason the market works better than socialism is because no one is smart enough to make this prediction. Even if they go to Harvard. Once again, we are not speaking Russion – QED, it don’t work.

So now it’s just a matter of priority? So we would do it for everybody but we can’t so we only do it for the “important” ones. Once again, if it is “free” this argument makes no sense. And, for godsakes, S**T happens? So, even if it’s wrong, too bad?

In the end that is part of the problem, it is immoral unless it is free. If it is free, then it should be free for everyone, or once again, it’s immoral. Life isn’t fair, but the government has an obligation to be fair. I don’t expect them to level the field, just not to tilt it on purpose.

“It provided a couple of decades’ worth of benefit, so that’s inaccurate. There were many thousands of people employed by the company itself and its suppliers, as well as others in their communities who receive indirect benefit from it, who were all helped as a result.”

A couple decade’s worth, and now the problem is bigger. So we have to do it again? The free market is only in effect 19 out of 20 years? None of these people were helped by the way. They worked or invested to get back a return. They helped themselves. The fact that many of them were chosen by the government as the winners is the problem. It’s immoral.

“The shame of the Chrysler bailout was not that the bailout was undertaken, but that it wasn’t more extensive and that it didn’t address the root causes that necessitated the bailout in the first place. They fixed the financial problem, but not the managerial failure that helped to create it in the first place. So we relieved the patient’s symptoms and gave him a longer life, but we didn’t rid him of his cancer. That was a “C” effort, when we should have been shooting for an “A.””

Yes, that is always the problem with interventions, we always just KNOW that we can get it right next time. BS! It’s wrong 999 times out of 1000. Even then, it’s just wrong.

“The failure of a large firm creates more drawbacks for the economy than does the failure of a small firm. If we are to bail one out, as we are apt to do on occasion, then we should be doing it for our own sakes, not for theirs. It’s not an ideological choice — we don’t owe them anything — but a pragmatic, self-serving one.”

Yes, but which selves are getting served? Certainly not me. I had no stake in that game except to see a bunch of poor managers and over paid union laborers get bailed out of their own mess while everyone around, including them, didn’t get the message that their ways don’t work. Now, we have THREE companies in trouble. The only good thing is that they have less employees now than then because we taught them that there were no consequences to everyone in the company looking out for themselves rather than the customers.

“It’s fine to debate the virtues and flaws of bailouts, but it is wrong to claim that bailouts are costly and that laissez faire comes free of charge. You can oppose bailouts as you like, but it’s disingenuous to argue that a hands-off approach can’t also be expensive. Failing to act is still a form of choice, and with it can come consequences”

Ah, so you agree there are costs to the bail out? What were they please? You seem to disagree with all the ones I point out.

Here are some of the costs of letting Chrysler fail: Financial hardship for workers, lost value in property near the plants, increased cost of capital for the industry, etc. They are all easy to see which is why there is an impulse to stop them.

Here are some of the benefits: Most workers will get better jobs (even if they do not pay better), the industry will learn from the error and gain efficiency, the government MIGHT actually learn something and change regulations in a good way, a bunch of union hacks will be forced to get real jobs, better cars at better prices for the entire frigging world, and, lastly, we would not be seeing them about to fail now. We now have a whole new generation of workers who bought into the big lie. They were defrauded, weren’t they?

A company is just a sheet of paper. The people move on. They learn. They grow. They live. End the cycle of suffering, stop the interventions.

I’ve already covered that. If you cherry pick the deals that you guaranty and you end up with a default rate of zero, then there is no loss suffered as a result of the guaranty.

Obviously, if the pool is expanded, the marginal risk of failure goes up. That explains why these things are done selectively and generally only when there is a lot at stake if the interventionist option is avoided.

Since the Big 2.8 provide more immediate benefit to a larger pool of Americans, they get higher priority. As a resource allocation exercise, it does make sense for Uncle to care more about the fate of the Big 2.8 he would about a smaller entrepreneurial venture. So GM gets help that Tesla and Vector will not — s**t happens.

One of the main reasons is that it did not work. You want “facts”, and the fact is that it didn’t work. 20 years later after much upheavel, the whole thing is going south again, only it’s now the whole industry along with much of the state.

It provided a couple of decades’ worth of benefit, so that’s inaccurate. There were many thousands of people employed by the company itself and its suppliers, as well as others in their communities who receive indirect benefit from it, who were all helped as a result.

