Mon, 01 Jun 2009 01:54:45 +0000 – By Richard MillerAuthor, "In Word and Deeds: Battle Speeches In History"
It was said once that what was good for General Motors was good for America. I would update that aphorism: what is happening to General Motors is happening to America. Some of this is a bitter necessity--but much of it will be very bad, brought on by the voting public's collective refusal to face the consequences of our nation's (and our own) increasingly reckless financial behavior over the past three decades.
First, about that which is necessary. The key word here is "deleveraging." GM, like many other corporations, homeowners, and credit card borrowers simply incurred too much debt. Most of GM's debt was self-inflicted--ordinary borrowing. But much of the most damaging debt was simply conspiratorial. Unions and management had few incentives to control the former's spiraling wages, benefits and pensions while the latter had to avoid strikes and keep the machine running in order to earn its rich salaries and bonuses.
As for shareholders and bondholders, as long as GM played its own Ponzi game of being current on debt service, and as long as the stock rose in the general equity mania of the last generation, few asked many questions. Meanwhile, the only market that really counted --- the domestic auto market --- had been shrinking steadily for GM since the early 1970s. And the government (us, of course) was fond of its CAFEs, EPAs, OSHAs and other regulatory burdens that it imposed on the company. It all added up to what you now see unfolding before your eyes.
And what is very bad about GM's situation? The Obama administration, in the name of the public good but in the fact of political payoff, has paid billions and pledged upwards of $50 billion dollars to a company that has failed to raise one dime of private capital. And all this done without querying GM exactly what it will do differently to compete with Mercedes, Toyota or even Ford. Do you know what will be different? Please comment if you do because despite studying this GM for years, I don't have a clue.
Now here's the surprise: I don't blame Obama one bit. Sure, he broke his campaign pledge against Washington "politics as usual" by giving us Chicago "politics as usual." In this case Alderman Obama delivered to his ward bosses at the UAW. But the truth is that the president is just doing with GM what we, the people elected him to do: manage American decline and do it gently, painlessly, without seeming to abandon the old tropes of American Greatness.
We, the public, wanted to avoid the pain that the logic of our (former) economic and social system would have required of GM: file a non-government subsidized bankruptcy petition, and hope that the washed through assets would actually be acquired by some guy with a better idea on how to build cars.
"Too big to fail," we said in our collective arrogance. Too much pain. Too many suppliers forced out of business, too many workers unemployed, too many pensioners struggling to survive on reduced benefits. All probably true, and all part of the economic logic that built this country. Brutal, yes, but when you see the pain that the Indians and Chinese are willing to bear in order to supplant us as world leaders, you may remember that it's a price our ancestors bore when America was ascendant.
The truth is that as a nation, we're no longer "up to it," the "it" being the costs associated with world leadership. We, GM and America have entered our dotage. Obama isn't the problem, he's just a symptom. (And to demonstrate how non-partisan this is, remember that it was Republican Bush '43 and his trusty sidekick "Help U.S." Hank Paulson who argued for Detroit's first $25 billion as well as $700 billion in TARP funds. It was at that very moment that Old America was declared dead and gone by its elites. All Obama has done is turn up the volume on the same song.)
As a lifelong Republican, I'd love to bash the loyal opposition. But not this time. As a collective group we elected Obama to stop the pain. By making General Motors in effect a new department of the federal government, Obama, by deferring the pain to the Chinese government's willingness to buy our bonds, has only done what we asked him to do.
Managing America's decline--it's only a secret inside this country.