We were told in September that if we didn't pass the Paulson plan, the world would end. A modified plan passed (with the Republicans once again providing cover and taking the blame), and now we find out that the original plan did nothing. Paulson just wanted $700 billion (a made up number) to handle the crisis.
Wait, what? We bailed out the banks to save the economy, and now we're told that Detroit needs a bailout too. Detroit, whose city is billions in the red, and whose automakers supposedly form the backbone of our economy. If the Big 3 go under, we're told, they're taking the economy with it, as manufacturing and finance depend on selling cars to survive.
There's just one problem. The Big 3 Automakers stink. Not their cars, their management. Read this, which Tigerhawk excerpts from the WSJ online:
Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.
As a society, we have very little to show for this $465 billion. At the end of 1998, GM's market capitalization was $46 billion and Ford's was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies' unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.
Let me repeat that for the slow. GM and Ford would have been better off shutting down, and spending all of their money buying Honda, Nissan, Toyota, and Volkswagen. And we want to give these people money?
"Give us a lot of money, or the world ends." We've heard this before, and I imagine that just because it's a small bailout instead of a huge one, it's harder to say no. Next in line? The states who increased spending as the market grew, and now realize that their income base is entirely focused on rich people who just lost a lot of money. No rich people, no massive entitlements, pensions, and guaranteed growth in government programs. I'm talking to you California and New York. Your NIMBY voters, your liberal spending increases, and your ridiculous land use policies caused this bubble. You got fat on property taxes and income taxes, and now that the bubble burst, you're afraid to go to your own voters and demand money. You'd rather the federal government do it.
Missouri has a surplus, or at least it does until Nixon actually gets into office and starts spending. Other states, like Kansas, don't. Are we, the Missouri taxpayer, supposed to pay for the political success of Sebelius? She's the 12th most popular governor in the country, and yet she's a billion dollars in the red. Matt Blunt was the least popular governor, and yet he had a surplus.
Is that what the country has come to? If politicians spend our money, they get to be popular. If they are fiscal stewards, they get the shaft. Now there's more to popularity than spending, but at some point, the country has to take responsibility for these jokers we put into office. At some point, this will all catch up to us, and the result will be the destruction of our financial system, and with it, our political experiment.
Communists are dancing in the streets around the world, grateful that "capitalism is dead." But capitalism didn't die. It was hijacked by demagogues who bribe the people with their own money. And the failure, is entirely our own.
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