Aftermath Of The GM Bailout

General Motors — the company that American taxpayers bailed out less than a decade ago, rescuing the company from near-certain bankruptcy after years of mismanagement — continues to struggle, and the dominoes that were toppled by the bailout decision continue to fall.

636198172298775780-lsjbrd-04-17-2016-gli-1-a001-2016-04-14-img-gm-shutdown-jpg-1-1-fhe0e7gq-l792930015-img-gm-shutdown-jpg-1-1-fhe0e7gqYesterday the company announced that it is engaging in a massive restructuring that will close assembly plants in Ohio, Michigan, and Ontario, Canada, eliminate thousands of jobs, and end some car lines.  One of the vehicles  being discontinued is the Chevy Volt, the electric hybrid GM rolled out to great fanfare.  The company said that “GM is continuing to take proactive steps to improve overall business performance, including the reorganization of its global product development staffs, the realignment of its manufacturing capacity and a reduction of salaried workforce.”  GM’s CEO, Mary Barra, said “GM wants to stay in front of changing market conditions and customer preferences for its long-term success.”  One of the “changing market conditions” is the declining public demand for passenger cars like the Volt and the Chevy Impala, which also is being discontinued.

President Trump and the United Auto Workers are both unhappy at the GM move.  Trump said he didn’t like GM’s decision and reports that he told Barra “You know, this country has done a lot for General Motors. You better get back in there soon. That’s Ohio, and you better get back in there soon.”  The UAW, which will see the loss of lots of blue collar jobs held by its members, said:  “This callous decision by GM to reduce or cease operations in American plants, while opening or increasing production in Mexico and China plants for sales to American consumers, is, in its implementation, profoundly damaging to our American workforce.”  The UAW news release added that “GM’s production decisions, in light of employee concessions during the economic downturn and a taxpayer bailout from bankruptcy, puts profits before the working families of this country whose personal sacrifices stood with GM during those dark days.”

GM’s decision will no doubt be devastating to those employees who lose their jobs and the communities where the plants will close.  But it also makes me wonder how even the advocates for the taxpayer bailout of GM less than 10 years ago feel about their decision to prop up GM now.  The underlying question raised by the UAW and President Trump is legitimate:  Was the bailout worth it, in view of these kinds of decisions?  GM remains a public company, and it gets to make decisions that it considers to be in its own competitive interest.  And if changing market conditions really do require GM to cut thousands of jobs that the bailout advocates expected would continue indefinitely, that may just tells you something about the wisdom of taxpayer bailouts generally.

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Split Decision

The 2018 election results were a split decision.  Democrats won enough seats to take control of the House of Representatives, yet Republicans gained at least three seats in the Senate — with a few close races yet to be determined.  The “Blue Wave” some were forecasting didn’t really materialize, but the Democratic gains mean that we’ll have at least two years of divided government, with Ds in charge of the House of Representatives, the Rs controlling the Senate, and President Trump in the White House.

Voters Across The Country Head To The Polls For The Midterm ElectionsIn Ohio, Republicans held on to the governorship and statewide offices, our Democratic Senator was reelected, and Republicans retained control of Ohio’s House of Representatives delegation.  Despite a lot of spirited contests, the overall makeup didn’t change much.  It’s notable, however, that the voter turnout in this election appears to have been significantly higher than in 2014, the last off-cycle election.  More than 4 million Ohioans cast their ballots in the governor’s race this year, compared to only about 3 million Ohioans voting for governor in 2014.  I don’t know what that works out to as a percentage of registered voters, but the increase in the raw number of voters is very encouraging.  And Ohio voters also overwhelmingly rejected a referendum to amend the state constitution to reduce sentences for drug offenders.

And speaking of constitutions, you could reasonably argue that the federal Constitution had a lot to do with the split decision that we saw from voters yesterday.  The bicameral approach that the Framers reached as a compromise has every member of the House of Representatives up for election every two years, making the House the voice of the people on the current issues of the day, whereas Senators, holding six-year terms that require only one-third of the Senate to stand for election in any two-year cycle, are supposed to be less prone to popular passions.  In short, it’s harder, and takes longer, to change the makeup of the Senate — but things might be different next time around, when more Republican seats are in play.

And the Constitution also will have something to say about what happens in the next two years, too.  With Republicans controlling the Senate, they’ll be able to provide advice and consent and confirm judicial nominees and other nominees, but since all bills for raising revenue must originate in the House of Representatives, Democrats will have the ability to thwart any tax or spending initiatives they don’t find palatable.  Each House will have the ability to conduct any investigations they deem necessary, and legislation will be approved only if the House and Senate leaders, and President Trump, can find common ground — a compromise approach that both parties can swallow.

