Should the government bail out GM?

[sketchtrack]

There is no wonder GM is going under since it hasn't been selling fuel efficient vehicles in America. Now they are going under because people aren't buying as many big trucks and SUVs. GM sells fuel efficient vehicles in other countries that they don't sell here, and why?

Why should they be bailed out by tax money, which is unconstitutional, just because they were too dumb to see things coming?

 

[D H]

which is unconstitutional

The federal government has been involved in several bailouts, including New York City, Chrysler, and Bears Stern. So what is it that makes you think these bailouts are unconstitutional given that several have already taken place?

 

[sketchtrack]

The federal government has been involved in several bailouts, including New York City, Chrysler, and Bears Stern. So what is it that makes you think these bailouts are unconstitutional given that several have already taken place?

Show me where the constitution gives congress the power to bail out corporations.

Just because the constitution has been violated before doesn't mean it won't be done again.

 

[D H]

Show me where the constitution gives congress the power to bail out corporations.

The Commerce Clause is the usual justification for such activities.

I pointed out some bailouts that were allowed to proceed. The ball is in your court (pun intended) to show that such activities are truly unconstitutional or just something that you wished were unconstitutional.

 

[turbo]

US auto-makers have been given favorable tax status, protective tariffs, etc for many, many years. They should not be bailed out at the expense of the taxpayers. If they fail, another smarter, more efficient company will step in. Case in point - Ford closed its Marysville plant, claiming it was old and inefficient and that the work-force was unproductive. Honda bought the plant, retooled, hired back a lot of the Ford workforce, and launched into production of the Accord. It was the most popular car in the US, and had the highest percentage of US-made parts at the time. The only way Ford could get Taurus sales to exceed those of the Accord was to sell Tauruses to themselves internally and lease them to rental companies and other fleet users. Their claim that the Taurus was the "best selling" car in the US was based on internal fleet sales, not sales to individuals.

 

[sketchtrack]

The Commerce Clause is the usual justification for such activities.

I pointed out some bailouts that were allowed to proceed. The ball is in your court (pun intended) to show that such activities are truly unconstitutional or just something that you wished were unconstitutional.

Article I, Section 8, Clause 1,3:

“ The Congress shall have power . . . To regulate commerce with foreign nations, and among the several states, and with the Indian tribes; ”"The Tenth Amendment states that the federal government of the United States has only the powers specifically delegated to it by the Constitution. Other powers are reserved to the states, or to the people. The Commerce Clause is an important source of those powers delegated to Congress, and therefore its interpretation is very important in determining the scope of federal power in controlling innumerable aspects of American life. The Commerce Clause has been the most widely interpreted and abused clause in the Constitution, making way for many laws which are contradictory to the original intended meaning of the Constitution."

http://en.wikipedia.org/wiki/Commerce_Clause#Text

Maybe it is just me, but I don't see a connection with the commerce clause and using tax money to loan to corporations. I think it is clearly an abuse.

 

[Mk]

"The Tenth Amendment states that the federal government of the United States has only the powers specifically delegated to it by the Constitution. Other powers are reserved to the states, or to the people. The Commerce Clause is an important source of those powers delegated to Congress, and therefore its interpretation is very important in determining the scope of federal power in controlling innumerable aspects of American life. The Commerce Clause has been the most widely interpreted and abused clause in the Constitution, making way for many laws which are contradictory to the original intended meaning of the Constitution."

If anybody intends on bringing it up, Wikipedia is discussing how that paragraph should be written, as it may not follow Wikipedia's Neutral Point of View guidelines:
http://en.wikipedia.org/wiki/Talk:Commerce_Clause

 

[D H]

Wikipedia is discussing how that paragraph should be written, as it may not follow Wikipedia's Neutral Point of View guidelines

I noticed that. Wikipedia is free; you get what you pay for.

Moving on, the Constitution also authorizes Congress

• To establish ... uniform Laws on the subject of Bankruptcies throughout the United States.
  (Article 1, Section 8, Clause 4)
• To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.
  (Article 1, Section 8, Clause 18)

The fact remains that Congress has bailed out corporations in the past and that such bailouts were allowed to proceed. Strict constructionists have some very funky stuff in their pipes. The Constitution does not authorize the Air Force, for example. The Constitution is very explicit about the branches of the military that Congress can fund. Nobody in their right mind would think to challenge the Air Force on the grounds of constitutionality.

