Tuesday, April 27, 2010

GM pays back $6.7B in government loans using $13.4B of government money parked in an escrow account in order to secure $10B in new government loans.

UPDATED: 01-May-10
All week I've watched GM CEO Ed Whitacre walking down a factory floor in a GM advertisement, crowing about repaying government loans while saying he could respect the opinion of those who did not want to give GM a "second chance". It is good to know that Ed can respect my opinion of the bailout. He might be interested to know that my current opinion is that his claim that GM repaid the loan from the US Government in full and ahead of schedule is complete horseshit. I hope Ed still respects me.

Shikha Dalmia at Forbes goes beyond opinion and actually does the homework:
GM CEO Ed Whitacre announced in a Wall Street Journal column Wednesday that his company has paid back its government bailout loan "in full, with interest, years ahead of schedule." He is even running TV ads on all major networks to that effect--a needless expense given that a credulous media is only too happy to parrot his claims for free. Detroit Free Press' Mike Thompson, for example, advises bailout proponents to start "warming up their vocal chords" to jeer their opponents with chants of "I told you so."
I wonder - Does Mike Thompson really believe that anyone beside himself would uncritically take the GM PR, advertising, and administration spin at face value and say "I told you so!" C'mon, Mike. Who would do that?

But I digress. Shika explains how the shell game worked:
"...the Obama administration handed GM only $6.7 billion as a pure loan... The vast bulk of the bailout money [$49.5B] was transferred to GM through the purchase of 60.8% equity stake in the company--arguably an even worse deal for taxpayers than the loan, given that the equity position requires them to bear the risk of the investment without any guaranteed return."

"...the Obama administration put $13.4 billion of the aid money as "working capital" in an escrow account when the company was in bankruptcy. The company is using this escrow money--government money--to pay back the government loan."

"...the company has applied to the Department of Energy for $10 billion in low (5%) interest loan to retool its plants to meet the government's tougher new CAFÉ (Corporate Average Fuel Economy) standards. However, giving GM more taxpayer money on top of the existing bailout would have been a political disaster for the Obama administration and a PR debacle for the company. Paying back the small bailout loan makes the new--and bigger--DOE loan much more feasible."
I said this was like a carny shell game, but that is not fair - to the shell game. In a shell game a bean is presumed to be placed under one of three cups, and the mark is fooled by quick manipulation of the cups into guessing and betting incorrectly where it might be found.

In GM's case, the administration just keeps stuffing more and more of our money into the company's pockets, the company moves some of the money from one pocket to another, gives a little back, and finally both the company and administration that gave them our money misrepresent what is taking place. When all is said and done, GM winds up owing us more money than before they "repaid" the loan.

But, no worries. We'll get the money all back. Someday. Over the rainbow. Just as soon as the 72.5% of GM company stock that US and Canadian taxpayers own is worth as much as they are owed and can be safely sold to repay it. The GAO suggests this may happen just as soon as....
" It concluded in a December report (which a more recent April report has said nothing to contradict, despite media spin to the contrary) that: "The Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies' values would have to grow substantially more than they have in the past."
... hell freezes over.

Hat tip to McQ at Questions and Observations who sums it up with this depressing observation:

"...it's actually worse than first imagined."

In the meantime, as taxpayers, we can take comfort in the knowledge that our money is being used to prop up a failed competitor and make life harder for the Ford Corporation. Ford is a well run American company that took the hard management decisions necessary to survive in a tough environment and made the right management decisions to earn the respect of all Americans. Ford continues to innovate and build new products out of their own capital and profits, not requiring or requesting any government handouts. And we are all paying to subsidize their competitors.

We can all sleep better knowing that our tax dollars are being used to undermine a great American company that did the right thing by reanimating their zombie competitors.

I guess I'll just have to be satisfied with the knowledge that since GM and Chrysler took my money against my will, they'll never get a dollar from me willingly to buy one of their cars. It's something.

UPDATE: 01-May-10
Nick Gillespie at Reason TV distills the scam into an easily digestible 90 second video:

H/T to Fausta, who also weighed in with a post explaining how "GM Paid Nothing". The real question, for me, is why does the media for the most part simply regurgitate such a transparent misrepresentation of the facts?

Divided and Balanced.™
Now that is fair.

Friday, April 23, 2010

The Carnival of Divided Government
Triginta Septendecim (XXXVII)
Special 4 Year Blogiversary Edition

Welcome to the 37th edition of the Carnival of Divided Government - The Special Four Year Blogiversary Edition.
Happy Birthday to me!

