Archive for the ‘Keynesian state’ Category

Government Says It Lost "Only" $9.26 Billion On Auto Bailout

By kevin Glass

A Department of the Treasury report this week released some of its final numbers on the auto industry bailout, with good news: “only” $9.26 billion was flushed down the drain bailing out America’s labor union-dominated auto industry.
As the Detroit Free press reports:

Taxpayers lost $9.26 billion on the U.S. government’s automotive industry rescue program, according to a final tally released by U.S. Treasury this week… The government said it recovered $70.42 billion of the $79.68 billion it gave to General Motors, Chrysler, Ally Financial, Chrysler Financial and automotive suppliers through the federal Auto Industry Financing Program.

The government lost money, but far less than initially expected when the program was launched in 2009.

Of course, President Obama himself was consistently telling Americans that “GM has repaid every taxpayer dollar my administration” lent to them in the auto bailout program. That is, of course, a blatant lie.

And the Treasury Department isn’t exactly the most reliable source of numbers here, considering they’re led by political apointees beholden to President Obama. The Congressional Budget Office, for example, has historically put out different numbers than Treasury, showing the bailout to be in worse shape. The nearly $10 billion loss might be understating it.

The real test will be if GM and the other companies continue to survive or continue to need bailouts. As Jim Pethokoukis wrote for AEI last year:

Bailing out a failing company is a lot easier than turning around a troubled company so it once again makes a quality product… Washington didn’t save GM, if by “GM” you mean an innovating, value-adding, self-sustaining automaker. That’s just not something government really knows how to do.

GM has proved to be in dire straits. They had a disastrous recall in 2014, and they’ve struggled to produce midsize cars that compete even close to the same level as Japan’s leading Camry and Civic products. Maybe we’ll end up having lost “only” $10 billion. In a counterfactual world, though, the U.S. automakers might already be producing beter products. And in the real world, we may have just wasted a truckload of money delaying the inevitable.

The Sequester Cuts Shouldn't Have Hurt the FAA at All

Letters From ReadersSequester

In your editorial “Flight De­lay Rebuke” (April 27), you say the “political capitulation” was likely caused by backlash from “the American public waiting in departure lounges.” It was more likely caused by backlash from frequent-flying senators and congressmen who were personally unwill­ing to suffer flight delays.

If these people from the political class were dependent on Medicare and ObamaCare for their health care, and So­cial Security for their retire­ment, they would just as quickly fix these institutions. Jim Williams Yorba Linda, Calif.

This is yet another first for President Obarrta: the first-ever strike of a CEO and top management against share­holders. We need an annual general meeting for this bunch of “managers” who can’t manage.

It takes a tremendous effort to make this Congresslook good, but Mr. Obama is ^finally succeeding at that, too. Ken Harms Yorba Linda, Calif.

Your editorial on the Obama administration’s ef­forts to maximize the pain of the sequester through air-traffic-controller furloughs, might have reported that the Federal Aviation Administra­tion’s operating budget is fully funded by user fees col­lected directly from the trav­elers who were delayed.

Airline customers are pay­ing directly for the air-traffic control system and have done so since the passage of the Airport and Airway Revenue Act of 1970. The FAA fiscal year 2013 operating budget is $9.72 billion, while $11.53 bil­lion in user fees were col­lected from airline-industry passengers in 2011, the most recent year available (source: FAA fact sheet, February 2012). As of the end of FY 2012 the Airport and Airways Trust Fund which holds these user fees had a surplus of $10.3 billion, enough to fully fund this year’s FAA opera­tions budget from cash on hand.
D. Roger Ferguson Des Moines, Iowa

In your editorial “The FAA Strikes Again, the FAA Brags” (April 25), you quote an FAA employee email: “FAA man­agement has stated in meet­ings that they need to make the furloughs as hard as pos­sible for the public so that they understand how serious it is.” Another FAA email you cite concludes that manage­ment’s “effort… is geared towards generating fear and demonstrating failure.”

Can you or any of your readers working in the private sector imagine going through cost reductions with the idea to make it hard as possible on your customers?
Jack Hayden Newport Beach, Calif.

David Stockman feels force of Washington fury


It takes a lot for an official who served at the heart of the White House to go beyond the pale in Washington, but a diatribe against all economic policy since 1933 – attacking everyone from Franklin Roosevelt to Milton Friedman – is one way to manage it.
David Stockman, budget director for Ronald Reagan from 1981 to 1985, is the man who will be short of dinner party invitations after becoming the most mainstream figure to argue that all America’s economic problems stem from the welfare state and the end of the gold standard.

Mr Stockman’s new book, The Great Deformation , highlights the enduring conservative appeal of a kind of economic primitivism that harks back to the days when laisser-faire ruled and macroeconomics had not been invented.
“The modern Keynesian state is broke, paralysed and mired in empty ritual incantations about stimulating “demand”, even as it fosters a mutant crony capitalism that periodically lavishes the top one per cent with speculative windfalls,” wrote Mr Stockman in the New York Times article that set off a minor furore in Washington this week.
The reaction, left and the right, was scathing. Jared Bernstein, former economic adviser to vice-president Joe Biden, gave one of the gentler liberal critiques. Mr Stockman, he said, was “about 11.8 per cent absolutely and totally on target” with his criticisms of crony capitalism. But the other 88.2 per cent was “a horrific screed, an ahistorical, dystopic, Hunger Games vision of America based on debt obsession and wilful ignorance of macroeconomics and the impact of market failure”.
The right was not much more impressed. David Frum, a speech writer for former president George W. Bush, called it “primitive” as economics, “silly” as advice, and diagnosed Mr Stockman with a mild case of elderly depression.
“As an insight into the gloomy mindset that overtakes us in older age, it’s a valuable warning to those still middle-aged that once we lose our faith in the future, it’s time to stop talking about politics in public,” he wrote.
Forecasts based on this world view have been spectacularly wrong in the last five years – instead of hyperinflation and a debt crisis, America has price rises of 1.3 per cent and a 10-year Treasury yielding 1.69 per cent. But Mr Stockman taps a strain of market discontent with fiscal stimulus and the US Federal Reserve’s policy of quantitative easing.
“There is nothing [Stockman says] that others haven’t,” says Peter Schiff, chief executive of the broker Euro Pacific Capital, with a similar outlook. “But when someone from the establishment criticises the establishment then everyone has to jump on him and discredit him.”
For the economic mainstream – which argues activist policy helps stabilise the economy, considers the gold standard ludicrously unworkable today, and diagnoses America’s primary problem as lack of demand – the 19th century critics are a challenge as there is some substance to the risks they identify.
There is legitimate concern about the rally in asset prices that has taken the S&P 500 index to a new high, and is spreading to real estate. Equity and property prices fell to long-run measures of fair value during the financial crisis, but not below, and have already moved above them.
“A lot of the inflation is in assets,” says Mr Schiff. “You can see it in the bond markets, you can see it in the stock market, you can see it in real estate. Real estate is already too high.”
The Fed rejects that QE – purchases of assets to drive down long-term interest rates – has formed an asset-price bubble. But concerns about stability have intensified at the central bank and led to debate about when to slow QE down.

If a bubble were to form and then to burst, it would seem to prove Mr Stockman and his colleagues right.High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights.

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