While I’m on the subject of GM and Chrysler, I’d like to put in a word for why I think that their bailouts and the bank bailouts that are being hailed as great triumphs, averting another Great Depression, etc. are egregious failures.
We have enormous over-capacity in auto production, financial services, and home construction in the United States. That over-capacity poses a problem: billions in resources are held essentially unusable as long as that over-capacity is preserved. Consequently, no policy that does not include a substantial, controlled reduction in these sectors can be deemed a success however popular it might be or whatever else it might achieve.
The last and present administrations’ policies WRT auto production (Chrysler and GM bailouts;“Cash for Clunkers”), financial services (TARPs I and II, HAMP, etc.), and home construction (first-time homebuyers subsidy, just to name one) have at best been delaying actions. What are they waiting for? Re-election? The next administration to hand off the problems to?
Averting another Great Depression is an egregious failure?
Steve
a) I don’t think they averted another Great Depression and b) I think they just kicked the can down the road.
Let me make an analogy. You can keep a balloon with a hole in it from deflating by pumping air into it. You can’t stop air from leaking out by pumping air into it. We need to patch the hole, not just pump air.
Let me make an analogy. If someone gets stabbed in the aorta, you stop that bleeding immediately with what is available. Ideally a sterile clamp, but if all you have is dirty, rusty one or a glove covered hand, that is what you do. With the bleeding stopped, you then fix everything else.
I think that TARP was a dirty clamp. It worked, but it would have been nice to use a nice sterile one under better conditions. The auto bailouts were done at a time of near panic. No one knew what was going to fail next. How long do you have to watch the stock market to figure out that the herd mentality is strong? Cash for clunkers, HAMP and home subsidies are where I think you have a better case. Those had little effect and were probably a waste of money.
“have at best been delaying actions. ”
Yes. I dont really expect government to solve the jobs problem. What I hope for, is that the worst harmful effects can be averted until the economy recovers. I dont think that any plan from the left or right or libertarians, even the Marxists, will make things better quickly. Simply put, we ran up too much debt. If you build it they will come will not work. Not for a long time.
That said, we should be working on our other long term structural issues. Our tax system sucks. Health care needs reformed, meaning getting costs down. We need a functioning energy policy. We need to balance spending and revenue better. I’d settle for those for now.
Steve
During the Great Depression the Roosevelt administration did a lot of stuff. Much of it was dumb, but some things worked well.
The problem right now is not that the government has done some dumb things – it undoubtedly has. The problem is that it’s not doing enough, period.