The shame of the Chrysler bailout was not that the bailout was undertaken, but that it wasn’t more extensive and that it didn’t address the root causes that necessitated the bailout in the first place. They fixed the financial problem, but not the managerial failure that helped to create it in the first place. So we relieved the patient’s symptoms and gave him a longer life, but we didn’t rid him of his cancer. That was a “C” effort, when we should have been shooting for an “A.”

If I only bet 200k on my business, then so what. OTOH, if someone is betting 200MM on a company then they should not be allowed to fail? And I have to compete against them for workers, and resources? Don’t you think all the other advantages they get are enough?

The failure of a large firm creates more drawbacks for the economy than does the failure of a small firm. If we are to bail one out, as we are apt to do on occasion, then we should be doing it for our own sakes, not for theirs. It’s not an ideological choice — we don’t owe them anything — but a pragmatic, self-serving one.

Finally, I note you skipped to geeber rather than dealing with my final paragraph. I suppose because it is correct.

No, it’s because I owed Geeber a response, and because I’d already touched on it. Clearly, I don’t believe that it’s a “free lunch” — I specifically pointed out that both alternatives had their own costs and benefits.

What I did is correct two of your basic errors. Firstly, I pointed out that there is no financial loss from a guaranty placed on a loan that does not default. Secondly, you act as if there is no cost incurred with a laissez faire approach, when clearly there are.

It’s fine to debate the virtues and flaws of bailouts, but it is wrong to claim that bailouts are costly and that laissez faire comes free of charge. You can oppose bailouts as you like, but it’s disingenuous to argue that a hands-off approach can’t also be expensive. Failing to act is still a form of choice, and with it can come consequences.

I find myself arguing with you TTAC writers a lot lately, which is not really my intent upon coming here. Hell I link to you on my own blog’s roll. BUT, in the WSJ interview, Ghosn did not say that he thought one or more of the Detroit 3 would go bankrupt. What he said is there may come a point when there are no longer 3 independent US automakers.

There are a variety of ways to get from here to there; actual failure and bankruptcy are not required. For example, perhaps Ford and GM would merge, and Chrysler gets wholly bought by … I dunno, Tata — and Tata eliminates the Chrysler brand and calls everything Nano. The Grand Caravan Nano. At that point we’d say: there is one independent US automaker. Yet we could get to that point without a single bankruptcy. I could name you tons of companies that disappeared without ever going bankrupt, and those are just the stocks I’ve bought in my IRA.

Ghosn may think they’re all going to go tits up, but if so he was careful enough not to actually SAY that — despite what I keep reading here. If you are inferring that he was implying that … that’s just an opinion, that’s not straight reporting.

If it is free, then where is mine? Where is my loan guarantee? If it has no cost to the government to supply it, we should all be getting it, no? Under your logic a lottery ticket is free, because you get more money back than it costs to buy. If Chrysler’s ability to pay back the loan was a sure thing, then the government would not have been needed to intervene. Furthermore, even in hindsight we are incapable of calculating the costs. If it were possible, we would all be speaking Russian or Chinese by now.

“The fundamental flaw in your arguments is that you put on your ideological hat and run everything through it with that pre-determined taint, instead of just assessing the facts and reaching a conclusion based upon those facts.”

No argument is flawed due to it’s source. An argument can only be flawed based on it’s lack of logical validitiy (the conclusion does not necessarily follow) or because the premises are false. If you want to say you do not believe that there are costs that are not being measured because they are hard to find then fine. At least show me the big benefit. Chrysler was saved, and now are entire domestic auto industry is on the brink of failure. We have lost market share, and jobs (not that jobs actually have much value, but people of your ideological taint seem to think they do).

“It’s horribly simplistic to claim that one of those choices is marvelous and wonderful, while the other is horrible and evil — BOTH alternatives have their pros and cons, and the decision making process should account for all of these.”

It’s only evil in that it was decided to use the governments power to support the failure of one group of people at the expense of many, many more. So ya, I guess it is sort of evil. I would rather say foolish, or stupid, but whatever.

“If Company X provides a lot of employment and those jobs can’t be replaced for those workers, then the government will bear the cost in the form of higher transfer payments and lower tax revenues. Now, you can pretend if you like that unemployment creates no burden on the system, but it does, whether or not your ideological stance allows you to see it.”

The assumption that the jobs cannot be replaced is clearly false, even under socialism the jobs can be replaced. If you just want to make up jobs, then do it. Furthermore I do not claim that unemployment has no cost, nor the failure. My point is that the cost of the intervention is actually higher for many many reasons. One of the main reasons is that it did not work. You want “facts”, and the fact is that it didn’t work. 20 years later after much upheavel, the whole thing is going south again, only it’s now the whole industry along with much of the state.