To claim that bailouts are unconstitutional on the grounds that such acts are no explicitly mentioned in the Constitution is a red herring. The Constitution is intentionally quite short. It does not spell out everything that Congress is allowed or forbidden to do.

 

[sketchtrack]

I noticed that. Wikipedia is free; you get what you pay for.

Moving on, the Constitution also authorizes Congress

• To establish ... uniform Laws on the subject of Bankruptcies throughout the United States.
  (Article 1, Section 8, Clause 4)
• To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.
  (Article 1, Section 8, Clause 18)

The fact remains that Congress has bailed out corporations in the past and that such bailouts were allowed to proceed. Strict constructionists have some very funky stuff in their pipes. The Constitution does not authorize the Air Force, for example. The Constitution is very explicit about the branches of the military that Congress can fund. Nobody in their right mind would think to challenge the Air Force on the grounds of constitutionality.

To claim that bailouts are unconstitutional on the grounds that such acts are no explicitly mentioned in the Constitution is a red herring. The Constitution is intentionally quite short. It does not spell out everything that Congress is allowed or forbidden to do.

Ok, so your argument is that even if it is unconstitutional, so what, we already broke it before.

How about an argument as to why we should bail out GM?

Also, the Air Force isn't a private corporation, and I believe that adding the Air Force and funding it is clearly constitutional.

"To provide for organizing, arming, and disciplining the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;"

 

[D H]

No, my argument is that your original statement on unconstitutionality is flawed. That it is unconstitutional is your opinion. You are entitled to your own opinions, but you are not entitled to your own facts.

 

[quadraphonics]

Maybe it is just me, but I don't see a connection with the commerce clause and using tax money to loan to corporations. I think it is clearly an abuse.

Nor is there an obvious connection between the commerce clause and the DEA using helicopters and SWAT teams to storm medical marijuana clubs in San Francisco, but there you have it. The thing about the constitution is that it's a legal document, and the way its words appear to a layperson is not relevant. This is how lawyers stay in business.

 

[wildman]

No, my argument is that your original statement on unconstitutionality is flawed. That it is unconstitutional is your opinion. You are entitled to your own opinions, but you are not entitled to your own facts.

Like it or not the Supreme Court decides what is unconstitutional and they have decided that bail outs are constitutional.

 

[drankin]

I agree with turbo, the government shouldn't be bailing out corporations or any other capitilist venture. Let free market do it's work. Out with the old, in with the new. Including airlines, farming, etc.

Government bailouts interfere with the free market, IMO.

 

[Vanadium 50]

A few points:

1. As mentioned before, there is precedent with Chrysler in 1979. The constitutional authority for this is the Commerce Clause, and at least this is obviously related to interstate commerce. The case Wickard v. Filburn in the 1940's greatly expanded the interpretation of this clause, when it was held that a farmer growing wheat on his own land for his own consumption could be regulated under this clause. Since then, I believe there were only two cases the federal government lost in arguing that they were empowered to regulate under the Commerce Clause.

Like it or not, this is how the courts have ruled.

(As an aside, this is also the clause under which national health care advocates argue that the federal government is empowered to act).

2. The Chrysler bailout didn't cost US taxpayers a dime. Arguably, it saved them money, through the taxes paid by the Chrysler employees.

3. For those who argue for a laissez-faire policy of "let them fail", the present system is hardly laissez-faire. There are many, many government regulations on the industry, and they add cost to the vehicle. While all manufacturers face the same regulations, so the playing field is level, as the cost of cars go up, the number of people who buy them goes down. People drive their cars longer, and so buy fewer of them, so GM sells fewer of them.

Additionally, the Sherman Anti-Trust act has the unintended consequence of placing US manufacturers at a relative disadvantage. As Lee Iacocca put it, "GM and Toyota can form a joint venture to put Ford out of business, but GM and Ford can't form a joint venture to put Toyota out of business."

 

[WarPhalange]

GM deserves to burn to the ground for completely raping the public transportation system in the US.

 

[drankin]

A few points:

1. As mentioned before, there is precedent with Chrysler in 1979. The constitutional authority for this is the Commerce Clause, and at least this is obviously related to interstate commerce. The case Wickard v. Filburn in the 1940's greatly expanded the interpretation of this clause, when it was held that a farmer growing wheat on his own land for his own consumption could be regulated under this clause. Since then, I believe there were only two cases the federal government lost in arguing that they were empowered to regulate under the Commerce Clause.

Like it or not, this is how the courts have ruled.