Four years ago, I started this blog by asking the question "Is this blog for you?", then offering the answer "Probably not." Well, I got that part right. 380 posts and 400,000 words later, uncountable throngs of blog readers reached the same conclusion and have flocked from this blog. In the meantime, the country has moved from disastrous Single Party Republican Rule to disastrous Single Party Democratic Rule. I think the country has a a collective learning disability. Nevertheless, we shoulder on - pushing that divided government rock up the mountain every election cycle.

A blogiversary is a time for reflection. Looking back on my first three posts from April, 2006 I take a certain perverse pride in offering a coherent and consistent thematic content from then until now. Then, we were advocating a straight Democratic vote in the 2006 mid-terms in order to break the hegemony and consequent bad governance of Single Party Republican Rule. Four years and two elections later, it's deja vu all over again. Now we are advocating a straight Republican vote in the 2010 mid-terms to break the hegemony and consequent bad governance of Single Party Democratic Rule. With a little luck, we'll have a similar result in 2010.

A blogiversary is also a time for presents. We like presents. It has been a while since we've spruced the place up. Since Blogger is finally getting around to updating their templates, we are giving ourselves a blog makeover for our birthday. Look for changes over the next few days or weeks. We've also giving ourself Twitter and Facebook accounts. We will be introducing them into our blogging process, just as soon a we figure out WTF to do with them. Everybody tells us we need then, so we must need them, but we really don't know why. For right now, we are content to see how many twitter followers we can accumulate without ever sending a single tweet.

In the meantime, the concept of and prospect for divided government is ramping up into the election season, so without further ado...
Read More ==>

Wednesday, April 21, 2010

It's the spending stupid.

Let me net this out:

Long term - I don't have an answer. But I do know that right now we don't particularly need a plan to build a hospital for our critically ill federal budget patient. What we need right now is a tourniquet to stop the bleeding.

Short term - Neither party can be trusted on spending. Divided government has been shown as a historical fact to restrain the growth of spending (as well as deliver other benefits) by scholars, political scientists, economists, historians, and constitutional lawyers. There is exactly one voting booth imperative for anyone concerned about spending - voting for divided government. This means voting straight Republican for federal office in 2010, and if they take Congress, then voting to re-elect Obama in 2012.

Republican vs. Democrat is a false choice.

Divided Government vs One Party Rule is the real choice facing voters.

Divided and Balanced.™
Now that is fair.

Friday, April 16, 2010

Poor Carpentry

Peter Beinart of The Daily Beast indulges in some Lakoffian framing to "explain" how the Tea Party movement isn't "populist." All he has to do to get there is redefine populism and by implication recast the federal government under the current administration as being the little guy. Seriously! Here, let's watch him stack the deck...
In American history, populism has a specific meaning: It’s our non-Marxist way of talking about class. Being a populist means standing up for the little guy against ruling elites.

Such vague claptrap is what Beinart deploys as a definition of populism for exclusionary purposes. And it fails on the face of it. In modern poli-sci terms populism is best defined as "an ideology which pits a virtuous and homogeneous people against a set of elites and dangerous ‘others’ who are together depicted as depriving (or attempting to deprive) the sovereign people of their rights, values, prosperity, identity and voice." [1]

This is a clear definition of populism that fits well the assorted populist movements in American history, including the current Tea Party movement. Beinart doesn't want to employ it because it specifically negates the rhetorical pretzel logic he has conspicuously constructed to steer the definition back into the fallacious trap of using "populism" as a mere sneering pejorative when describing any popular non-leftist movement. In Beinart's world, ONLY leftist movements employing identity politics can truly be "populist."

Beinart has substituted "little guy" into the equation to exclude anyone falling outside the heroic leftist totem of "the oppressed" from being capable of being "populist." In Beinart's world, only "the oppressed" can be "populists," and in leftist terms that automatically excludes anyone not favored by, well, leftists. It's simply a new polish on the old "victimhood" routine, one intended to deny victim status to anyone not of Beinart's tribe. One is either a victim or an oppressor, and by defining populism in terms of class struggle (while claiming he's being "non-Marxist" in doing so) Beinart seeks to automatically and categorically label the Tea Party people as elitist oppresssors. Thus anyone they are opposed to must categorically be the oppressed.

