"Government Motors" returns to top of world's auto sales

President Obama or President Bush and Congress are not immigrant hotel owners with a little spare money in their pocket to offer "prizes" for vanity reasons. Orteig had emigrated to the U.S. from France, worked as a bus boy before making it and owned two hotels that were popular with French airmen assigned to duty in the U.S. during WWI. That is what spurred him to offer a prize to be the first person to get to a place airmen were going to race for on their own.

We are a country with $4 trillion worth of Federal spending, and a huge amount of accumulated debt. When Congress gets into the business of trying to incentivize behaviors, they spend public money. From the place we are right now, they are spending public money we don't have, so they are add to our debt, which is at dangerous levels already, in part because of all the incentivizing they have done over the years. And because of influence peddling and the corrupt nature of the relationship between our politicians and private concerns, the public money -- my money, your money, future generation's money -- they throw around gets handed out in twisted ways. Let's be honest. We are a country in which trillions of dollars worth of corrupt favors get handed out in ways that divert money from productive areas of the economy to hand-picked areas chosen by an inherently crooked lot of people. Congress is not a French immigrant -- a private citizen -- with a business catering to flyers who decides to offer a trifling amount of his own money as a "prize" to accomplish something they are on the verge of.

 

For the vast majority of our country's history, in which government spending was less than 5 percent of our GDP, nobody called it "austerity."

Remarkably, it coincided with with relatively little -- and long periods with virtually no -- public debt.

Even at the height of the Civil War, when they threw caution to the wind, public debt as a percentage of GDP was 33 percent.

Today it is what, 105 percent?

It's not only insane, it's not sustainable.

The funny thing is that we have $4 trillion budgets, I post about how it plays out with the system of special interest politics we have evolved into. ... and your quip is. ... austerity?

$4 trillion of Federal public spending a year. A public dept that exceeds our yearly economic activity. And growing.

Yup. Austerity. That's a good one.

 

,

I'm not sure what posts you are talking about. It's a bit of a shift from the pithy "austerity" post. You can shift the conversation there if you want, but the giant spending bill was passed in 2009. In 2009, we sat mired in a recession. In 2010, the economy grew at a 3 percent clip. Last year, it sputtered at 1.7 percent. Whatever you bought as "stimulus" wasn't very stimulative. Three years later and we haven't gotten a speckle of what was promised to get the pork through, and last year growth slowed back down to a crawl.

Of course, that has nothing to do with the conversation about government incentivizing behavior. No more pithy austerity posts?

 

Daemon, Thanks. If it helps clear it up, I am not cherry picking. This thread is about the mess they made of GM. But when Bush was spending us into trouble, I was posting on here during those years saying how dangerous what we were doing was, and posting most of what I am posting now.

The only difference in tone I may have taken is that Bush walked into office with our government sitting at somewhat manageable levels of debt (at least in the context of where we are today) and no deficits. So during those years, it was more of a, "This is really dangerous stuff. What they are doing is opening the door for trouble."

By the time we got to the immediate $800 billion pork bill sent through by Obama right after he was elected, who was able to ride the wave of his election to help Congress get off all the special interest favors they had lined up but couldn't get through normally, I was looking at it from the lens of, Bush and Congress got us to this point. Where Obama and Congress are taking us now is right to the line. They have brought us to a point now, where our debt is more than 100 percent of GDP. Do I acknowledge the role George Bush played in that? I posted continuously about it on here when he was president.

With the GM bailout, my complaints on this thread have been two fold. First, our government stepped into a private property situation and stole money from GMs bond holders, who owned the largest amount of unsecured debt, but got the smallest amount of equity (by far) in the restructured GM. This was done for two reasons. ... So the government could take a bigger stake (at the expense of the bond holders they robbed), and so that the administration could pander to organized labor, which got a bigger stake than the bond holders, despite the fact that the bond holders had a bigger claim. In a bankruptcy, that would have never been the case. And even worse than that, it was done SOOOOOO inequitably. The bond holders didn't just get screwed, they were robbed. The whole thing was sold as a stabilizing event. The government stepping in to create stability. What they did was create all kinds of fear for anyone who ever thinks about lending to a corporation again, because now they have to worry that our government will change the rules on them and steal their wealth. It really puts uncertainty into markets.

Secondly, what you are not taking into account is that when we put $26 billion of public money in play, it has to come from somewhere. You can claim X number of GM jobs were saved. And I will ask you at what cost? This is a zero sum game, so when we have the government deciding to hand out favors and decide what industries to give them to, the money has to come from somewhere. And it comes -- from an economic standpoint -- from more potentially productive areas of the economy, which are actually demand driven. There was a reason GM was going bankrupt. We saved it. Great. And in the process, that is $26 billion that if left in people's pockets had a great chance to find areas of the economy where there was actual demand. That is how markets work. It's also why centrally planned governments have always failed.

And yes, there is government waste. The final outcome on the "stimulus" which wasn't a stimulus, but just runaway spending, was that the money was ridiculously wasted. This is something that I actually helped work on: http://online.wSportsJournalists.com/article/SB10001424053111904716604576544500632493510.html

I don't have a ton of time to respond right now. I am late for a call. But hopefully I didn't distract from your points. I want to address what you said.

Things are worse today than where we were in 2005 because we had a huge bubble pop that dragged our economy into a mire. Our response was to do more of the same with regard to monetary policy (try to inflate away our ever growing debt) and with fiscal policy (spend, spend and then find more ways to spend). In 2005, we were building up to a mess. Today, we are in a mess. That is the difference.