Reviving the Tactics of Reaganism

by: David Sirota

Wed Apr 01, 2009 at 08:24


Last year, you may recall that President Obama took some flack for seeming to idealize Ronald Reagan. However you felt about those comments, I think we're seeing that they previewed an effort to emulate Reagan's tactics - in particular, when it comes to bailouts.

Reagan famously backed a massive increase in the defense budget and corporate welfare while pretending to be a budget hawk by bemoaning the supposed wastefulness of programs like welfare - programs whose expenditures were tiny in comparison to those on the Pentagon and corporate welfare.

Likewise, we've seen Obama support giving away hundreds of billions of dollars - no strings attached - to Wall Street banks while simultaneously presenting himself as getting tough on Corporate America with his promise to hold the auto industry accountable for its failures. Of course, the automakers are asking for a tiny fraction of what Wall Street has already gotten.

It's the same paradigm. Hand out huge sums of cash to powerful political constituencies (for Reagan, defense contractors; for Obama, Wall Street), withhold a relatively small amount of cash from disempowered political constituencies (for Reagan, welfare recipients; for Obama, struggling automakers) - then cite the latter action as proof of "toughness," and hope nobody remembers the former largesse.

I'm not saying the auto industry doesn't deserve to be pushed around - but I am saying that the Obama administration (at least when it comes to the issue of bailouts) is resurrecting the fundamentally dishonest tenets of Reaganism.

David Sirota :: Reviving the Tactics of Reaganism

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Reviving the Tactics of Reaganism | 33 comments
December (4.00 / 2)
December's auto "bailout" was loans, not the money given full-bore to financial houses. Along with lots of labor conditions and restructuring requirements? Why? probably because a lot of folks don't heart unions. Auto unions, education unions, health unions - all in the cross-hairs.

I noted more details over the last days at:
http://tpmcafe.talkingpointsme...

But the basics are that Detroit asked for $34 billion in loans, got half that, and 2 months later are told to show how effective they've been or undergo a "surgical bankruptcy". By chainsaw, I presume.

Compare that $17.4 billion loan for 2 auto companies to AIG's $180 billion (in 3 waves - no failing for those guys), as well as the total $2 trillion or $12 trillion in bailout money, depending on who you ask. That, after Detroit and unions have already made tremendous efforts at re-structuring and compromising on benefits, something the jackasses at AIG have shown no sign of.

GM's supposed to turn around and produce new technology, but then again, they are: the Chevy Volt, an interesting electric car that's not surprisingly difficult to invent. Not enough for our auto experts in DC - in fact, it's somehow another sign of failure, they put too much effort into it!!! Just 2 years ago (year ending 2006), Chrysler sold 2 million cars in the US, GM sold 4 million. Not too shabby - may need help, but not quite sales figures that "no one wants" that I'm hearing. Perhaps that $4 a gallon gas price did have its effects? Okay, I'm waiting for our new breed of brainiacs to bring peace and prosperity to dozens of large burning corporations across America. Who knew, but John Galt is alive and well in the White House. If only those lazy corporate types will sit up and listen.

Ah yes (4.00 / 2)
The requirement for GM & Chrysler to suddenly become more energy efficient is rather humorous. Do new car technologies jump off the shelf into the engine block in 2 months? Did the Brainiac propose improving CAFE standards when back in the Senate? Did Rahm? Did any of these folks comment on southern tax subsidies to foreign automakers, or foreign government subsidies to same automakers?  
Early 1990s (0.00 / 0)
We came within 1 vote of requiring 40 mpg in 1993, but it got filibustered.

Frankly, after they spent so much effort lobbying against innovation--not to mention the fact that they did NOTHING to help get national health insurance to diminish their legacy costs, I have no real sympathy for these companies, and see no reason why taxpayers need to bail out any large company...particularly as we let small companies die all the time.

I wish banks got similar treatment.  One private theory I have as to why they are being treated differently is that people can intuitively understand the auto industry, so everyone has an opinion on what to do when it's in trouble.  