Now let's watch the second part of the framing attempt, in which Beinart casts the Obama administration in the role of the oppressed, since those opposed to the oppressed by Beinart's definition cannot be populists:
The Tea Partiers aren’t standing up for the little guy; they’re standing up to the little guy. We’ve long known that their leaders, like Sarah Palin, opposed against real regulation of Wall Street. Now we learn that what the Tea Partiers dislike about Barack Obama’s economic policies is that they don’t do enough for the rich. According to the Times, Tea Partiers are more likely than other Americans to think Barack Obama’s policies favor the poor, and they’re mad as heck about it.

Yeah, right. This is merely an attempt by Beinart to cast anyone opposed to the actions of the administration as being part of a privileged racist/elitist mob. Beinart is asserting here that being opposed to the massive growth of federal government and economy-crushing spending by same somehow automatically makes Tea Party people privileged elitists oppressing the "little guy." The "little guy" in this case being the federal government as personified by Barack Obama! (Try oppressing the IRS next time you're summoned for an audit. You'll quickly find out who the "little guy" really is.)

Pretty disingenuous stuff coming from a left-wing elitist Ivy League product of exclusive private schools, Yale, and Oxford. Perhaps Mr. Beinart has mistaken his own wealth of elitist privilege as being an acceptable substitute for intelligence, when even the most cursory examination of his premises makes clear that his ham-handed rhetorical framing is pretty poor carpentry indeed.

As George Orwell once famously remarked, "One has to belong to the intelligentsia to believe things like that; no ordinary man could be such a fool."

UPDATE: Right on cue, here comes reliable tool and left-wing elitist Ivy League product of exclusive private schools, Harvard, and Oxford E.J.Dionne promoting the narrative. Why, you'd almost think it was a coordinated effort on the part of left-wing elitist Ivy League products of exclusive private schools, Harvard/Yale, and Oxford to shape the narrative. Is having had a Rhodes scholarship one of the required credentials for this club? Elsewhere, Glenn Reynolds notes his own powers of prognostication.

UPDATE AGAIN: James Taranto at WSJ's Best of the Web takes notice with "Populism of the Privileged." Heh. Remember that we were there first.

[1] Albertazzi, Daniele and Duncan McDonnell, 2008, Twenty-First Century Populism: The Spectre of Western European Democracy, New York and London: Palgrave Macmillan, p.3

Tuesday, April 06, 2010

Econ 301: Data and Doubt

If like me you have a solid background in advanced real-world empirical economics, you're probably getting rather annoyed by now with the creatively optimistic interpretations of every stat release that comes out. This is generally a manifestation of confirmation bias, the tendency on the part of somewhat naive ideologues to see everything as evidence of their own wishes manifesting rather than as data points for objective assessment in a coherent empirical framework. Pointing out to same that they don't really know what they're talking about is somewhat futile -- ideologues follow pre-dispositions, not evidence and objective analysis, and the attempt will probably just get you called names. Especially as they tend to be certain they ARE being objective, despite the contrary evidence and their own lack of expertise in the field.

For those more interested in what's actually going on than in simply cheerleading their own fantasy scenarios, David Rosenberg of Gluskin-Sheff has a handy and concise list of some of the most mis-represented stats currently being used to cheerlead (and claim admin credit for) a "recovery" that at best looks to be somewhat slow and anemic at this point. A sample:
The ISM index came out before the payroll numbers did and injected a big round of enthusiasm into the pro-cyclical camp. The index did shoot up in March, to 59.6 from 56.5, and while many of the components were up, the prime reason for the increase was the eight-point surge in the inventory component, to 55.3. Moreover, the orders-to-inventories ratio slid to a level suggesting that we could be in for a big pullback in the next few months. Meanwhile, very little attention has been made to the construction spending data, which sagged 1.3% MoM in February with broad-based declines across sectors — and January’s 0.6% drop was revised to -1.4% (the fourth slippage in a row).

Go read the whole thing at the link. It's a good quick-and-dirty capsule check on why the institutional investors are not nearly as sanguine about the current condition of the national economy as the administration mouthpieces and partisan cheerleaders are.

UPDATE: Some related thoughts on the unemployment figures.

Thursday, April 01, 2010

Why We Don't Trust Congress

Since mw is off having a good time again, I'm going to cross-post whatever comes to hand until he gets back and realizes what a horrible mistake he made in letting me have the blog keys ...

Georgia's 4th Congressional District must be so proud of him! I admire the admiral's forbearance. The really scary thing is that Johnson is a major improvement over the previous member to hold that seat. Even scarier, while he's not the sharpest knife in the drawer, the odds are excellent that he's not the dullest either.