“Because Chrysler creates a lot more benefit to a lot more people and businesses than does your small consulting company. When you have tens of thousands on the payroll and buy materials that help to keep a lot of other businesses afloat, then you’ll have more leverage, too. Until then, them’s the breaks.”

Right. Without even knowing what kind of consulting company I refer to, you ASSIGN a lower social value to it than that of Chrysler. It’s not about value at all, just about keeping the money moving around among BIG businesses that provide LOTS of jobs (once again, you should reevaluate the “value” of jobs). If I only bet 200k on my business, then so what. OTOH, if someone is betting 200MM on a company then they should not be allowed to fail? And I have to compete against them for workers, and resources? Don’t you think all the other advantages they get are enough?

Finally, I note you skipped to geeber rather than dealing with my final paragraph. I suppose because it is correct. There is undoubtedly damage done by these sorts of interventions, and we should not let government get away with hiding those while claiming to have been a great benevolent force. Certainly Chrysler was not the worst ever, but ignoring the costs IS evil. It’s that sort of thing that will get us more Keynesian schemes, and New Deals that will simply keep people in ACTUAL poverty.

We agree here. I guess my point is that if Uncle Sam is going to play nanny here, then we should see long-term benefit and have a right to demand it. Obviously, not every company received government bailouts, and I think that the hurdle for getting them should be set at a high level.

It does make me wonder just how effective the government can be at forcing corporate culture change.

It’s very difficult. For one, our federal government itself doesn’t provide a benchmark for how a corporate culture should be, so it’s fair to question how competently they can be expected to administer such a process. The trend these days is toward private-public partnerships, and one can hope that this could provide a possible alternative.

Ford is making real changes now, and those changes, even if government aid does arrive, will be what ultimately ensures the long-term success of the company.

Absolutely agree. Among the 2.8, Ford seems best positioned to fix the core management problem. We’ll see whether they have time to deliver the product that will be needed to go along with it.

I’m not disagreeing with your larger point, just noting that there were some strings attached to the Chrysler bailout. Whether they were the right strings is certainly a subject for discussion.

It does make me wonder just how effective the government can be at forcing corporate culture change. The loan guarantees and the success of the minivan got Chrysler out of the woods, but, as you noted, by 1986 it was business as usual…no real brand differentiation, no real improvements to the product (the K-car platform hung around for way too long), and no real improvements in quality.

Ford is making real changes now, and those changes, even if government aid does arrive, will be what ultimately ensures the long-term success of the company.

The cost is incurred only if the loan defaults. Obviously, it’s not optimal for the guarantor if the loan does default, but the cost isn’t actually incurred if the loan is repaid. And in the case of Chrysler, it did make good on its repayments. The lesson: if one is going to guaranty loans, a lot of cherry picking and covenants are required.

What we are down to is a fundamental disagreement on whether there is a “benefit” in keeping a company afloat that cannot swim on it’s own. I say there is not.

The fundamental flaw in your arguments is that you put on your ideological hat and run everything through it with that pre-determined taint, instead of just assessing the facts and reaching a conclusion based upon those facts.

If Company X is on the brink of failure and could be saved with loan guaranties, then Alternatives A (bailout) and B (leaving them alone) will each carry certain benefits and drawbacks. It’s horribly simplistic to claim that one of those choices is marvelous and wonderful, while the other is horrible and evil — BOTH alternatives have their pros and cons, and the decision making process should account for all of these.

If Company X provides a lot of employment and those jobs can’t be replaced for those workers, then the government will bear the cost in the form of higher transfer payments and lower tax revenues. Now, you can pretend if you like that unemployment creates no burden on the system, but it does, whether or not your ideological stance allows you to see it.

Does that mean Company X should be bailed out? Not necessarily. However, it’s reasonable to assess the pros and cons, and unreasonable to pretend that the hands-off option carries with it absolutely no negatives.

Why is it that you want to apply one standard to Chrysler, and another to my consulting company?

Because Chrysler creates a lot more benefit to a lot more people and businesses than does your small consulting company. When you have tens of thousands on the payroll and buy materials that help to keep a lot of other businesses afloat, then you’ll have more leverage, too. Until then, them’s the breaks.

As I recall, the Chrysler bailout did come with some strings attached.

My point was that the product needs to improve, and since the decline that led to the need for bailouts was largely the result of bad product that this should be priority one before any guaranties are provided.

