Should Detroit receive a bailout?

[bascule]

About a decade ago our city rolled out some pretty large-scale upgrades to the mass transit system here, including light rail.

 

The system sees a great deal of use and is generally considered a success.

 

If conditions are right, "if you build it they will come" does apply to mass transit systems.

[Pangloss]

Obama basically came out explicitly against this yesterday on Meet the Press. To paraphrase, he finds the idea of articially inflating gas prices to be very sound, and agrees that it would significantly curb our oil usage, but he does not want any such thing passing right now. His reasoning is that so many Americans are out of work, struggling to pay bills, losing their homes, and having a hard time putting food on the table that he doesn't want to add yet another stressor on their financial burdens. He likes the idea in the longer term, but doesn't seem willing to make so many people suffer as a result of it in the immediate term.

 

Oh well. It's the only bright spot in an otherwise bleak economic picture (edit: gas prices, I mean), so I guess it makes sense. Sounds like he's open to it over the long term.

 

------------

 

Interesting example today of how public outcry is going to influence government decision-making regarding bailed-out companies.

 

http://abcnews.go.com/Business/story?id=6420714&page=1

 

"Frankly, it's shameful that a bank that got $25 billion in bailout money turns around and shuts down a factory by cutting off their credit and then refuses that money be spent on people's rightfully earned benefits," said Leah Fried, a union organizer for United Electrical Workers. "We're going to hold Bank of America accountable for what they are doing here."

 

There's probably more to this than meets the eye, in particular an accusation that BoA did not give the legally required notice before shutting down the debtor company. But it's notable that before any of this has been investigated, much less argued before a judge, Illinois Governor Rod Blogojevitch (yeah, I copied and pasted it) slapped BoA with a state-wide moratorium on government dealings with the lender, based solely on the complaints of 200 union employees who claim they were unfairly terminated.

 

So... what's he going to do if it turns out that the bank did the right thing? Leave those people literally out in the cold?

 

Anyway, not saying government can't do the right thing, but I think we are going to have to decide what is important -- saving the economy, or saving each and every single job.

Edited December 8, 2008 by Pangloss

[bascule]

As I see this legislation creep forward, I feel it's about time I took a categorical stand.

 

This is atrocious. I do not like these companies. I do not like their workers. I feel the companies have failed as a business. I feel the workers' unions have been exploitative and have resisted automation in a Luddite-esque manner. I see the future of the American automotive industry in companies like Tesla Motors, who seem far ahead of the curve even when you compare to Japanese companies.

 

I would like to see GM fail. I would like to see UAW fail. I would like to see Tesla Motors succeed in their place. I would like to see a new American automotive industry producing vehicles which seem state of the art even when compared to Japan. GM is a lumbering behemoth cranking out inferior products and the market has been responding for decades. Their Hail Mary was to try to cash in on SUVs, a trend I find completely myopic and disgusting, and eventually the market turned around and bit them in the ass for it. Now their failure is complete.

 

BUT WAIT! Uncle Sam is going to rescue them. I can't help but feel disgusted.

[CaptainPanic]

That Michael Moore quote was like something out of Karl Marx's playbook. I feel dirty having even read it. It's completely wrong, of course -- that would effectively end any remaining free enterprise in the transportation sector. Honda, Toyota and BMW might as well close their plants and lay off their tens of thousands of $44/hr workers.

 

That's why we don't let people like Michael Moore run this country, folks.

 

That's also why you don't have a functioning train system in the USA.

 

The USA uses more energy per capita than almost all countries in the world (except some really cold or really hot and oil-rich countries). You can mention Carl Marx as much as you like, or call the rest of the world commies... that does not change the fact that the ultra-capitalist American system hasn't proven to be very energy efficient... It's time that somebody puts a stop to that... because the celebrated free market isn't gonna do it.

 

And I don't believe the argument that the USA is so much richer than Europe and therefore uses more energy. Taking a car for 250 meters to go shopping is not wealth, it is an attitude problem.

 

And this trick with the car companies can be just what the rest of the world needs. Yes, I hope that all the people who build SUV's will be fired next month. I'm sorry for them, it's not personal. I hope they get a new job the next day.

