We Have To Let Bad Business Fail
Tweet
With the auto industry now the latest to belly up to the bar for a corporate handout, I think we need to just let these companies fail. It won’t absolve us of a financial hit, but the money we would bail the corporate types out with would far better be spent on providing a cushion and re-training for the people who end up victims of the fall than just writing a check to a CEO. Those guys talk a good game about the wonders of the free market when they’re at the top of the roller coaster, but as soon as things get rough they cry for their mamas.
21 Responses to “We Have To Let Bad Business Fail”
GOP Rep. Spencer Bachus Facing House Ethics Probe For Insider Trading
Jennifer Aniston Reportedly Pregnant With Twins
PHOTOS: Tamara Ecclestone At The Langham Hotel
Red Front? “Center For American Freedom” Logo Echoes Communist Style
Romney Calls For Defunding Planned Parenthood, Wife Was A Donor
GOP Fundraising Email Asks Supporters To “Knock Out” Obama
Romney Comes Up Limp In Nevada
Obama Opens Lead On Romney In New Poll
Latest Entries
Why Do Liberals Support Drone Strikes?
Weekly Standard Rolls Out The Iraq Argument For Iran
Equal Polarization, My Ass
Some Crazy Stuff That Happened In World War II
Maryland Republican Campaign Funds Used To Defend Voter Suppression
The Obama Jobs Record In One Graph
Martin O’Malley All In For Marriage Equality
Newt Gingrich, Filled With More Excrement Than Your Average Politician
New Year, Powerline Still Stupid
Thanks Again
Meta
Blogroll
Disclaimer
The views on this site are mine and mine alone, and do not reflect the views of my employer, Media Matters for America
© 2000-2011 Oliver Willis
Right. General Motors fails, and more than two million people are out of work. Management, autoworkers, parts suppliers, dealers, salespeople. Ford goes, another couple of million people without jobs.
Yes, let’s create millions of new jobless. Great idea. Change we can believe in. And these people will be re-trained to do what, exactly? Wal Mart can only employ so many new greeters, and the Salvation Army doesn’t have enough bells to go around.
I might consider a bailout if these companies had shown any sign of competence in competing with foreign automakers. But they just haven’t. I agree with OW that we’re better off putting the money to helping out the Michigan folks who will get hurt. I’m in favor of helping some of them relocate to Mississippi — the shittiness of the state won’t be that big a change — where they can put their accumulated experience to work for Toyota, which instead of begging for government largesse is opening new plants.
This is the fundamental problem: how long are we supposed to keep propping up companies that don’t work?
Isn’t that supposed to be the magic of the free market? Survival of the fittest and only the strong survive, right? GM fails and Chrysler and Ford pick up the slack. Maybe even improve their products. As a Ford owner, I think it sucks that European Fords are better than mine. The guys on Top Gear keep talking about how the Ford Mondeo is one of the best cars ever made, but we wouldn’t know.
Oliver, I’m afraid the discussion of what to do with what is left of this economy is – FOR SURE – above your pay grade! Mine too, and I’m pretty sure EVERYONE of us who read this site – nothing personal to you, me, or the rest of us.
Do WE realize that a 10 trillion dollar debt needs YEARLY payments of 1 TRILLION just to pay the INTEREST at 5%? You ARE bankrupt – period.
Screamin’ Demon is right – IF GM goes under MILLIONS are out of work. AND – what little remains of America’s INDUSTRIAL sector will be fatally, permanently DESTROYED. The BAD news is – letting them go under MAY be the right action. The US is royally SCREWED.
IF I was President Obama; I would IMMEDIATELY DISENGAGE from Iraq, Afghanistan, Europe and Asia. I’d bring ALL the US military HOME – and disband 50% of them – at least. IF THE US DOES NOT START TO SPEND – at least somewhere NEAR it’s INCOME – AND SOON – there is NO HOPE.
Your DEBT has gone from 5 to 10 TRILLION in less than 5 years. Forget the world – forget trying to run the universe – IF YOU don’t get your economic house in order NOW – there may not be a tomorrow.
AND – I’m an optimist!
OW: but the money we would bail the corporate types out with would far better be spent on providing a cushion and re-training for the people who end up victims of the fall
Got that right.
Those in favor are saying the companies HAVE to be bailed out because it’s the workers who will end up unemployed and in trouble.