Chrysler never really addressed the long-run problem of second-rate product, despite repaying the loans. The inherent problem was never ultimately fixed. The shame of it is that they had the opportunity, but didn’t do it when they had the chance. We’ll see soon enough whether or not it’s too late.

As I recall, the Chrysler bailout did come with some strings attached. The UAW had to agree to wage and benefits concessions (Iacocca already had agreed to accept a salary of $1 per year). The company also agreed to stop making its big-block V-8s (which were pretty much only used in trucks, full-size vans and the motorhome chassis by that point, and in the wake of the 1979 fuel shortage, everyone thought gas guzzlers were going to die a quick death).

Chrysler also had to give up the corporate jet, which, judging from Iacocca’s reaction, was akin to making him sacrifice his firstborn child.

Right now the company most willing to make significant changes is Ford, as Mullaly appears to be revamping the corporate culture. Quality improvements begun under William Clay Ford, Jr., are taking hold, and Mullaly refrains from UAW bashing (in public, at least).

So Ford may be a good candidate for some sort of government help, although, ironically enough, it has only made these changes because of the looming threat of bankruptcy. A guarantee that the federal government would ultimately ride to the rescue would have reduced the company’s sense of urgency…

Actually, there is a cost even if the loan does not default because you cannot be sure that the loan will not default. You pretty much agree in your second argument. You accuse me of being in a theoretical world, but in what world do you get to have hindsight to assign values to risk?

What we are down to is a fundamental disagreement on whether there is a “benefit” in keeping a company afloat that cannot swim on it’s own. I say there is not. See above for exceptions. If they were not cheated, or somehow the victim of some perfect storm, I say there will be more harm than good. I am sorry that you claim to not understand this, because I KNOW YOU DO.

Why is it that you want to apply one standard to Chrysler, and another to my consulting company? If I close shop tomorrow, why is there no bail out or intervention? If I am unemployed tomorrow, why do I not get benefits?

It is possible that unemployment insurance will work outside of government. It is not a government function, and should be privatized. That would help a lot.

What won’t help is having government look at business plans. You might want to think about that one again. OTOH, some string attachment would be nice. How about we put all the people running the place along with the union on notice that they are personally liable for a small part of the loans? These people just lost all the stockholders’ and creditors’ money. If they think this puppy can fly, they need skin in the game.

Lastly, I am no perfect world libertarian, see above. Accusing me of such does not make it so, and trying to pigeon hole my positions does not change them into something else nor invalidate them. If we want to start calling names, let’s call this belief in a governed market place what it really is – Fascism.

If you want to disagree with the idea that letting the market work rather than saving failing companies with government money is wrong, then fine. No worries, but do accept the idea that it is not a free lunch, and that there are bad effects that are just harder to connect to the intervention. You could give a few million dollars to many small business men and watch them put their competitors out of business. Rarely would anyone be able to prove the connection. You know this, but do you really agree that the Chrysler intervention was without cost?

Is that an ad hominem argument? I get your point, but my point was that once you have enough government interference you can then justify anything. We will have to point out this fallacy everytime government tries it if we ever hope to stem the tide.

As for the jobs not coming back, the analysis of the time was stupid. Those people would never make the same money again? Perhaps THAT was what was causing the failure? Seriously, this is all socialist rhetoric when you expose it. It is based on economics of scarcity. If you believe that crap, you might as well go back to tariffs to protect everything. At best your argument says that government pushed the problem to the next generation. My proposal is to let the market work so that you take your hit up front, and let the lessons learned have an effect. The Market provides information after all. It was telling us that Chrysler was weak. We didn’t listen. It may be telling us again.

Economic security – None of your evidence is anything close to providing economic security. Economic support, but not security. The closest thing they would come to security might be analagous to small poles in ones yard in lieu of a fence. None of them will keep people from going broke.

Military security- Apparently I am no more a libertarian than you are a conservative! Here is the basic bit you, and so many others, seem to miss: The ideal government policy may not work in a world where there is more than one government. One of the primary desires I have of our government is to protect me from OTHER GOVERNMENTS (and pirates/brigands/terrorists). Ron Paul and the libertarians just don’t get this. To me it is key.