[Phi for All]

I feel the way bascule does with one difference. I don't *want* to see the big three fail, but I don't want to prop them up artificially either. Remember in 1969 when they claimed retooling for sub-compacts would bankrupt them, in response to the VW Bug? When Datsun and Toyota came into the market in 1970, Ford and GM suddenly changed their tune and had the Pinto and the Vega within another year.

 

I think if we say no to bailout, the tune will change again. If we say yes, it'll be the same old song and dance.

[iNow]

As I see this legislation creep forward, I feel it's about time I took a categorical stand.

 

This is atrocious. I do not like these companies. I do not like their workers. I feel the companies have failed as a business. I feel the workers' unions have been exploitative and have resisted automation in a Luddite-esque manner. I see the future of the American automotive industry in companies like Tesla Motors, who seem far ahead of the curve even when you compare to Japanese companies.

 

I would like to see GM fail. I would like to see UAW fail. I would like to see Tesla Motors succeed in their place. I would like to see a new American automotive industry producing vehicles which seem state of the art even when compared to Japan. GM is a lumbering behemoth cranking out inferior products and the market has been responding for decades. Their Hail Mary was to try to cash in on SUVs, a trend I find completely myopic and disgusting, and eventually the market turned around and bit them in the ass for it. Now their failure is complete.

 

BUT WAIT! Uncle Sam is going to rescue them. I can't help but feel disgusted.

 

And I can't help but agree. You're hitting nails on heads. Phi's clarification about not necessarily "wanting" it is also good, but the bigger point is that we are being screwed by our "representative" government, as they are not representing us. In fact, they are going explicitly against the desires of the majority. Good grief.

[ParanoiA]

As I see this legislation creep forward, I feel it's about time I took a categorical stand.

 

This is atrocious. I do not like these companies. I do not like their workers. I feel the companies have failed as a business. I feel the workers' unions have been exploitative and have resisted automation in a Luddite-esque manner. I see the future of the American automotive industry in companies like Tesla Motors, who seem far ahead of the curve even when you compare to Japanese companies.

 

I would like to see GM fail. I would like to see UAW fail. I would like to see Tesla Motors succeed in their place. I would like to see a new American automotive industry producing vehicles which seem state of the art even when compared to Japan. GM is a lumbering behemoth cranking out inferior products and the market has been responding for decades. Their Hail Mary was to try to cash in on SUVs, a trend I find completely myopic and disgusting, and eventually the market turned around and bit them in the ass for it. Now their failure is complete.

 

BUT WAIT! Uncle Sam is going to rescue them. I can't help but feel disgusted.

 

Hell yeah. I agree 100%. I'm really hoping companies like Tesla motors can get their bite of the market despite our government's insistance on rewarding failure with rescue. Of course, I wonder what we'll do when Tesla Motors is the cause of their problems...

 

The big three are too stagnant. It's time for revolution. The automobile revolution.

[npts2020]

Well, they did scale back the "requisition request" from stupidly ridiculous ($34B) to just ridiculous ($15B).

 

Notes to MrSkeptic, CaptainPanic, and others.

1) When mass transit becomes similar to personal transit in convenience and cost, people will switch to mass transit but seems to me unlikely to ever happen (especially in the US) with todays modes. The way around this is to make mass transit more like personal transit i.e. automating the system. A minimal system would only require a master controller, guidance devices imbedded in the road, and vehicle control. This does not address the problem of locomotion, however, which needs a better source like electricity generated from renewable sources.

2) Much of the current infrastructure could be used with little modification other than repairing wear and tear. The problem with this is that the new system would be much the same as the old system, only automated (brings to my mind Steve Martin in "The Jerk" buying his family a new house). In addition, there is a substantial percentage of Americas highways that now need major repair or replacement, so why not to begin to put into place something that would actually be better i.e. enclosed to be faster, incorporating a new power grid, powered by solar and wind, prefab roadway sections for faster building and repairs etc. This should be competitive with rail systems for cost and would be a much more flexible system.