Fine. Then give the 25 Billion to the workers. NOT to the companies that have shown they can’t survive. NOT to the managers and executives who have shown they haven’t done anything to earn the money. To the workers the everyone is so worried about.
If there are the 2 million of them the Screamin’ Demon mentions that’d be 12,500 each. Not a huge sum, but enough to provide some training and groceries while they find jobs with Toyota or Nissan or Wal-Mart or otherwise get absorbed into the larger workforce. Will it be rough for a while? Absolutely. Maybe next time they’ll use more of their union muscle to make sure the company is well run and refuse to assemble SUVs while gas heads upwards of $4.
More a rant than a thought out, compasionate solution? Sure. But I’m tired of bailing out companies that fail because “it’s gonna be bad for the economy.” Fuck it. Fuck them. LET IT BE BAD FOR ALL OF US. Then maybe next time the companies will forgo the short term profits for a longer term stability.
The invisible hand keeps busy at the public trough and it keeps slapping people in the face.
I don’t agree w/Oliver here (depends on the long-term, but if you can bail out GM for $25 billion, you’ll get more than that amount back in taxes over the next 5 years. How much is 6 months of unemployment insurance for 2,000,000 workers?), but I believe one of the biggest problems in reining in our economic problems is the acceptance that everything is just too complicated. It’s really not (the derivatives are more complicated, but not impossible to understand), these are fairly simple issues, it’s just cost/benefit.
Well, we’re damn close to bankrupt, but 5% of $10 trillion is $500 billion/yr. Which is a hell of a lot of money, but not bankruptcy, as long as tax income is $2.5 trillion. That said, huge cuts need to be made and taxes need to be raised, where possible, ASAP. If we’re going to climb out of this, it’s going to hurt…
One in ten jobs are related to the auto industry in the US.
Letting them fail = Great Depression 2.0
depends on the long-term, but if you can bail out GM for $25 billion, you’ll get more than that amount back in taxes over the next 5 years
Again, this assumes that GM just needs a one time cash infusion to become a successful, high-functioning company that is capable of competing with Toyota et al. What gives you confidence that this is the state of affairs? Most GM employees will be in tax brackets that, under Obama’s tax plan, won’t be paying much in federal income taxes. Even if GM starts to eke out a profit over the next five years, it would have to out-balance its losses in past years before it paid any corporate income tax.
Crusty Dem: depends on the long-term, but if you can bail out GM for $25 billion, you’ll get more than that amount back in taxes over the next 5 years
And how much will you spend bailing out the next company? And how long will it take to get THAT back?
And how much might you have made otherwise if you DIDN’T have to keep bailing out some big company or industry every several years?
No, the “You’ll get it back” and “if you let them fail it will hurt worse” arguments just don’t hold up.
I believe Dilbert is apropos here.
Tell you what, GM. We’ll help you with your employee healthcare burden, mkay?
Unless that’s “socialism.” Then never mind.
I think Sean D. Martin is right. Who gets the money if the Fed forks over a bailout to GM? The corporate hierarchy will get their pensions and golden parachutes. The workers? Not so much.
And the end of the day a bailout would be putting a band-aid on a sucking chest wound. GM isn’t just in trouble, it’s a failed project with both a shitty actual product and a horrible brand.
Let it fail and put the “bailout” towards some sort of unemployment fund/educational voucher for GM workers.
Shorter: It fails now, or it fails later after throwing lots of tax-payers’ money at it.
“Right. General Motors fails, and more than two million people are out of work. Management, autoworkers, parts suppliers, dealers, salespeople. Ford goes, another couple of million people without jobs.”
The point is… it is possible to pay too much to save the jobs. It doesn’t matter how many jobs you are trying to save, there comes a point when it is no longer worth it.
By the way, I believe if a company is too big to fail, it is too big to exist.
Nobody wants people to lose their jobs. The question is this: does giving GM a “socialist” bail-out protect those jobs for another year, or is it simply delaying the inevitable?
No one wants to see the Big 3 fail. Ever see Flint, Michigan? Want the whole Upper Midwest to look like that? Maybe what needs to be done is what is done for the banks- take equity in exchange for a bailout. If the taxpayer is forced to support a private business, they should get an ownership stake in it. Only fair.
But long term, Olvier is right — GM doesn’t have a future. They make shitty cars. They have a shitty brand. The cars they do sell (SUV’s) aren’t popular any longer.
Give money to the workers for job training and education. Don’t give it to a failed project like GM.
