no third solution

Blogging about liberty, anarchy, economics and politics

Category Archives: Auto Industry

Of Guns, Canadian Healthcare, Taxes, and the Big Three Bailout

March 18th, 2009

It seems Obama wants to ban every gun under the sun except for Airsoft rifles and Super-Soaker waterguns. Time to reiterate: The State can rarely protect you from other individuals, and it cannot conceivably protect you from itself.

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In the past decade, the Big Three were only able to stay afloat because of easy credit. It’s been said elsewhere that they were essentially using motor vehicle sales as a loss-leader, while their real profit center was financing. When the credit crunch hit, the profit center evaporated. Now, they’re asking for your money in the form of bailouts and subsidized loans, in order to profit from loaning that money back to you. Talk about throwing good money after bad

Here’s an idea: let them go kaput. There are millions of vehicles in unsold inventories that could be auctioned off for pennies on the dollar. Some people say “nobody wants to buy a car from a bankrupt company.” The fact of the matter is that “nobody wants to buy a $30,000 car from a bankrupt company.” Give them the opportunity to pick up that same car at auction, for $10k, and there would be a line out the door. Then, make the components, parts, etc., of these vehicles public domain, and there will be no shortage of people willing to repair or otherwise service them at reasonable prices.

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Remember how certain people pay no taxes, and other people pay only a teensy-weensy bit of taxes, and a small handful of people pay nearly all the taxes? Or that States give tax-preferential treatment to companies choosing to relocate within their borders? Or that municipalities sometimes levy onerous taxes on “big box” retailers? Or on out-of-town guests? Discussing the AIG bailout-bonuses scandal, Chuck Rangel says that the tax code is not “a political weapon.”

Lulz.

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Oh hai: Canadians getting ripped off on the price of generic meds! I can haz socialized healthcare?

More Bailout, Pleeze

February 18th, 2009

A few months ago, General Motors’ market cap was about $6B. In November, when I said General Motors will go bankrupt. In December, I said that even with a federal bailout, there’s a chance that the auto manufacturers are still in over their heads. Then what? What if $17.4 Billion isn’t enough?

At some point in time, failure reaches a critical mass that *can’t* be propped up, no amount of money or effort, no matter how Herculean, can save the company(s). It’s possible that we’re living this right now, and if this is true, any diversion of public funds towards assisting this industry is merely throwing good money after bad, and serves to exacerbate and prolong our suffering.

Apparently, $17.4 billion wasn’t enough, because now in addition to cutting more jobs, GM and Chrysler are asking for even more federal money! I’m beginning to see how they plan to “repay” the bailout “loans”:

  1. Borrow money from the government
  2. Borrow more money from the government to pay back principle + interest in (1)
  3. Borrow more money from the government to pay back principle + interest in (2)
  4. Borrow more money from the…

That’s a damn fine framework for success, and wouldn’t you know, the markets noticed! As of the closing bell on February 17, 2009, GM’s market cap has fallen to a paltry $1.3B. The estimations of their worth have again been halved, and they’re asking for an even bigger loan?

General Motors makes 50 vehicle platforms that nobody wants to buy. The problem is oligopoly: she should never have gotten so big as to be the “lifeblood of American manufacturing”. A free market wouldn’t tolerate it. They could never have gotten so big, while at the same time being so lousy!

These loans are never going to be repaid, but even if they are, the money is going back to “the government” and not to you and me, who are the actual lenders.

What happens when April comes around, and General Motors still doesn’t have a viable future? Do they get more money? At what point does the nonsense end? At what point do the politicians recognize and accept the fact that continually taking money from the taxpayers and giving it to companies like General Motors in massive corporate welfare schemes can’t ever work? I previously suggested one way we might save the auto industry:

Get rid of corporate taxes. Also get rid of corporate welfare. That’s a “level playing field” if ever there was one. Get rid of capital gains taxes, while you’re at it. General Motors paid $37 Billion in taxes last year. Eliminate their tax liability for 2008 and forward. If the government gives them $37 billion of their own f*cking money back (I understand this kind of a distinction without a difference), and they still can’t return to profitability, there is absolutely zero reason to give them any of other people’s money.

FSK commented that my proposal should’ve included “get rid of all restrictions that make starting a new car company nearly impossible”. Let’s add that in the mix, too. If starting a new car company was easy, then the Big Three wouldn’t be “the lifeblood” of American manufacturing, and an entire generation of laborers wouldn’t be dependent on a few monopoly companies for employment.

Granholm: More Subsidies for Auto Industry, Please

January 16th, 2009

If you want a textbook example of rent-seeking, look no further than your local State government. In Michigan, the governor wants more federal subsidies for the Auto industry to protect us from “harmful” competition, abroad.

Michigan Gov. Jennifer Granholm says the federal government needs to invest more in research and development for auto-related alternative energy technologies such as the batteries for electric cars.

…South Korea’s LG Chem Ltd. on Monday was named as the lithium-ion battery supplier for General Motors Corp.’s Chevrolet Volt. Granholm says LG has benefited from its government’s commitment to research.

Damn those Asians!

Of course, I don’t believe that the South Korean taxpayers should be financing our fetish for all things “green”, but as long as the South Korean taxpayers are willing to subsidize our Electric Vehicles, let them do it. In a “race to the bottom”, the winner is the loser. It makes absolutely no sense, economically, to participate in such a competition.

Unless you can benefit from it, by forcing others to bear the lions’ share of the burdens.

Protectionism is a prisoner’s dilemma. The ruling class is deciding what move to make, the prisoners—the consumers—are not playing the game. Although open trade benefits people on both sides of the artbitrary borders drawn to secure Statehood, Protectionism serves the interest of the plutocrats in control of the State.

no third solution

Blogging about liberty, anarchy, economics and politics