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Krugman Schools George Will




Here is the argument in more detail Franklin Delano Obama? (thanks to Adam for the link)


 

Comments

He also schooled him on how General Motors should be bailed out.

I think it was Gore Vidal that explained the 'persistent war' philosophy of the US Gov't since WWII as being inspired by the financial 'success' of WWII.

That is, that without record spending in the military industrial complex, the United States would succumb to another depression.

Interesting theory and fear, but I wonder if we really need to spend as much as the rest of the world.. combined. How about just half of that? *8)

I agree with Krugman, we need another war to get us out of this mess.

Here is the recent column where Krugman makes a similar point at greater length. Definitely worth a read (he is painfully familiar, to the point of boredom, with the line of attack Will is using here).

The world is facing a chronic squeeze between energy supply and demand and the US needs a crash program of renewable energy production. It is pretty obvious that the excess investment in housing over the past eight years should have instead gone into developing for energy independence. Energy production along with transportation infrastructure should be the target of HUGE public works investment and employment. As Krugman said, I hope Obama has the audacity to implement such infrastructure investment policies.

Another bailout? This time for the auto makers?

The DOW is already back under 8,500, and we haven't even been hit by the lackluster consumer spending we expect this xmas yet.

Ladies, gentlemen, I respect the intelligence of this community greatly, but these bailouts are scams of the highest order.

And the way I see it Krugman and Will agree: it was WWII, not FDR, that ended the great depression.

However, if Obama wants to go down this path, and the American mandate supports him, I suggest he bailout Detroit on the condition they start building solar panels instead. That, or pass a law forcing us to buy American.

Note to readers from the future: the thought of being forced to buy certain brands was still a joke back in 2008, before New Deal III: the revenge of failed idealism.

Listen, I have to agree with Krugman on this. If this were any kind of normal time the answer would be clear: let the thing go into bankruptcy, file for chapter 11. These companies can still find some way to operate while keeping the credit companies at bay. But we're not in normal times right now.

General Motors can't build cars without parts, and it can't get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. The same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

That's why many analysts and scholars believe General Motors would likely end up in Chapter 7 bankruptcy, which would entail total liquidation. And then, as Krugman said, we could actually see the thing disappear and then we’re probably talking about a million plus jobs disappearing as well. And, according to experts, the damage would spread quickly. Automobile parts suppliers in the United States rely disproportionately on GM's business to stay afloat. If GM shut down, many if not all of the suppliers would soon follow. Without parts, Chrysler, Ford, and eventually foreign-owned factories in the United States would have to cease operations. This is not a good time to stand on principle and say we that we shouldn’t bail these guys out.

Erick:

"General Motors can't build cars without parts, and it can't get parts without credit."

I argue the far bigger issue with GM is that they can't sell cars, even if Uncle Sam handed them a 0% FedReserve "black" card like Paulson has.

The only reason the death of GM makes me nervous is the pending loss of 1m American jobs. As far as the GM product line goes- i.e. the Hummer- this company has already proven itself too stupid to win in a free market.

And what about the anti-trust laws? I always assumed these were rather popular among self-described liberals. If these auto companies are "too big to fail", they are too big, period.

But, assuming the bailout passes with minimal resistance, I would still wager GM will be in dire straights within another 5 years. If our education system has taught us anything it is this: money doesn't fix stupid by itself.

I agree with Krugman, we need another war to get us out of this mess.

How about a working high speed train system and electrical infrastructure.

If anything a bailout for Auto should be an enormous subsidy for any low consumption they can make. 200 billion could take half the price off 13 million cars or so. That would employ a lot of people in production. Even people in hard times would buy cars at half off and it would reduce our energy consumption and do something to head off the coming gasoline shortage.

So, you tax everyone so that some people can buy cars at half off? So, I would be helping lots of strangers buy cars.

Not trying to be snide, but isn't that effectively what that means?

If we retooled their factories and made solar panels, wind turbines, etc. instead, or did something similar to WWII only instead of cranking up factories to make bombs and bombers, we framed ourselves as the alternative power experts of the world...

Could we export that kinda tech to China?

Yep, that's pretty much how bailouts and subsidies work. You are stuck with the choices. No bailout and some 25% of manufacturing jobs go away. Bailout where we basically fund the Auto industry to do more of the same for a few years and they will end up producing gas guzzlers that lose half their value before they leave the lot rather than when they leave the lot. The third option is some package that gives them a way to make money producing efficient cars and we both save some jobs and burn less gas.

I agree with you 100%:

"If we retooled their factories and made solar panels, wind turbines, etc. instead, or did something similar to WWII only instead of cranking up factories to make bombs and bombers, we framed ourselves as the alternative power experts of the world...

Could we export that kinda tech to China?"

Not just China, but India, Europe, Africa, South America and the rest of this planet. All we have to do is beat the price-point of fossil fuel and let the market do its work.

Leave the cars to Asia- they do a better job. Specialization of labor is what Adam Smith was all about.

no disrespect, but can someone tell me if george will is wearing a whig.

maybe he and sam donaldson go out after the each show and buy new ones

"If anything a bailout for Auto should be an enormous subsidy for any low consumption they can make. 200 billion could take half the price off 13 million cars or so. That would employ a lot of people in production. Even people in hard times would buy cars at half off and it would reduce our energy consumption and do something to head off the coming gasoline shortage."

I think this is closer to the line of thinking that we need to have. I don't like these bailouts at all, no one does...However, if we are going to do them I would at least hope that we put some HUGE catch 22s to them, like firing everybody who is in charge of these failing banks and auto companies for a start. I think GM deserves to go under for it's lack of vision over the years. If we bail them out and they continue to go on making the same shitty gas guzzling cars then we are stupider than I thought.

It wouldn't be terrible to see one of the other two buy up GM.

I strongly diagree.

These crooks are already "too big too fail"- they are too big, period.

For consolidation is the last thing we need.

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