3)AFAIK no system like an automated personal transit system has ever been built. There are rail (Morgantown W. Va.) and guideway systems (Heathrow Airport) but nobody has yet built a system with a central control system that tells all of the vehicles what to do. I believe this control scheme to be best suited for a large scale system with millions of vehicles (someone please disabuse me of this notion if there is a better way) on a flexible (not all vehicles going the same speed in a single lane of traffic) road system.

4) All of the technology required is available and proven.

[Pangloss]

That's also why you don't have a functioning train system in the USA.

 

No it's not, it's because we're spread out over a larger area (and with good reason, and to good effect -- I also reject the notion that that spreading is wrong or inherently detrimental -- it may need work, but the idea in itself is not a bad thing).

 

And the proof on the rail thing is in the pudding -- in those places where we are more crowded-together, we DO have functioning and successful rail systems.

 

 

The USA uses more energy per capita than almost all countries in the world (except some really cold or really hot and oil-rich countries).

 

So what? If that energy were clean then your comment would be irrelevant.

 

 

You can mention Carl Marx as much as you like, or call the rest of the world commies... that does not change the fact that the ultra-capitalist American system hasn't proven to be very energy efficient... It's time that somebody puts a stop to that... because the celebrated free market isn't gonna do it.

 

And I don't believe the argument that the USA is so much richer than Europe and therefore uses more energy. Taking a car for 250 meters to go shopping is not wealth, it is an attitude problem.

 

See above. I think people who concern themselves with the fact that we're not all clumped together breathing each other's bad breath are going to be very surprised when we solve our energy problems over the next few decades WITHOUT adapting to your notion of a perfect society. You're not going to like it when we're living in CLEAN suburbs and driving CLEAN and EFFICIENT SUVs. And you're going to find some other reason to complain about it. And we're going to laugh at you then, too.

 

 

Yes, I hope that all the people who build SUV's will be fired next month.

 

I think you should reconsider your motivations for your positions.

[bascule]

I feel the way bascule does with one difference. I don't *want* to see the big three fail, but I don't want to prop them up artificially either.

 

When I say I want them to fail, it's in light of their claims that they need federal loans or else they will fail. If those are the two options the country is presented, I say let them fail.

[npts2020]

When I say I want them to fail, it's in light of their claims that they need federal loans or else they will fail. If those are the two options the country is presented, I say let them fail.

 

Why aren't the financial institutions who have gotten hundreds of billions of dollars from the federal government "to keep liquidity in the credit market" not loaning them the money?

[iNow]

Why aren't the financial institutions who have gotten hundreds of billions of dollars from the federal government "to keep liquidity in the credit market" not loaning them the money?

 

What a thought provoking question, npts. My initial impression is that the banks don't loan money in the amount needed. When's the last time you ran down to the credit union to request $20 billion? Also, too high a risk. Any loan officer that agreed to approve a loan with such minimal likelihood of return (high likelihood for default) is an idiot and probably was involved in a major way with the housing crisis. Finally, the banks need to reach the maximum number of people possible to bring the liquidity you referenced, and giving all of their recently acquired funds to the Big 3 would negate that broad impact.

 

Sorry to be such a buzz kill. I thought it was a really cool question. I then started thinking about possible reasons, and sort of ruined my own good feelings.

 

I like your style, though. That's what banks are there for, after all.

[Pangloss]

This is a surprisingly good time to buy a house, btw.

 

The only problem, of course, is selling the one you already own.

[iNow]

This is a surprisingly good time to buy a house, btw.

 

The only problem, of course, is selling the one you already own.

 

I'm not sure how it's relevant to the thread, but you're quite right. If I had money right now, I'd be gobbling up foreclosure homes like pac-man. My bosses brother is doing exactly that. He's bought like 7 or 8 in just the past few months. No need to even sell the primary residence...

[Pangloss]

Well in terms of money getting out to the markets, mortgages are the elephant in the room. I see a lot of houses for sale, but the paperwork requirements they stick on some of those MLS listings are really tight -- have this form ready, have this other form pre-approved, that sort of thing.

 

Sure are some amazing deals available, though, especially, as you say, if you can get enough paperwork together to draw down on a foreclosure or a short sale. We've thought about keeping the old house as well, but there it starts to get a little nervy, especially since everyone and their mother is renting right now. (I actually talked to one of my neighbors recently who rents and she was talking about how smart renters always go for houses these days, and apartment complexes in a lot of areas are actually hurting for business as a result!)

