“Democratic” Economic Solutions vs Another Failed Republican Bailout.
December 7, 2008


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Albert Einstein famously stated, “The definition of insanity is doing the same thing over and over again and expecting different results.” So, when Conservative economic policies have CLEARLY resulted in “unmitigated” (I hate that word) disaster, maybe… just maybe… everything they’ve been saying about “disastrous Liberal economic policies” might be wrong too? It’s time we started asking such questions.

MSNBC’s Rachael Maddow made some insightful observations Friday about the auto industry crisis and posed some interesting questions:

Are the Banks to blame for the Auto Industry crisis?

Briefly, Rachel points out that ALL car sales are down… including Toyota & Honda… in part because consumers can’t get bank loans to buy the cars. And while we promised banks $700 Billion in cash to free up the credit market and get banks loaning money again, the banks aren’t because they’re not about to loan money to people they worry won’t be able to pay it back. Bad credit, consumers already deep in debt, soaring unemployment (533,000 just last November. the worst one month decline since 1974… back when the country was spending billions every month to continue a decade-long illegal war sold on lies, and a scandal-ridden Republican president leaving office) are all reasons why the banks aren’t loaning out all that bailout money we lent them to rescue the economy.

You say, “Americans can’t get bank loans to buy cars“?

Here’s a thought: Take some of that $700 Billion we promised the banks to make loans with and give it to the automakers instead to give car loans. Remember “GM Financing” or “Ford’s New Buyer Program“? Whatever happened to them? On Wall Street, fluctuating “sub-prime” mortgage lending rates devastated the banking industry. Banks can’t make money loaning money at “zero percent interest”, but car companies can because they have a direct stake in the product you buy with that money, and the size of the loan is substantially lower than those for a house, so they can make loans with less risk. (Side note: I’ve always believed the $700B bailout of Wall Street was a huge mistake. If the source of the problem was people unable to afford their rising mortgage rates, why not just convert every “Adjustable Rate Mortgage” into a “fixed rate mortgage” 1.5% above whatever it was at the time they signed? Problem solved. Banks continue to receive their mortgage payments, buyers get to stay in their homes, and it wouldn’t of cost tax payers a dime.)

Another thought: GM spends more on health care than it does on steel for its cars. That’s obscene, and puts U.S. automakers at a severe disadvantage. In 2005, GM spent $5.2Billion on health care for its 145,000 employees and family members, and 1.1-Million retirees. Instead of giving automakers an additional $34 Billion dollars (on top of the $25 Billion they already received) with no assurance that the companies will survive, how about the U.S. government take over their health care? $5.2 Billion is damn cheaper than $34 Billion. Relieve them of that burden and put them on a more level playing field with foreign automakers. Give every autoworker the same health coverage as members of Congress. Foreign car companies can’t complain of “unfairness” because THEIR governments do the same thing covering THEIR employee’s health care.

And could you imagine a better argument for “National Health care” if it works to help save the entire U.S. auto industry?

(UPDATE: “GM CEO: Serious Health Care Reform ‘Undoubtedly Would Help Level The Playing Field’” – 12/5/08)

Next, increase the tariff on cars “imported” into the U.S.. Cars built in the U.S. by foreign automakers like Toyota, Honda, BMW and Mercedes would not be affected. Only “econo-boxes” built using cheap labor that American car companies can’t compete with, or high-end luxury vehicles where price is less of an issue, would be affected. Doing so would have a side benefit of depriving foreign automakers of a reason to pay their own workers less. Either they can pay their workers more or pay import taxes. And I defy any Conservative to argue that raising tariffs on countries that pay their workers 1/4 what we do would result in retaliatory tariffs that hurt U.S. exports. Trust me, workers that make $2.50/hour aren’t buying imported American cars. They’re buying the same cheap cars they make in that country because that’s all they can afford.