“Common ground”?  It sounds like an almost mystical place in these days of incredibly sharp and heated political differences.  One of the more interesting things to look for over the next few years is just how much “common ground” can be found.

A Day Of Expectancy

The polling place in my neighborhood opens at 6:30 Eastern time this morning.  I’ll be there then, ready to exercise my franchise in this election — the latest election to be called The Most Important Election in American History.

vote_here_signs_0By voting on Election Day, I’m late to the game these days.  Many of my friends, colleagues and family members have already voted.  Richard has cast his ballot down in Texas, where early voting numbers have set records, and that’s true in other parts of the country, too.  I think early voting is a great thing, because it provides flexibility and allows more people to participate in the process in accordance with their work and family schedules.  Still, I prefer voting on Election Day itself.  The lines might be a little longer, but there is just something about being at the polls with your fellow citizens, waiting patiently and quietly to have your turn in the voting booth, without accompanying rancor or bluster.  There’s a certain solemnity to it, and a certain majesty, too.  It always makes me feel good about myself, my community, and my country.

I also like Election Day because it is a day of expectancy.  As the day unfolds, you know that millions of little, individual decisions are happening all around you that are slowly producing big, important results.  It’s like a titanic machine with countless small parts, moving ponderously but inexorably in one direction or another — and we’re the little gears and sprockets and cogs that make it go.  Whether we agree with the decisions or not, by the end of the day today we’ll have a pretty good idea of what our fellow citizens are thinking about the country and its direction.

And, especially recently, I like Election Day for yet another reason:  because after today, all of the commercials and predictions and fanfare will be over, at least for a little while, and we can have some breathing space before we start gearing up for the next Most Important Election in American History.  I think we can use some breathing space.

Confounding Ohio

I made a promise to myself to not post anything about politics until after the election is over next week, but I’m going to make an exception of sorts tonight.

3questionmarksI ran across this New York Times article about the Ohio Democratic Party’s efforts to try to get Ohio to flip from the Republican column — to my amazement, and the amazement of many, Ohio went heavily for Donald Trump in the election — to the Democratic column.  It’s an interesting treatment of how Ohio Democrats have tried to refine and revise their message to get Ohioans to vote Democratic this time.

What’s really of interest to me, however, isn’t the inside baseball talk about how the Democrats are tried to rebuild the winning coalition they used to have in Ohio, but the clear underlying message that resonates in virtually every paragraph of the piece:  none of the politicos really know exactly how Ohioans will react this year.  Whether Democrat or Republican, the political types will do their best and present what they hope is a winning message, but come Election Day they’ll hold their breath and keep their fingers crossed that they hit the target.  Until then, in Ohio, nobody really knows.

During my years of living in Ohio, we’ve had periods where Democrats dominated at the state levels, periods where Republicans dominated, and transitional periods between those two poles.  Whenever we reach one of the poles — Democrat or Republican — somebody declares that Ohio has now moved firmly and immutably into that camp, only to find Ohioans vote for the other party the next election.  In Ohio, conventional political wisdom often turns out to be conventional foolishness.

Call me a provocateur, but I think it’s great that Ohio’s unpredictability routinely confounds the political know-it-alls on both sides.  Maybe, just maybe, they don’t really know as much as they think.

Our Ever-Ignored Deficit

The Trump Administration has announced that, in fiscal year 2018, the federal budget deficit was a staggering $779 billion.  That’s a 17 percent increase over fiscal year 2017, and the largest budget deficit in six years.

In short, we’re running enormous, historically disproportionate budget deficits — even though the economy is humming, jobs are being created, unemployment has reached the lowest levels in years, and the federal government is collecting record amounts of income tax revenue.  At a time when we should be balancing our budget, or even running a surplus, we’re farther underwater than ever.

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Nobody seems to really care about this — except a handful of old deficit hawks like me.  The Republicans who used to claim to be the party of fiscal discipline cut tax rates, but they just haven’t gotten around to making the necessary cuts to federal spending that are needed to bring the budget into balance.  No surprise there — cutting taxes and raising defense spending is the easy, champagne-cork-popping part of their agenda; actually digging into the details and deciding which federal programs to cut, and by how much, is the harder, painful part that every Republican running for reelection will happily defer.  And the Democrats, who have never cared too much about balanced budgets anyway, are too busy reacting with outrage to everything President Trump does or says to focus on the deficit.

Some people argue that times are good right now, so what’s the big deal?  Maybe the deficit really doesn’t make that much of a difference, they suggest.  But if the U.S. government can’t live within its means when the economy is strong and record tax revenues are rolling in to the federal treasury, what is the deficit going to look like when the economy turns sour, payrolls get cut, and tax revenues fall?  Just how big is this deficit going to get, anyway?

