The President wants us to believe that the recent IPO for General Motors was a smashing success. And it was…if you believe that it’s a good idea to lose money (the direct cost of the bailout) and make the economy less efficient by misallocating resources (the indirect cost of the bailout). The always superb John Lott has a good explanation at Foxnews.com, and here is an excerpt.
Only the government would consider it a success to buy stock at $43.84 a share and sell it at $33. — But President Obama and those who supported his bailout of General Motors and Chrysler are claiming just that… It simply doesn’t account for the over $50 billion in direct bailout funds and the tens of billions of dollars in other breaks President Obama gave the company and its unions. It also ignores that GM’s stockholders and particularly its bondholders had their wealth stolen from them when the government took over ownership of the company. Traditional property right protections were shredded by the Obama administration, making corporate investments in America riskier as a result.
By the way, Mickey Kaus is surprised that investors were willing to buy GM shares, but he hypothesizes that they were fools or that they expect GM to hollow out its American operations and build cars in China.
Either way, not a good way to squander the tax dollars of the American people. Another legacy of Bush-Obama statism. Way to go, guys!
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[…] is music to my ears. I’ve been saying for years that any company can be kept afloat indefinitely with taxpayers subsidies. So if that’s the […]
[…] the way, Mickey Kaus explains that the government’s numbers are incomplete and that the actual damage is significantly […]
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…So terribly intoxicating is the left wing perpetual motion machine of high prosperity through low incentives to produce, that it is taken seriously not only by its proponents but its opponents too…
It would be interesting if we discovered some parallel earth, somewhere revolving around another sun, that ditched economic efficiency for the compassion of equality in outcome. Where would they be now? 1200 AD? 1400 AD? Still battling bubonic plagues? Born and dying at 32 in the same house that is 45 degrees in the winter?
Compassion has the nasty attribute of becoming much less compassionate in the longer term. But even on much shorter time spans, compassionately growing at 2% vs. “greedily” growing at 4%, compounded over 50-100 years results in a rather cruel outcome.
But who wins votes promoting greed? The “greedy” have produced disproportionately and we can take a good chunk of it at the polls. Growth be damned! These are still the overriding collective dynamics in most countries… and increasingly so in America. So prepare yourselves for a new, European style, 1-2% long term trendline growth. In a world that grows at 4%, what will the outcome be? Very compassionate indeed…
…but no wait! With the right macroeconomic central planning we can have both lower incentives to produce AND high growth. The method, this long sought wholly grail of macro-economic manipulation, has just been finally discovered! Just read my book, “Krugman for Dummies”.
Uh, KFD: Money & economic efficiency may seem like cold and callous concepts to you, but they are the foundation that supports the wellbeing of people, who you’ll find ARE valued most by people of all political persuasions. Your children may be the most valued things in your life, but good luck feeding them without money. Should I empty my bank account and throw a feast for them today, only to have them starve next week? Hm, economic efficiency may be important too.
And how exactly do you plan to “join together and prevent China from ‘stealing’ American jobs”? More ineffective protectionism and laws? Americans could produce the same goods as China, sure. But they will cost many times as much and people won’t buy them. There’s that pesky money & economic efficiency again. Most people, given the choice, want maximum value for their limited expenditure and generally that means buying the cheaper product no matter who made it.
As usual the right wingers who measure things only in terms of money, fail to see how a large number of jobs was saved at the modest cost of a little over $10 per share.
The other effects, like the very low but systemic increase in borrowing costs related to increased risk (because of potential future political confiscatory actions), the suboptimal economic efficiency perhaps associated with having Americans build on American soil unexceptional automobiles that fewer and fewer people find attractive, the decreased productivity of taxpayers who will have a larger proportion of their efforts confiscated to serve GM… all those effects do not exist, they are simply fabrications of a right wing ideology obsessed with what they call “economic efficiency”. An ideology with warped and inhumane priorities. Who comes first? People or economic efficiency?
Now if we could all simply join our efforts together and prevent China from stealing American jobs, so that a significant proportion of our population can once again devote its vitality and Western level competence to making nuts and bolts, Christmas ornaments, plastic toys, and the rest of the stuff that one typically finds at Walmart, then we would certainly prosper and maintain our standard of living leadership in the world. A large proportion of our citizens would produce the same stuff that the Chinese produce but have a standard of living that is 5 times higher. What’s not to like?