[Phi for All]

I think Congress is making another big mistake in this bailout. I'm hearing from all kinds of folks who, though glad to be paying less for gas, are suddenly realizing that big oil is still able to turn a nice profit charging 40% of what we paid this summer. Even more backlash ahead for infernal combustion and the robber LeBarons at Chrysler, GM and Ford.

[Mr Skeptic]

And I can't help but agree. You're hitting nails on heads. Phi's clarification about not necessarily "wanting" it is also good, but the bigger point is that we are being screwed by our "representative" government, as they are not representing us. In fact, they are going explicitly against the desires of the majority. Good grief.

 

Heh, heh. What happened to our government being specifically designed so that it could go against the will of the majority?

In general parlance, we call it a democracy and everyone understands what we mean. No problems there. However, in this thread the suggestion was made that majority sentiment matters when writing laws, and it was in this context which the discussion of democracy arose. This was not a correct representation of our system, as we are a representative republic with a system in place to prevent the minority from being overrun by tyranny of the majority.

 

Of course, I don't see any particular reason that these companies deserve a bailout or how we would be better off for it, but that doesn't matter now that our Republic is going to gave them their bailout, to the tune of $15 Billion.

[iNow]

I think you've engaged in a bit of equivocation by suggesting that the Big 3 in Detroit are the same as individual citizens who are part of a social minority, but I give you credit for the injection of humor. Obviously, a corporation is not guaranteed the same rights as an individual citizen, nor are heterosexual corporations being given bailouts but homosexual corporations (which are equal on all other measures) being denied bailouts on account of their sexuality alone.

 

 

<Note: I'll be sharing a link from tonight's The Daily Show in the Prop 8 thread tomorrow when it becomes available. Jon Stewart had Gov Mike Huckabee on and discussed that very issue. It was an interesting exchange.>

[CaptainPanic]

No it's not, it's because we're spread out over a larger area (and with good reason, and to good effect -- I also reject the notion that that spreading is wrong or inherently detrimental -- it may need work, but the idea in itself is not a bad thing).

 

And the proof on the rail thing is in the pudding -- in those places where we are more crowded-together, we DO have functioning and successful rail systems.

 

I refer to this wikipedia website (I'm surprised it exists).

http://en.wikipedia.org/wiki/Rail_usage_statistics_by_country#Passenger_km_per_head_of_population

 

It shows passenger kilometers per head of the population.

 

Simply said: US citizens don't take the train, they either drive or fly.

 

So what? If that energy were clean then your comment would be irrelevant.

 

See above. I think people who concern themselves with the fact that we're not all clumped together breathing each other's bad breath are going to be very surprised when we solve our energy problems over the next few decades WITHOUT adapting to your notion of a perfect society. You're not going to like it when we're living in CLEAN suburbs and driving CLEAN and EFFICIENT SUVs. And you're going to find some other reason to complain about it. And we're going to laugh at you then, too.

 

If you have 1 person in a car, and no luggage or cargo, on a flat paved road, then an "efficient SUV" is a contradiction, also if it were to use clean energy.

 

But, if the US would use clean energy, then you will not hear me complaining. If it's clean, you can be as inefficient as you like. But using clean energy definitely requires a new type of car: as you wrote, a clean and efficient car (SUV is you like). And I don't think that the developments by the industry are going fast enough.

 

An individual consumer will happily buy an internal combustion engine car, and he can in the same time wish that the whole country would be buying cleaner cars. It's a paradox of the free market.

 

I think that if the car companies go bankrupt, there will be new jobs soon enough. A new factory for a new product can be built in 1 year. And new type of clean cars are already being developed and even built.

 

I think you should reconsider your motivations for your positions.

 

I fear that I have offended you in some way, so I shall try to be as objective as possible in a politics thread (it's hard!). I also think you're not reading my arguments, and you are being offensive (saying that I would complain no matter what)... This is no crusade against the USA or anyone in person. But I do hope that people will accept the fact that many people worldwide are no fundamentalist capitalists, like some/most Americans.

