Oh, to bailout or not to bailout

Matthew Slaughter at the Wall Street Journal reminds us that the big three are not the only car manufacturers in the U.S. Foreign-based companies employ 402,800 Americans at an average salary of $63,358, not counting the supply chain. He’s also makes the good point that a bailout could reduce the amount of foreign direct investment in the country if the federal government is willing to bail out investor's domestic competitors.

On the other hand, The New Republic makes the case for the bailout. While the author, Jonathan Cohn, acknowledges that much of the scorn is deserved, he argues that bankruptcy will make it difficult for the companies to get car parts. He says GM, Ford and Chrysler have actually shown great improvement, taking the steps everybody says are necessary “until an unexpected trifecta of high gas prices, vanishing credit, and a deep recession hit.” From the article:

“According to the most recent Harbour Report, the benchmark guide for manufacturing prowess, Chrysler's factories now match Toyota's for the most productive, while both Ford's and GM's are improving. (A Toledo Jeep factory was actually named the nation's most efficient.) Consumer Reports now says Ford's reliability is approaching that of perennial leaders Honda and Toyota, whose ratings actually slipped last year. In late 2010, GM will introduce the Chevrolet Volt, a plug-in hybrid that can go 40 miles without gas, and the Chevrolet Cruze, a compact that relies solely on gas but that gets 45 miles to the gallon.”

One discussion I haven’t seen yet is how the failure of one of the big three would affect the other two. Would it drag them down with it? Would it further compromise the economy like the Lehman Brothers’ collapse? Or would it benefit the survivors?

None of the companies seems to be able raise cash anyway, so in practice it may not make much of a difference if one of their domestic competitors fails. But it could potentially improve the sales of the remaining two just by reducing competition. Of course, consumer confidence in the domestic manufacturers could crumble, leading to a further reduction of sales. What really worries me about letting one (or all) of the U.S.-based carmakers fail is the economic fallout like the one following the decision not to save Lehman Brothers.

Since there’s no easy answer for this, it’s not such a bad thing that the government is taking its sweet time to decide what to do.

The Daily Show and the new administration

The New York Magazine wonders how Jon Stewart and the Daily Show will stay relevant during the Obama administration.

No question that much of the appeal of the show is the outrage and sarcasm towards the Bush administration's absurdities. But the greatest strength of the show, I think, is not political sarcasm, but making fun of the press' political coverage. And in that regard there will be plenty of material.

Fox News and other right-wing outlets will no doubt display a lot of fake outrage. I expect we will see a lot of comparisons about what they said under Bush ("how dare you criticize the president in a time of war!") and what they will say now. The Daily show mastered the art of funnily pointing out hypocrisy, double standards and silliness in the media.

And silly the media will be. You can bet that they will be made fun of any time they talk about Obama too adoringly or too negatively. Particularly when we see the pieces comparing the way they talk about the new president with the portrayal of George W. Bush.

If history is any guide, Stewart won't let his sympathy of the president-elect's policies be in the way of a good joke when he sees one. By the time of the election John McCain was the most frequent guest in the Daily Show (and the host was clearly fond of him) but that did prevent McCain from being poked fun at. Stewart is a professional comedian to whom comedy comes before politics, as he made clear in his 2006 Rolling Stone interview.

But most importantly, don't underestimate Barack Obama's ability to provide his fair share of ready-made jokes. He is a politician after all.

How to be a talk show host

A conservative one, that is:

"...(1) perpetuate the notion that listeners are victims and the host is the vehicle by which they are empowered; (2) use an us-versus-them approach that regularly targets Democrats, “Republicans in Name Only” and the mainstream media; (3) refuse to do an even-handed discussion of issues; (4) belittle callers when the argument can’t be won on the merits; (5) strategically find occasions to disagree with the Republican leaders or conservative doctrine to give the impression of being an independent thinker; (6) won’t risk their credibility by backing a Republican candidate who has no chance of winning; (7) rely on the “you know what would happen if this was a liberal” line of attack; (8) use the “pre-emptive strike” to immediately accuse the media of overplaying a budding news story that might make conservatives look bad; (9) selectively use facts to support their position and ignore any that don’t; (10) pound away on an issue, hour after hour, day after day, to motivate listeners to contact their public officials in support of a particular policy; (11) use a double standard on such issues as the line-item veto, perjury and activist judges (all three are great if they help Republicans or conservatives, but bad if used in support of Democrats)."

From the Milwaukee Magazine. Full article here. The story ensued from a magazine news feature called Secrets of Talk Radio.

Private jet beggers

Why would the executives from GM, Ford and Chrysler go to Washington on a private jet to beg for money? Don't they have any notion of how stupid that is? Even if it's a drop in the bucket, isn't it a little insensitive? Quote from the CNN.com story:

"There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they're going to be trimming down and streamlining their businesses," Rep. Gary Ackerman, D-New York, told the chief executive officers of Ford, Chrysler and General Motors at a hearing of the House Financial Services Committee.

"It's almost like seeing a guy show up at the soup kitchen in high hat and tuxedo. It kind of makes you a little bit suspicious."

It just shows that these guys either don't care or live in a different reality. Probably both.

The lesson from GM

A bailout for GM seems likely, although many seem to think that bankruptcy may be the best option for the company (not to mention the taxpayers).

Thanks to its lobbyists, GM did not confront its high labor costs and failed to adapt to a changing market. As Thomas Friedman of the New York Times put it:

"...the entire Michigan delegation [...] voted however the Detroit automakers and unions instructed them to vote. That shielded General Motors, Ford and Chrysler from environmental concerns, mileage concerns and the full impact of global competition that could have forced Detroit to adapt long ago."

GM's very ability to get the government to protect the company seems to be one of the key reasons for its troubles. The question now is whether the taxpayer's money will save GM or, if bankruptcy is indeed the solution, put the final nail in the coffin by helping the carmaker avoid cleaning up its act.

Is the lesson from GM that you can always lobby your way out of a big challenge? Or that government protection can be too much of a good thing?

If the bailout comes, we may not know for a long time.

Book recommendation

Much is being said about how an Obama presidency will affect the relationship with Cuba, so let me take this opportunity to recommend an excellent biography of Fidel Castro written by the late journalist Tad Szulc.

Fidel Castro: A Critical Portrait, contains all the ingredients of a great biography: comprehensive research, an interesting character, balanced and insightful analysis, and very good writing. Tad Szulc put together a book that should be used in class as an example of how to write a biography.
The only downside is that it was published more than 20 years ago, so it doesn't cover the period after the end of the cold war and the collapse of communist regimes around the world.

I've seen this before...

The optimism. The historical significance. The national celebration. The gracious comments of the sitting president on the victory of the opposition candidate. And most importantly, the incredibly high expectations. The amazing reaction following Obama's victory seems similar to that after the election of Brazil's first working-class president, Luis Inacio Lula da Silva. The similarities are striking. Lula even defined himself as the candidate of "hope."

The man of the people went on to fill his cabinet with cronies, was involved in what is perhaps the greatest corruption scandal in the country's history (and that is saying a lot for Brazil), has accomplished little more than a massive expansion of a government program providing stipends to poor families and seems more interested in perpetuating his party's power than bringing about the change he promised.

But there are differences of course. Obama is highly educated and belongs to a party that has held the national office before, while Lula dropped school in fourth grade and his presidency was the first of his party. And thankfully America is not Brazil, where a convicted felon can be elected to office. Like the senate. Oh, wait.

Update: It turns out that Ted Stevens was not elected to the senate, though it was a very close race.