“Yes they did quite well…” You now want to point out that there were positive effects. So what? I said that is the problem. They point to some identifiable short term benefits and calim victory. If this is such a free ride, where is my billion dollars in secured loans to start a business? My point is that they did not avoid the things you say they were trying to avoid: loss of market share to imports and loss of jobs. The problem seems to have bounced back with a vengeance. The jobs are mostly gone. Had the market been allowed to work, I say, less pain would have been had overall. I say, the other domestics would have woke up earlier and started winning. Many of the Chrysler employees would work for them today, Detroit would not be on the verge of collapse. Or, perhaps all auto manufacturing could have gone overseas. The most basic economics course tells us that is a good thing. Why does everyone want THIS to be an exception? It’s okay for my consulting company to go broke, but big manufacturing companies have to get rescued? WHY? Companies go belly up EVERY DAY, and it’s okay. But if a smaller amount of jobs are lost at an auto company than are lost in the SMB market on a regular basis then we all have to cry about it.

“Not a bailout” Yes, a bailout, see MY post. But seriously, let’s call it an “intervention”. I don’t care. And yes, student loans are a HUGE intervention on behalf of academia. They do not help the students at all. Quite the opposite.

“We have been playing…” And has it been a good thing? NO! Even Keynes claimed he was not a Keynesian. Government needs to ensure that everyone plays by the rules. There is a need for intervention in order to keep the market place fuctioning properly. (We should have the fed, but they need to be less aggressive).

I am not a TOTAL laissez-faire dreamer. However, Chrysler is a good example when intervention was not called for. They could not weather a common international occurence and it’s effect on a commodity price. Too bad. Had they been the victims of market manipulation designed to target THEM, then fine, maybe something needed to be done. That is where I draw the line. Their competitors survived it, so they should have to. That is how the market gets rid of the weaker players to make room for the stronger ones.

Detroit, both the city and the auto industry, are based on the thinking you espoused. That is why they are rotting, failing, and dying. It will not change until they embrace the market.

There is only a cost if the loan defaults. It’s the institutional equivalent of one of us co-signing a loan for a friend or relative.

Otherwise, it would make sense for the government to guarantee all loans because it would cost nothing.

Not at all. The default rate across the pool of borrowers is not zero percent, so the guarantor would be on the hook for those loans that did default. Hence, blanket guaranties are generally a bad idea; as a guarantor, you need to choose your borrowers carefully.

Selective guaranties can provide a net benefit if (a) the borrower doesn’t default and (b) keeping the borrower in business creates a net benefit. And I’m sorry, but if you want to understand this, then you’re going to have abandon the theoretical world of libertarianism for the reality of how the world works.

Unemployed people create burdens on the society that will cost the taxpayers money, either directly (feeding them, clothing them) or indirectly (arresting and jailing them when the unfed, unclothed winners of the Libertarian Award show their thanks by stealing your car and robbing your cornerstore to pay for the food and clothes that you don’t want to pay for.) None of the available choices are free of negative consequences, it’s a matter of deciding which basket of benefits and pain that you prefer.

The problem with the loan guarantees is that they don’t come with enough strings attached to assure good performance by the borrower. If the feds were to help the Big 2.8, fine, I can almost live with that. But in that case, the Big 2.8 should be required to provide a effective business plan that shows how they will be able to repay the loans and improve their future performance so that they don’t come back later to grovel for more. Since they apparently aren’t accountable to the consumer or the shareholders, perhaps the guarantor should be the one to straighten them out.

“In other words, the government had to interfere because of the obligations it made when it interfered in other areas where it also had no good business being.”

You can be a Libertarian about this if you want to but the cats out of the bag already. I would like to do away with Social Security and go to private investments but it’s just not possible, politically or otherwise.

“Perhaps if chrysler had not had all the government interference in the first place, the loans may not have been needed either.”

We are in agreement. It has been my opinion that if the money spent (and the engineers time) to comply with government mandates for safety and emmisions in the 70’s had been spent on product developement instead we might have seen a different outcome for the domestics, even unto this day. But as I said the cats out of the bag already.

“And my statement was anything but cold. Do you think all those people will not get better jobs if a better companies are allowed to prosper? Is that it?”

Yes, that is it. Every analysis at the time said those jobs were not going to be replaced. Maybe the children of the workers would find better jobs, but you kiss a generation goodbye from earning anything near what they did – hence the increased costs to us the taxpayers.

“Furthermore, governments are certainly NOT supposed to provide economic security. They are not capable of doing so, and it has failed every time it has been tried. There is NO SUCH THING as economic security. None, zero, nada. Trying to create it will DESTROY an economy. Please point out where you think that actually worked.”

