I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes. – then-candidate Barack Obama, 9/12/2008. A senior administration official said the new standards would raise the cost of an average car by $1,300, $600 of which could be attributed to the rules being announced today. – Washington Post, on the Obama administration’s new auto emissions standards, 5/19/2009.
One of today’s great Chicago architects likes to critique buildings by asking: “If this is the answer, what was the question?” It cuts to the chase. Imagine standing before this…thing and applying the above critique. The question becomes: “Can you build me a poorly lit maximum-security prison tower to live in? Absurd, right? Just like the result. Similarly, to properly understand the absurdity of the U.S. Government backing car warranties, we must ask ourselves what the objective is regarding the auto industry. Improved sales? Economic viability? Something along these lines, surely, …
“A Conservative,” that anonymous scribe within Heritage, surfaces again for the second time in three days with a cautionary tale for the Big Three about Henry Ford, FDR and Big Government strings. This latest edition of New Common Sense, titled “Ford Faced Down FDR’s Blue Eagle,” reads as follows: Out of the rubble of the proposed bailout of the Big Three automakers, a phoenix may rise — or is it a blue eagle? President Bush and Treasury Secretary Henry Paulson just might speed $10 billion or more to Detroit regardless …
Last night while marshaling votes for the House’s eventual 237-to-170 vote in favor of nationalizing Detroit, House Majority Leader Steny Hoyer (D-MD) told the Wall Street Journal: “If we do nothing we face the risk that sometime soon there will be no American auto industry.” Hoyer has it exactly backward. A government takeover of the Big Three represents the biggest threat to their long-term existence, while a Chapter 11 restructuring is the best way to ensure the long-term viability of the industry. Bankruptcy Does Not Mean Death: The auto nationalization …
Lynne Kiesling highlights these daunting numbers from David Yermack’s WSJ piece: • GM and Ford are two companies that made the most money-losing investments in the 1980s; between them they “destroyed $110 billion in capital” in the decade, according to an analysis from the careful and renowned economist Michael Jensen. • Over the most recent decade, “the capital destruction by GM has been breathtaking,” $182 billion, and Yermack estimates that the aggregate capital investment in GM and Ford since 1980 has let to a net reduction in capital of $465 …
Congress is facing a few road bumps during this lame duck session to pass any legislation. The Omnibus Lands Bill that restricts energy exploration has been put on the backburner, at least for now, to make room for a vote to bail out Detroit. The good news is Democrats and Republicans are at a stalemate when it comes to how to actually help General Motors, Ford and Chrysler. The auto bailout debate is heating up and although Republicans, Democrats, the Bush Administration and President-elect all agree that Detroit should not …
General Motors wants to merge with Chrysler. Doesn’t sound so bad, right? Turning Detroit’s Big Three into the Big Two might be just the remedy for an ailing U.S. auto industry. Maybe not. But that’s not the problem. The problem is how GM is proposing to merge with Chrysler — asking me and you to pay for it. Chief Executive Officer Rick Wagoner is leading the plea to Congress and the Treasury for $10 billion to complete the merger with Cerberus Capital Management, the owner of Chrysler, that would assist …
As discussed in Senior Research Fellow in Regulatory Policy James L. Gattuso’s recent blog post, the House this week approved a new $25 billion loan program for Detroit automakers, and the Senate is expected to soon follow suit. The loans are to develop alternatives to conventional fossil fuel powered vehicles as well as more fuel-efficient cars. The Congressional Budget Office (CBO) estimates that the loans would cost the federal government $7.5 billion – double what the initial estimates were. CBO’s blog explains the reason: Several recent press reports have incorrectly …
Almost 30 years ago, a steep rise in oil prices drove consumers to buy smaller, more fuel-efficient cars. Cars that American auto manufacturers simply didn’t make. The resulting huge drop in sales drove Chrysler to the brink of bankruptcy, but before the market could play itself out, President Jimmy Carter came in “rescued” Chrysler with $1.2 billion in loan guarantees. At first glance it may appear that Chrysler was saved from bankruptcy. But a closer examination of the record shows that even with the loans, Chrysler went through a quasi-bankruptcy. …
Nothing gathers a crowd in Washington like the sight of money being handed out. Thus, in the wake of last weekend’s federal takeover of Freddie Mac and Fannie Mae, lobbyists for the automobile industry could be found stalking the halls of Congress, asking for help from the government too. Specifically, they are asking for $50 billion in federal loan guarantees to develop alternatives to conventional fossil fuel vehicles. The idea has garnered surprisingly broad support — with both Barack Obama and John McCain both expressing support for aid to the …
