Sunday, May 31, 2009 - Posts
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Key sentence in the government's GM bankruptcy release (via Ambinder) highlighted:
The U.S. Treasury is prepared to provide approximately $30.1 billion of debtor in possession financing to support GM through an expedited chapter 11 proceeding and transition the new GM through its restructuring plan. The U.S. Treasury does not anticipate providing any additional assistance to GM beyond this commitment.
Hmm. If $50 billion ($30B plus an earlier $20B) really is the limit of the taxpayer subsidy, fine. Then GM and the still-privileged UAW will have to make some tough choices down the road--and whatever happens the bailout could be justified by the backup, background rationale of 'we delayed the end until the economy could handle it.' But is the Obama Administration really planning to cut off GM's intravenous drip of federal billions, if when the $50 billion doesn't put the company back on its feet? It doesn't look that way, from this quote in the NYT:
“We don’t think that after this next $30 billion, they will need more money,” one administration official said. “But the fact is there are things you don’t know — like when the car market will come back, and how much Toyota and Honda and Volkswagen will benefit from the chaos.”
That official isn't saying 'We gave them $50 billion. If that's not enough they're on their own. Maybe the UAW will even have to take a wage cut.' The official is saying "We gave them fifty billion but if that's not enough to let them compete with Honda then 'they will need more money.'" In other words, they're not on their own. Indeed, if they want to maximize their subsidy from Uncle Sam, they'd be well advised to need a few more dozen billions within a year or so. ... You'd think that skeptics in Congress, perhaps noticing the surprisingly anti-bailout polls, could succeed in nailing the administration down to a firmer date for cutting off the federal subsidy (which might actually have the pro-GM effect of forcing the UAW to face reality).** ...
P.S.: Toyota has just unveiled a small, mileage-oriented luxurious Lexus hybrid. It seems to be way more than a padded Prius. Gets 34 mpg. Will sell like hotcakes in West L.A.. Elsewhere, might "benefit from the chaos." ... What are the chances that quality-challenged GM will be able to build something in the same league? I'd say that Elon Musk, for all his problems, has as much of a chance of doing it as GM--and Bill Clinton's good friend Belinda Stronach has a better chance than either of them. ...
P.P.S.: The NYT also says that
On Monday, Mr. Obama is expected to argue that any alternative to his plan would be worse, and that a liquidation of G.M. — the only other real option — would send the unemployment rate soaring over 10 percent and would radiate damage throughout the economy. [E.A.]
The unmentioned middle alternative would have been for Obama to actually have driven a hard bargain and forced a significant-but-tolerable reduction in UAW wages, maybe even enough to give GM a small competitive advantage (heaven forbid). WaPo's Steven Pearlstein, a bailout popularizer who seems to have good Obama sources, even predicted this outcome, assuring us back in April that "unionized workers will have to accept immediate reductions in base pay." Didn't happen. Instead, the Treasury sent more money. ...
**--Two Bad Frames: Note that the way this issue is often framed in the press--'Will the government get back its money?'--actually tilts the argument in favor of continued subsidies. After all, if the government just puts in more money, maybe its investment will finally rise in value! Wouldn't want to lose it all after investing so much! If I were advising Congressional skeptics, I'd say 'Forget the getting the $50B back. Maybe it's gone--just like a lot of the TARP bailout money. So what. Forget about the government's "investment." Focus on turning off the spigot.' ... Similarly, as noted, when critics (and the press) frame the issue as "bondholders vs. the UAW' it minimizes the critics' chances of success. The bondholders are doing as well as they could expect to do--and they are, you know, bondholders. It's everyone else (including but not limited to taxpayers) who's paying the price of the unions' extraordinarily favorable bailout deal. ... 11:32 P.M.
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"Clarence Thomas is a great justice. Sonia Sotomayor will be, too." Who wrote that subhed to Dahlia Lithwick's Slate piece? Make him or her get coffee for everyone else for the next month. Lithwick's piece doesn't argue that Thomas is a great justice. It argues he's not a "dim bulb," a "moron," a "dunce or a Scalia clone," and makes an ambiguous, unendorsed reference to the "more common" view that he has a "deeply reasoned and consistent judicial philosophy." ... It would be interesting if Lithwick thought Thomas was a great justice. I can't believe she does--especially after reading this piece. ... 6/1 Update: Subhed rewritten. .. 3:11 A.M.
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Here's another suspect rationalization from the Obama auto task force, as recounted by David von Drehle in TIME:
Task-force members counter that other unsecured claims have received even better deals than the union's. Warranties, for example, have been 100% guaranteed - no haircut at all. "We're trying to avoid liquidation, and so these claims have to be classified according to their importance to the future viability of the company," a task-force official explained. "Obviously you can't sell cars without warranties. You can't make cars without suppliers. So most of those claims are being paid. And you can't build cars without skilled workers." [E.A.]
How many of the UAW's members are skilled workers? I thought one of the big virtues assembly line work is that it can be done by unskilled workers. Even with all the fancy computer-assisted quality control systems, does most auto assembly work really require skills that can't be learned fairly quickly?
The unnamed "task force official" implies that Chrysler's work force (and GM's) is so precious that it must be protected from sharing in the sacrifice of bankruptcy. Is it? If UAW workers are so distinctly productive then why do virtually all auto manufacturers starting production in the U.S. try to get as far away from the union as possible? Is there any doubt that if all Chrysler's workers quit tomorrow they could fairly quickly be replaced by workers--from local communities--who were a) cheaper and b) just as good or better? .. .
The point isn't that the unsecured creditors who did worse than the union deserve a better deal. They don't, at least as long as they're doing as well as they would in a conventional bankruptcy (without the government's expensive intervention). But the lack of sacrifice required of the UAW, after it helped drive its industry into the ditch, is a problem in and of itself, given the billions in taxpayer funds that are being spent to prevent that sacrifice (and the billions more that will be required over the next few years as GM and Chrysler fall short of the inflated expectations set by the Obama task force). Why should the government tax unskilled workers making $18 an hour, who haven't bankrupted their employers, in order to protect unskilled workers making $28 an hour, who have bankrupted their employers, from having to take a pay cut? The press' focus on creditors (because they are the ones whining loudest at the moment) is what is allowing the Obama administration to duck that question. When the question does get asked, I don't think Marc Ambinder's initial suggested answer--"The Obama administration supports the union movement"--will cut it. ... 2:57 A.M.
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Jeffrey Rosen pitches what he says is the latest fashion in "progressive" constitutional theory, "democratic constitutionalism." How is it different?:
While a Warren Court liberal might counsel the Supreme Court to leap ahead of public opinion and provide constitutional protections for gay marriage today, and while a minimalist might urge state and federal courts to wait until public opinion has shifted decisively, a democratic constitutionalist would embrace bold state court decisions but hold back at the federal level.
a) Wow. Inspiring, no? b) Rosen's whole framework seems to be: "How much change can we cram down the throat of the American people?" Maybe that's the problem. Are there any changes Rosen's progressives want that they admit just can't be found in the Constitution? (And, once "public opinion has shifted decisively" in the direction of those changes, why do they have to find them in the Constitution anymore anyway?) c) What's all the talk about "consensus" and not "getting too far ahead of the will of the people"--and about how "Constitutional change ultimately flows from the bottom up, not the top down"? Isn't the more important judicial role to violate consensus and stand athwart the will of the people in defense of individual rights--and to enforce them from the top down? ... 2:48 A.M.
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