Student loans. Freddie Mac. Fannie Mae. Overseas Investment Corp., when it was used to expand markets for US businesses, now it just seems to be used to transplant US manufacturing to low cost countries. Free Enterprise Zones. All of these are guarantees or contructs of government policies to help promote business. And don’t get me started on state governments. First time home buyer programs anyone?
There is a strange dichotomy in your reasoning. I would assume that you think military security is valid function of government. What are wars fought over? Does one country get up in the morning and say hey lets go attack that other country? Wars are about economics and resources. You cannot separate foreign policy, military policy, from economic policy. The only exception to this is the current WOT, because the enemy is not a nation and therefore does not have an economic interest (although it’s not surprising that they chose as a target one of the economic centers of our economy). But look at the last war. Iraq invaded Kuwait. So? We were not getting any oil from them. Who cares? Why get involved? Two reasons: Saddam would not have stopped at Kuwait, he would have eventually gone in Saudi Arabia, and we get lots of oil from them; and Kuwait was a major supplier to Europe and Japan. If those economies go in the toilet, what do you think happens to us? That’s why Europe and Japan were all for intervention in the Gulf. Even France sent troops!!! And Japan sent money. There was no economic interest for Europe to support us after 9/11, on the contrary it was in their economic interest to oppose us. If you think France was against overthrowing Saddam based on some gradiose ideals of national sovereignty, the UN, etc. you are naieve. It was about the money. You cannot divorce economic security from military security.

“Your final statement is amazing, especially for a so called conservative. Seriously, if Congress was trying to avoid all those things by bailing out chrysler, then they sure did do really well didn’t they?”

Yes they did quite well. Chrysler 1.) stayed in business and contiued their recovery, 2.) Made billions of profit all thru the 80’s and the 90’s 3.) Paid millions or billions in taxes and fees, 4.) It’s employees, dealers, and suppliers paid millions or billions in taxes and fees, 5.) the employees of same paid billions in taxes. 6.) All this money rippled thru the economy dozens of times.
All this economic activity occured over a period of almost 20 years (if you want to arbitrarily stop at the point where Daimler “merged” with them). Cost to the US government? Zero or an amount so miniscule in comparison to the above that it wouldn’t even show up in an excel spreadsheet graph.

“The bail out worked like most government attempts to “fix” economic outcome.”

Not a bailout. See my first post. You are right the government cannot fix economic outcome. But that was not this situation. Chrysler could well have gone under and the government would not have intervened. All they were going to do was gaurantee the loans. If guaranteed loans from your local bank are a “bailout” what was the S&L rescue? No loans from private finances involved. Just a direct transfer of taxpayer funds. By your definition student loans are a bailout.

“You can’t fight the invisible hand. It WILL slap you upside the face, and you WON’T see it coming.”

We’ve been playing with the invisible hand since the 1930’s and the rise of Keynesian economics. Before we had a depression. 30% unemployment. Not just a US, but a worldwide catastrophe. Since then nothing like that. I’m still waiting for the big slap, but it’s been 75 years already.

You pointed out how smart a move the loan guarantees were because the cost of all the unemployment and pension obligations would have been really big. In other words, the government had to interfere because of the obligations it made when it interfered in other areas where it also had no good business being. The answer should be to get rid of the other obligations! Perhaps if chrysler had not had all the government interference in the first place, the loans may not have been needed either.

And my statement was anything but cold. Do you think all those people will not get better jobs if a better companies are allowed to prosper? Is that it? The stronger the economy, the less damaging a job loss will be. In a really strong economy, job losses often result in an increase in pay! No, the cold, uncaring, and fearful attitude is that of the government control freaks who will keep everyone down.

Furthermore, governments are certainly NOT supposed to provide economic security. They are not capable of doing so, and it has failed every time it has been tried. There is NO SUCH THING as economic security. None, zero, nada. Trying to create it will DESTROY an economy. Please point out where you think that actually worked.

Your final statement is amazing, especially for a so called conservative. Seriously, if Congress was trying to avoid all those things by bailing out chrysler, then they sure did do really well didn’t they? Now we have 3 manufacturers on the brink. If numbers of dealers made a difference, the domestics would still be winning. The imports all got dealers anyway, and they sell more per dealer which makes them more efficient. GM is trying really hard to GET RID of dealers. I was not saying Ford and GM would have been stronger from less competition, I am saying that they would be made stronger because everyone would have seen that they were a business, NOT A SOCIAL PROGRAM.

The bail out worked like most government attempts to “fix” economic outcome. Some measurable short term results allowed them to take credit while hard to see moves by the invisible hand made the net effect negative. You can’t fight the invisible hand. It WILL slap you upside the face, and you WON’T see it coming.