What else do we make they could raise tariffs on? Clothing? We don’t make any low-cost clothing they would buy. Electronics? Even Intel doesn’t make chips in the U.S. anymore, and we haven’t made a TV here in almost two decades. Medicine? The government is the sole customer, purchasing all medicine for their government-run heath care systems. Since the government is the sole customer, raising the price on drugs would only cost themselves more money. That’s not going to happen. Garbage? Our biggest export today is “raw materials”. China has been paying $1000 per metric ton for American waste paper to turn into the cardboard boxes they package the stuff they ship back us for sale in Wal*Mart. Food? Tens of thousands took to the streets of Japan last June to protest allowing U.S. beef imports because we severely limit testing for diseases like “Mad Cow”:

American Beef import protest in Japan – June, 2008
American Beef import protest in Japan - June, 2008

Mexican farmers protested the import of tariff-free U.S. corn flooding into their market earlier this year. And Polish farmers protested the importation of ALL U.S. food back in 2003. Trust me, “food tariffs” are not going to be what kills the U.S. economy.

Radio talkshow host Thom Hartmann made an interesting observation Friday: One of the reasons the economy did so well in the post-WWII era with a 90% corporate tax rate was because companies would rather reinvest their profits back into the company rather than pay taxes on it. If those profits just sit in the bank, they’re not helping anyone. And with a low income tax rate, there’s no disincentive against just holding on to all that money. But if you raise taxes on profits, companies are more likely to reinvest that back money into their business, buying more equipment, increasing Research & Development (R&D), and hiring more workers… all things that add value to the business (which they own). There is actually a very strong argument to be made that “higher taxes on Corporate profits may actually be GOOD for business.”

They (Conservatives) tell us, “raising taxes, tariffs and the minimum wage will cost jobs and ruin the economy. It’s common sense!” Sounds reasonable, so we do what they say and what happens? The very “economic catastrophe” they claimed THE EXACT OPPOSITE would cause, their policies cause instead. So much for “common sense”. They preach “the evils of Socialized __________________” (fill in the blank: medicine/education/regulation/etc) and the wonders of “free trade”. Yet, as I like to point out, there’s not a country on the face of the Earth where the citizens are demanding the government replace their “National Healthcare” with the American “free market medical care” system. No place. Nada. Zip. Zero. And one need look no further than the social catastrophe that is Iraq as an example of what a complete and total disaster “privatization” is as an economic philosophy. The Neocons looked at Iraq and saw an “economic Petri Dish”, an entire country starting from scratch, the perfect laboratory to prove to the world that Conservative economic policies work and how wonderful a government based upon “Pure Free Market Capitalism” could be. Once Iraq blossomed into a Capitalistic and democratic Utopia, no one would ever again be able to challenge the wisdom of their philosophy. It was the perfect plan… if it worked. But, as I’ve repeatedly pointed out, Conservatives are incapable of looking two steps ahead or even fathoming the possibility they might actually be wrong about something. As we saw with Iraq, there’s never a Plan B. They don’t make contingency plans in case they are wrong. So when they are, pray you’re not within a thousand miles when it blows up in their face. Unfortunately for the Iraqi’s, it’s a lesson learned the hard way.

These are now the same people telling us how to rescue the ailing economy… THEIR economy. The result of THEIR policies. And we’re listening to them on how to fix it???

Einstein was right. We KNOW “Conservative Economics” have been a miserable failure. Time to stop repeating the same mistakes over and over, expecting a different result. Maybe it’s time to try some of those “bad ideas” they’ve warned us would be a “disaster”. These are, after all, the same people that told us (and continue to repeat to this day) “tax cuts will promote business, create jobs and grow the economy”. Now we have PROOF that everything they’ve said is complete and utter (pardon my French) horse-shit. So, on this, the 67th Anniversary of Pearl Harbor… another tragedy born of arrogance and short-sightedness… I ask, “why do we keep listening to these idiots when they have yet to be right on ANYTHING?” Maybe it’s time for some UN-common sense.

(Postscript: Remember the last great idea the car companies came up with to promote sales? Chrysler promised “$2.99/gal gas for three years” last May to new car buyers two months before gas hit $4/gallon. Six months later, the national average for gasoline is below $1.99/gal as the imploding economy affects the oil market. Hey, it was a clever gimmick… while it lasted. But with the current bailout crisis, one wonders how they would of been able to discount $5/$6 a gallon gas over the next three years had it of come to that.)


December 7, 2008 · Admin Mugsy · No Comments - Add
Posted in: Politics

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