It all seems pretty ironic to me.  President Trump boasts of being tough with foreign governments on trade and international relations, and putting America’s interests first in all things — but the need to sell bonds to finance the growing deficit does exactly the opposite.  The Chinese, the Saudis, and everybody else who is buying the U.S. bonds we are selling are thereby acquiring enormous leverage, and if they start demanding higher interest payments before they make their purchases we’re in a world of hurt.

So pay no attention, folks!  It’s all boring numbers, anyway!  Let’s forget about the serious, long-term aspects of running a government, and go back to talking about the latest outrages that will dominate the news cycle for a day or two until some new and exciting outrage comes along.

Presidential Debates, Just Around The Corner

In case you haven’t had your fill of politics already, with an important election only a few weeks away and political stories of one kind or another dominating every newscast, here’s some encouraging news — the first Democratic presidential candidate debates for the 2020 election are just around the corner.

t1larg-debate-stage-empty-t1largPolitico is reporting that the first debates will probably occur in the spring of 2019, months before the first primaries and caucuses, and a full year and a half before the 2020 election.  And even though that seems ridiculously early to non-political types like me, it’s apparently causing all of the would-be candidates to ramp up their activities now.  It’s expected that there will be a lot of people who will be vying for the chance to square off against President Trump in 2020 — more people, in fact, that can reasonably fit on one debate stage.  And if sheet numbers mean there will be two debate stages and two sets of debaters, all of the candidates want to be sure that they appear on the stage that includes all of the perceived “real contenders,” and are not relegated to the “everybody else” stage.  So everybody who is contemplating throwing their hat in the ring is out there raising money, hiring staff, visiting Iowa and New Hampshire, and trying to make news and start showing up in the polls.

Who are the “real contenders” for the Democrats?  According to the Politico article, only one person — a Congressman named John Delaney, who I’ve never even heard of — has formally declared his candidacy at this point.  Among the people who reportedly are considering a bid are Joe Biden, Bernie Sanders, and Elizabeth Warren, as well as Cory Booker and Kamala Harris.  Some people think Hillary Clinton might run, or Michael Bloomberg, and no doubt there are mayors, governors, other senators and representatives, and corporate figures who may launch campaigns.  If only a few of these folks actually run, you’ve already got a pretty crowded stage.

It’s hard to believe that we’re at the point of gearing up for another presidential election already, but politics being what it is, I am sure that there are a lot of Democrats out there thinking very seriously about running for President.  Why not?  After all, if Donald Trump can win the Republican nomination and actually get elected, just about anything is possible.  So why not take a shot — and do whatever you can to make sure that you get onto the coveted “contenders” stage?

Condemned To Repetition

George Santayana famously observed:  “Those who cannot remember the past are condemned to repeat it.”

I thought of old George when I read this article reporting that some banks, amazingly, have decided to once again offer zero down payment subprime mortgages.  Apparently it’s only taken ten years for banks to forget the lessons they purportedly learned during the last subprime mortgage lending bubble, when the collapse of countless numbers of bad loans brought the economy to the brink of total disaster.

tips-for-buying-foreclosed-homes-mstAccording to the article quoted above; “Borrowers can have low credit scores, but have to go through an education session about the program and submit all necessary documents, from income statements to phone bills. Then they go through counseling to understand their monthly budget and ensure they can afford the mortgage payment. The loans are 15- or 30-year fixed with interest rates below market, about 4.5 percent.”  In addition to the “education session” and documentation and counseling requirements, recipients of the loans have to live in the houses with the mortgages.

The lending agencies think that residency requirement will keep out the investors looking to flip houses, which is one of the conditions that contributed to the prior housing bubble and subprime mortgage debacle.  Another purported protection against disaster is that the housing market is strong, there’s a shortage of homes for sale at entry-level prices, and therefore homeowners who can’t make their payments supposedly will be able to sell their houses and repay their mortgage loans.  And proponents of the lending program say it helps poor people and working families to buy houses and build personal wealth.

I’m all for people becoming homeowners if that’s their dream, but if banks think that things like education sessions and counseling are going to allow them to avoid problems when the economy turns — as it inevitably will — they are dreaming.  It’s not hard to forecast that some aggressive loan officers will push the rules, some house-flippers will figure out a way to take advantage of the programs, some bad apples will take out the mortgages and then abandon the houses when times get tough, and then we may well be back in the same perilous situation that existed in 2007 and 2008.

I hope not everyone has forgotten what happened to bring on the Great Recession.  And I hope some political leader makes it clear that banks are welcome to follow whatever practices they think are appropriate for their businesses, but this time, if it all goes to hell, taxpayers won’t be bailing them out — again.