Mylegacy, you’d want Obama to disband 50% of the military? So your plan to avoid 2,000,000 autoworkers being put out of a job is to put 2,000,000 servicemembers out of a job?
Quaker in the Basement, that’s a great idea. Then GM will need to ask for $30,000,000,000.00 instead of $25,000,000,000 to cover the additional tax burden of having to fund their employee healthcare through the government.
Obama is gonig to handle this economic problem the same way previous Democratic presidents have handled financial problems. He’s going to pay people to dig holes and fill them up again, and maybe get the US involved in a war which requires the industrial sector to make military hardware.
The question is this: does giving GM a “socialist” bail-out protect those jobs for another year, or is it simply delaying the inevitable?
Isn’t that the same thing?
Maybe what needs to be done is what is done for the banks- take equity in exchange for a bailout. If the taxpayer is forced to support a private business, they should get an ownership stake in it.
Except it was only worthwhile to take equity in companies that had a basically good business model and simply had gotten into a problem due to overenthustiastic investment in derivatives and other newfangled financial instruments. I think we are seeing with AIG the problem with putting taxpayer money behind companies that seem to have a deeply troubled culture.
Think of it like health care tradeoffs. Sane health care systems don’t dump a ton of money into giving terminally ill people another three months of life, unless they can spare that money from programs that save many more lives for the long term (e.g. programs to prevent premature births). What is the point of propping up the terminally ill U.S. auto industry unless we have so much extra money that we’ve already covered programs that help to create jobs and prepare workers to fill those jobs?
First off, people are getting their facts completely screwed here. I’m not going to name-call, I’m just going to say folks need to pay better attention to their sources. I’ve seen telivised estimates of 3-5 million jobs AFFECTED if ALL three US-based auto manufacturers folded. At best we are talking 1-1.7 million WORLD-WIDE affected if GM folds, assuming that all three US auto-makers have a similar base. Though I will agree, GM holds a significantly higher market share than Ford or Chrysler, so I adjust my personal estimate to 2 million world-wide jobs affected at the most.
GM directly employs somewhere around 250,000 people or – 15000 world-wide (per wikipedia). This figure includes executives and engineers.
Let’s evaluate what everyone has been saying here.
If GM disappears, does this mean every GM car dealership disappears? That is a ludicris idea. If GM goes tits up does that mean that every parts store and mechanic will fold? Get real, there are way too many foreign branded vehicles on the road right now for one major US automotive company to dictate the future of the American work-force.
GE is a prime example of the yield of poor business tactics. They have remained irresponsively non-competitive for a long time. I think GM may have considered themselves in a position where they wouldn’t have to compete. Personally, I believe this is due to their goodwill (in accounting terms) and that many people would prefer to purchase “American made”, (though many GM vehicles have historically been assembled in Mexico). Along with this non-competitive attitude, the quality of products have decreased. This is in-part due to the stipulations that GM has been muscled-into by the american worker’s friend- Unions. Believe me, I am getting to a point here.
Every action has a reaction. Worker’s unions, economic inflation, the threat of foreign companies taking over market-share, as well as GM doing business like there is no tomorrow have culminated in this tragic scenario where thare are many people world-wide with jobs at stake. I emphasize WORLD-WIDE, because the US is not the only pie GM has a hand in… Therefore, one could assume that the entirety of GM’s sales do not come from the US (while I will assume a majority do), so the next obvious question becomes, “Why is the the responsibility of the US government to bail this INTERNATIONAL company out?”
With the failure of banks after the sub-prime mortgage idea went south, it is easy to see that the high price items that consumers most often used loans to purchase are the next logical point of decline. Banks have been the keystone of the economy since their inception, and bad legislation required them to put their nuts on the chopping block and give loans to undeserving consumers, who simply could not afford to pay their bills and/or chose to spend irresponsibly.
Ultimately, the only jobs safe are as follows: the pharmaceutical industry (one of the US’ leading exports), agricultural industry, the skilled-service industry (HVAC, auto-repair, etc), the education system (which I expect to see a drop-off in college/technical school educations), utility companies, and finally manual-labor/fast food jobs.
So, there is no escaping, we’re going to have a ton of people without jobs. I myself am at probably as high risk of seeing a layoff in the next 6 months (IT industry). I suppose if I get laid off I will finally get a little sample of the socialist institutions I’ve been paying for my entire life.
Unemployment and welfare here I come!