(As an aside, this is also the clause under which national health care advocates argue that the federal government is empowered to act).

2. The Chrysler bailout didn't cost US taxpayers a dime. Arguably, it saved them money, through the taxes paid by the Chrysler employees.

3. For those who argue for a laissez-faire policy of "let them fail", the present system is hardly laissez-faire. There are many, many government regulations on the industry, and they add cost to the vehicle. While all manufacturers face the same regulations, so the playing field is level, as the cost of cars go up, the number of people who buy them goes down. People drive their cars longer, and so buy fewer of them, so GM sells fewer of them.

Additionally, the Sherman Anti-Trust act has the unintended consequence of placing US manufacturers at a relative disadvantage. As Lee Iacocca put it, "GM and Toyota can form a joint venture to put Ford out of business, but GM and Ford can't form a joint venture to put Toyota out of business."

I don't care if it saves or costs us money. The government shouldn't be bailing out failed manufacturers. Increasing tariffs on Toyota wouldn't bug me at all.

 

[drankin]

GM deserves to burn to the ground for completely raping the public transportation system in the US.

What? Can you support your rape allegation?

 

[WarPhalange]

http://www.trainweb.org/mts/ctc/ctc06.html
http://en.wikipedia.org/wiki/General_Motors_streetcar_conspiracy

You can say what you want, but a car company bought public transportation companies and destroyed them.

 

[turbo]

I agree with turbo, the government shouldn't be bailing out corporations or any other capitilist venture. Let free market do it's work. Out with the old, in with the new. Including airlines, farming, etc.

Government bailouts interfere with the free market, IMO.

The government bailed out Chrysler. What did we get from that? We didn't get a leaner, smarter auto-producer. Instead we got a greedier, more-connected auto-producer that was quicker to game the system. How could Chrysler manage to meet the CAFE fleet standards while producing larger and more inefficient trucks? Simple! Bribe members of congress to declare that the PT Cruiser is actually a truck, despite the fact that it is just a low-level wagon built on a Neon body. The PT brought down the "truck" fleet mileage so that Chrysler could avoid meeting CAFE standards on actual trucks. Creeps is creeps.

 

[drankin]

http://www.trainweb.org/mts/ctc/ctc06.html
http://en.wikipedia.org/wiki/General_Motors_streetcar_conspiracy

You can say what you want, but a car company bought public transportation companies and destroyed them.

LOL, why did the public transportation companies SELL? Once sold they can do what they want, not to mention that was in 19-friggin-39! :rofl: That's a good one, War!

(1937, my bad)

 

[Vanadium 50]

LOL, why did the public transportation companies SELL? Once sold they can do what they want, not to mention that was in 19-friggin-39! :rofl: That's a good one, War! (1937, my bad)

Weren't most of the streetcar lines private?

Of course, the public transport systems outside the US, far away from GM's malign influence, must still be using streetcars today. That's why London and Paris have their streets filled with streetcars.

 

[WarPhalange]

LOL, why did the public transportation companies SELL? Once sold they can do what they want, not to mention that was in 19-friggin-39! :rofl: That's a good one, War!

(1937, my bad)

Wait, let's recap:

War (that's me): GM bought public transit and destroyed it, hence "rape" of the public transport system.

drakin: O RLY?

War: YA RLY

drakin: So what?

Have you ever lived outside of the US drakin? Preferably Europe somewhere? You'll see a big difference in public transportation. If people here used the buses and trains as much, gas pains would be a lot lighter. But no, every day I see people alone in cars stuck in traffic and they don't want to either carpool or take public transportation.

It doesn't matter when it happened, what matters is the attitude it set on people.

I can't use bus -> I have to get a car. Then what? Buses come back you say? I have a car -> why would I take the bus?

So then what? People who don't own cars can use buses? Not enough buses -> I have to get a car.

Make more buses? Not enough money to make buses because people don't ride enough -> no more buses.

Oh, but it happened 70 years ago so it *magically* disappears. I'd like to live in your world, drakin.

 

[drankin]

Weren't most of the streetcar lines private?

Of course, the public transport systems outside the US, far away from GM's malign influence, must still be using streetcars today. That's why London and Paris have their streets filled with streetcars.

War's link spoke specifically about street cars owned by the city of San Francisco and other California cities. I'm sure there is a lot more to the story of what was happening in 1937.

 

[drankin]

Wait, let's recap:

War (that's me): GM bought public transit and destroyed it, hence "rape" of the public transport system.

drakin: O RLY?