 

I think that reforms in an industry do not always need to be market driven. A population can have a different need than a market. If that is the case, then an intervention is acceptable.

 

But I fear we have a fundamental difference, which may be as fundamental as religion. I don't agree with the "privatize everything" and leave it up to the market to solve all the world's problems, and I do see many benefits of state owned companies. Since the "economy" is such a vague thing (even economists don't seem to understand it), we can discuss it forever. (And we are, given the length of the thread).

[npts2020]

I for one am glad of the length of this thread, it is a very good and fairly intelligent discussion. Personally I would be much more sympathetic if the big 3 were the ONLY auto manufacturers but they are not. Some other automakers are not asking to be bailed out, those are the ones that should be entrusted to keep building cars. The current situation brings to my mind a college student who sends in for every credit card offer he recieves, maxes all of them out, then goes back to his parents for a bailout because he can't afford the loans. Why is it that ALL of the finance options for Detroit have been shut off if giving them money was such a good idea? Apparently investing in automakers is even less attractive than sub-prime mortgages and other "liar's loans".

[Mr Skeptic]

Well just because it is not a good idea for someone else, doesn't mean it is not a good idea for the government. These companies employ people and make products and generate lots of tax revenue for the government. A bank wouldn't receive these additional benefits, so the loan would be more risky for them.

 

Still, a bailout is just asking for trouble -- it messes with the free market in all the wrong ways. If we are going to be handing bailouts out like candy, we need some laws concerning bailouts and to make sure that bailouts are distributed fairly among everyone, even small businesses. That way it doesn't reward those who are big clumsy behemoths (failing, and "too big to fail").

[Phi for All]

Simply said: US citizens don't take the train, they either drive or fly.

When it comes to transportation, please keep in mind all the varied climates and the sheer size of our national terrain. Very few countries are anything like us in those terms.

 

As Pangloss mentioned, in areas of high density and similar climate, like our northeast coastal area, trains are a big part of daily life. Out west in Colorado where I live, you could fit most of those northeastern states into our one state with room to spare, yet we don't have half the population of just New York City. The northern parts of Colorado get generally colder while the southern parts border on the deserts of New Mexico and are generally warmer. It's tough to design cost-effective rail transportation that can service such limited populations and varied climates. And let's not forget the differences in terrain. Our mountains are quite different from those in east coast states.

 

But we do have a problem with our vehicular reality. We buy cars based on if they could handle the few times we have many passengers, when the reality is we use them primarily by ourselves. The US auto makers have spent billions over the years convincing the male population that the car you buy signals to women how big your penis is, so having a sub-sub-compact just for commuting is not going to be easy to sell.

 

I'd like to see some enterprising business (probably with the help of the feds) offer a full electric like

for limited lease, possibly with the provision that you could drive it to an airport (or train station) or wherever and leave it there for the next guy. You would join a member service and be able to commandeer any available EV offered by the service and pay for the time you use. This would definitely take some time to accomplish but there's never been a better time to break out of old inefficient patterns.

[Saryctos]

I think a helping hand would be to convince people that everyone needs a 'commuter' vehicle. You can keep your SUV, your v8 monster, but use your $10k highway/city vehicle for the straight trips with minimal luggage. If people were encouraged to use a two car system(1 regular, 1 small and efficient), not only would it save on gasoline, but it would increase the demand for more automobiles. The problem here is the supply/demand conundrum. How do you make people want what doesn't exist? Then how do you justify the cost if there's no demand?

Hell, these commuter vehicles could even be designed in a way that makes it easier for future integration with an automated transit system.

 

I'd like to see some enterprising business (probably with the help of the feds) offer a full electric like the Tango for limited lease, possibly with the provision that you could drive it to an airport (or train station) or wherever and leave it there for the next guy. You would join a member service and be able to commandeer any available EV offered by the service and pay for the time you use. This would definitely take some time to accomplish but there's never been a better time to break out of old inefficient patterns.

I'm not sure how well a shared vehicle program would work out. Too many a-holes would screw it up, too much worthless litigation over damages, or false claims of damage on the guy who borrowed it before you. Although I could see it working for individual businesses and their employees. Smaller, well known user base would make it more personal and less likely for careless damage and misuse.