War: YA RLY

drakin: So what?

Have you ever lived outside of the US drakin? Preferably Europe somewhere? You'll see a big difference in public transportation. If people here used the buses and trains as much, gas pains would be a lot lighter. But no, every day I see people alone in cars stuck in traffic and they don't want to either carpool or take public transportation.

It doesn't matter when it happened, what matters is the attitude it set on people.

I can't use bus -> I have to get a car. Then what? Buses come back you say? I have a car -> why would I take the bus?

So then what? People who don't own cars can use buses? Not enough buses -> I have to get a car.

Make more buses? Not enough money to make buses because people don't ride enough -> no more buses.

Oh, but it happened 70 years ago so it *magically* disappears. I'd like to live in your world, drakin.

Wow! GM destroyed the US! Give me a break.

This is conspiracy hogwash. People choose to drive cars. It's more practical for most of us. You can't blame GM because they MAKE cars.

 

[WarPhalange]

GM buying a public transport system and dismantling it isn't a conspiracy. It happened.

You can contemplate as to why it happened, but it's hard to ignore it tremendously helped GM.

So... they did it... it tremendously helped them... yeah, it's a coincidence, you're right.

People choose to drive cars. It's more practical for most of us.

Did I not just address this or did you skip over it? It's more practical because there aren't enough public systems in place. If there were more, more people would use it. It's not hard to understand, I don't see why I have to keep repeating myself.

 

[DavidME]

I think bailouts are inconsistent, whether of an automaker or airline or bank.

When they were collecting profit hand over fist, capitalism was their religion.

Now many American corporations are losing money due to the stupidity and greed of seeking large short term profits at the expense of a solid long term business plan.

Now the same ones famous for lauding the "free market" and telling government to keep their hands off of it are begging government to allow them to shift the culpability of their stupidity and greed to the American taxpayer.

Let them die.

Bailing them out will give us nothing but more of the same shortsighted decisions.

 

[edward]

GM buying a public transport system and dismantling it isn't a conspiracy. It happened.

You can contemplate as to why it happened, but it's hard to ignore it tremendously helped GM.

So... they did it... it tremendously helped them... yeah, it's a coincidence, you're right.




Did I not just address this or did you skip over it? It's more practical because there aren't enough public systems in place. If there were more, more people would use it. It's not hard to understand, I don't see why I have to keep repeating myself.

It did happen, but GM had a lot of help from Standard oil and several others, even urban planners.

But this did not just happen. Big business and government helped plan it this way. Many of those electric tram lines ended up being bought by car firms, notably General Motors. Between 1936 and 1950 a holding company backed by GM, Firestone and Standard Oil bought 100 tram firms in 45 American cities. They were dismantled and replaced by GM buses: more inefficient, more likely to lead to congestion and, in the end, more profitable to GM. Many bus lines then failed, leaving consumers with no choice but to buy cars.

But it was not just 'conspiracy' by the big car firms. Urban planners of the 1940s and 1950s seemed possessed with a manic zeal to push the car at the expense of public transit. Their vision was a sprawling suburbia linked by huge, broad expressways. One of the most influential was Robert Moses, who is responsible for much of modern New York's sprawl. Though never elected to office he was probably the most powerful man in New York from the 1930s to the 1950s. He once declared 'Cities are for traffic' and planned to build a huge freeway through downtown Manhattan that would have levelled much of SoHo and Greenwich Village.

http://brothersjuddblog.com/archives/2006/05/even_the_gerbil.html

I remember my father telling me that long distance rail service would also fail because of pressure from air travel and automobiles. He was right.

As for GM I really hate to see that many jobs lost.

 

[TheStatutoryApe]

Between the company itself and the several workers whose jobs will hopefully be saved by this how much revenue do you think the fed makes off of GM per year? And how does that compare to the cost of the bail out?

 

[sketchtrack]

For the federal reserve banks, it is a win win. GM ultimately takes a loan from them to do business, and then when they get bailed out, it is a loan that the U.S. takes from the federal reserve banks.

 

[Cyrus]

No, let them go broke. Their cars are UGLY, and I don't ever see them putting in any effort compared to European or Japanese cars.

 

[Cyrus]

http://www.trainweb.org/mts/ctc/ctc06.html
http://en.wikipedia.org/wiki/General_Motors_streetcar_conspiracy

You can say what you want, but a car company bought public transportation companies and destroyed them.

That was 60+ years ago.....why is this relevant?