[CaptainPanic]

Well just because it is not a good idea for someone else, doesn't mean it is not a good idea for the government. These companies employ people and make products and generate lots of tax revenue for the government. A bank wouldn't receive these additional benefits, so the loan would be more risky for them.

 

Seems to me it's cheaper to give unemployment benefits rather than keeping these people working in an old fashioned industry. Then you save the employees from poverty, while liberating a large workforce and finances that are used by an old industry.

 

When it comes to transportation, please keep in mind all the varied climates and the sheer size of our national terrain. Very few countries are anything like us in those terms.

 

As Pangloss mentioned, in areas of high density and similar climate, like our northeast coastal area, trains are a big part of daily life. Out west in Colorado where I live, you could fit most of those northeastern states into our one state with room to spare, yet we don't have half the population of just New York City. The northern parts of Colorado get generally colder while the southern parts border on the deserts of New Mexico and are generally warmer. It's tough to design cost-effective rail transportation that can service such limited populations and varied climates. And let's not forget the differences in terrain. Our mountains are quite different from those in east coast states.

 

I cannot change numbers. The wiki link I provided (here it is again) shows that US citizens only travel 80 kilmeters per year, per person. Netherlands gets 940 kilometers per person per year.

 

Another example is the "Modal share of railway transport (excluding metro) compared to other modes of transport." - The USA is completely at the bottom of that, well below a country like Finland which also is not so densely populated... or switzerland which is... hmm... pretty much only mountains.

 

I believe I heard that Obama wants to improve this situation. If true, it would make me glad. (Trains are nice, and cleaner than cars - comfortable too).

 

I'd like to see some enterprising business (probably with the help of the feds) offer a full electric like

for limited lease, possibly with the provision that you could drive it to an airport (or train station) or wherever and leave it there for the next guy. You would join a member service and be able to commandeer any available EV offered by the service and pay for the time you use. This would definitely take some time to accomplish but there's never been a better time to break out of old inefficient patterns.

 

Breaking out of an old fashioned pattern is always a good idea. Perhaps it's America's new years resolution for 2009?

[Pangloss]

I refer to this wikipedia website (I'm surprised it exists).

http://en.wikipedia.org/wiki/Rail_usage_statistics_by_country#Passenger_km_per_head_of_population

 

It shows passenger kilometers per head of the population.

 

Simply said: US citizens don't take the train, they either drive or fly.

 

Your link doesn't refute my statement, which was:

 

in those places where we are more crowded-together, we DO have functioning and successful rail systems.

 

Which I only mention because you actually put that forth as a direct refutation to the above statement (and continue to do so after Phi also pointed out your error). Your link doesn't look at places where we have high pop density and consistent train service. So it's not a valid refutation of the statement.

 

We're not saying that Americans use trains as a general rule -- you're correct in saying that they do not. What we're saying is that they don't use them because they're not convenient. If you think Obama's infrastructural improvements will have value, then it would seem that you agree with this point, so what's the problem?

 

 

But, if the US would use clean energy, then you will not hear me complaining. If it's clean, you can be as inefficient as you like.

 

This is no crusade against the USA or anyone in person. But I do hope that people will accept the fact that many people worldwide are no fundamentalist capitalists, like some/most Americans.

 

Much better, thanks.

 

 

But I fear we have a fundamental difference, which may be as fundamental as religion. I don't agree with the "privatize everything" and leave it up to the market to solve all the world's problems...

 

Nope, we're not different in that regard. We're different in this one:

 

 

, and I do see many benefits of state owned companies.

 

Which doesn't necessarily follow, but it's certainly a valid point of view, and I respect that.

 

---

line[/hr]

 

Just to update this thread a bit, the current plan being debated calls for $14 billion in low-interest loans and the requirement of a restructuring plan involving reworking salaries across the board. The plan would be overseen by a "car czar" who would review the progress of the makers in April and could in theory recall the loans and put the companies out of business at that time.

 

The plan has been approved by the House but faces an uphill battle in the Senate, where it needs 10 Republicans to come on board.

Edited December 11, 2008 by Pangloss
multiple post merged