 

[WarPhalange]

Are you trying to say that things that happened in the past have no impact on what is happening today? Seriously?

 

[D H]

No, let them go broke. Their cars are UGLY, and I don't ever see them putting in any effort compared to European or Japanese cars.

Almost here is using emotional arguments: capitalism is good so we should let the free market run its course, capitalism is evil so we should let the beast die, GM killed public transportation and is the cause of global warming, GM's cars are UGLY. This is supposed to be a rational forum.

Rational arguments against bailing GM out

• Our government has historically kept its dirty mitts out of businesses' business (for the most part), and that hands-off attitude is one of the reasons for our country's economic success. Bailing out GM sets a very bad precedence.
• Just because we bailed out Chrysler in the past doesn't mean we should replicate that mistake.
• Their is no guarantee that bailing GM out will succeed and there are plenty of indicators that it won't succeed. The maxim "Don't send good money after bad" comes to mind. We will spend a lot in bailing the company out and we will spend a lot again when it eventually goes bust. It's better to just spend a lot if and when it goes bust.
• The potential that they will go bankrupt is forcing GM to act a little smarter than they have in the past. They might well work themselves out of there mess without any government assistance/interference. Bailing GM out implicitly assumes they will go bankrupt and removes the pressures to reform themselves.

Rational arguments for bailing GM out

• Should GM go bankrupt, it will cost the US government a lot of money. GM has "only" 266,000 employees, most in the US. They have a lot more indirect employees in the companies that supply GM parts. The US government will have to shell out a lot of money in terms of unemployment compensation should GM go bankrupt. Many of those 266,000+ employees will not find jobs for a long time.
• The costs of paying 266,000+ people unemployment compensation pales in comparison to the payments the US government would have to make to GMs retirees should GM go bankrupt. While unemployment compensation stops after a short time, pension payments do not stop. GM has 450,000 retirees , and their pensions are backed by the Pension Benefit Guaranty Corporation in the case of bankruptcy.
• Those 266,000+ employees pay income taxes. A good chunk of that income stream will be lost forever should GM go bankrupt.
• GM stockholders will have a one year claim of massive capital gains losses. The wealthiest people in this country represent the lion's share of the federal government's total receipts, and these people will legitimately pay very little tax for the tax year in which GM goes bust. The timing of this event couldn't be much worse.
• The baby boomers, many of whom are about to retire, will not have enough work years left to recover from the shock a GM bankruptcy will inflict on their retirement accounts. Many of these people will thusly need government assistance in later years, and they will not need this assistance if GM remains a viable entity.

 

[quadraphonics]

The potential that they will go bankrupt is forcing GM to act a little smarter than they have in the past. They might well work themselves out of there mess without any government assistance/interference. Bailing GM out implicitly assumes they will go bankrupt and removes the pressures to reform themselves.

I'd say that this is the most fundamental entry in either list. Whatever the government does or does not do, GM is in trouble for a reason, and that reason is not a lack of government backing. All of the arguments for bailing GM out hinge on the bailout being successful; i.e., resulting in a viable business. The whole problem with that is that the prospect of a bailout is a huge disincentive for the kinds of measures that would make GM viable. A policy of privatizing profit, and socializing risk, results in grossly irresponsible behavior that ultimately blows up in everyone's faces (see also: mortgage crisis). We need to get past the idea that some companies are too big to be allowed to fail, because actions premised on that idea lead directly to failure of said companies.

Let's also not get too frightened about the consequences of a GM failure. The likely result is not the disappearance of all of GM's infrastructure, jobs and value, but rather the purchase of said entities at discount rates by entities with the will and means to make them work. Those factories will mostly be purchased and retooled by other, more productive automotive companies, who will in turn employ the productive employees, generate huge increases in their stock value, and ultimately offer better, cheaper cars to everyone. The only people that lose are GM executives, unproductive employees, and people who invested in GM stock to the exclusion of all the other (much more successful) automotive companies. Not only should we allow GM to fail, we should hasten that event by boycotting the crappy, ugly, inefficient cars that they produce until they get their acts together. GM is a company, not a social institution, and it would behoove us to treat it that way. When an American car company cannot compete in an era of a low dollar, we're better off without it, as scary as that might be for people in Michigan.

 

[Cyrus]

Are you trying to say that things that happened in the past have no impact on what is happening today? Seriously?

You can read, can't you?

Maybe you can explain how GM destroyed the metro-rail and bus system I use here in washington, DC?