Banks, on the other hand, use all sorts of terminology "If we do not recapitalize then we will have outstanding obligations on our default derivatives, as intermediaries have shorted our fiduciary soundness while we attempt to credit the...etc. etc."  Since it's impossible for most people to have an intelligent understanding/debate with someone where you don't understand 1 word in 3, your counterargument is reduced to one of two choices:  "Whatever.  Piss off, you lying parasite!" and "Okee Dokee."

Had Obama chosen better advisors, we'd be getting the former response rather than the latter.

[ Parent ]
Actually being in the automotive industry.... (4.00 / 1)
....I am sometimes flabbergasted by the misunderstanidng of the industry by the public.  I probably expect people to know more than is reasonable about it because I have spent my entire adult life in it.

Regards,

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR

[ Parent ]
I'd Like to Hear Why You Think GM Is Where It Is Then (4.00 / 1)
I get that some of it is foreign competition but why hasn't GM been at the forefront of any of the major car trends of the last 45 yrs.  I see the following:

Pony Cars - Ford Mustang 1964, Chevy Camaro 1967
Compact Cars - Japanese and German cars clean everyone's clock in 1970s-80s.  GM - Chevy Vega 1971, Chevette 1976 (both lowsy cars).
Minivan - Chrysler 1983.  GM - Lumina APV 1990.
Midsize Cars - Taurus reinvents the class in 1986.  Chevy Lumina, 1990.
SUVs - Ford Explorer sets off the craze in 1990.  Redesigned Chevy Blazer, 1995.
Saturn - Great idea, captured many young, hip buyers in the early 1990s but no buy up car provided for 9 yrs so it died on the vine.

I am not of the car industry but I love cars and follow it pretty closely.  GM losts its way somewhere in the 1960s and is starting to get back 40+ years later.  Meanwhile, the company made some awful cars in 1980s and then okay but boring cars (Lumina, old Malibu, Impala) for most of the 1990s-2000s.

Why were Ford and Chrysler able to lead on trends but GM not?  Am I missing something?  This is a serious question.

[ Parent ]
You won't get an answer (0.00 / 0)
You're talking to people who don't think GM is doing anything wrong.
[ Parent ]
GM has been bleeding out for decades (0.00 / 0)
It's not as though its problems are new or only now being discovered.

If they can't get it together now, they never will.

[ Parent ]
Over the last 5 years.... (0.00 / 0)
...GM is the most popular brand of vehicle in the world.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR
[ Parent ]
Over the last 5 years... (4.00 / 1)
GM has lost a third of its marketshare.

They have been losing marketshare nearly every single year for the past 40 years.

What part of that is difficult to understand? Why are you pretending that GM isn't losing customers year after year?

Certainly, that sort of retraction is inevitable. I don't think anyone expects GM to have continued to dominate 50% of the marketplace. The 20% (and dropping) is perfectly sustainable and profitable.

The problem is that GM is still structured, as a company, as though it still has 50% marketshare. It has an unsustainable number of dealerships and models for its size That's why it's losing money.

And they've done nothing to address the problem except to squeeze the UAW.

GM isn't in trouble because of the recession; it's in trouble because it's stubbornly ignored reality for 40 years.

[ Parent ]
Your concern for the workers of UAW (4.00 / 1)
is very touching.

So I'm sure you will be joining many of us in condemning Obama if the product of his pushing GM into bankruptcy is that the UAW workers lose big time on their wages, pensions, and health care, right?

[ Parent ]
Obama is pushing GM into bankruptcy? (0.00 / 0)
They've been heading for bankruptcy for years! You realize that this isn't some sort of sudden crisis, right?
[ Parent ]
He could easily have worked to get bail out funds (4.00 / 1)
for them, to give them a second chance. In 1979, when Chrysler was also teetering on bankruptcy, it was given a another chance, and, against its many skeptics (why would it have been unable to put together private funds if the consensus was not that it was no longer viable?), came roaring back to life.

Obama could have done the like for GM; that was exactly what was in negotiation. Instead, he fired the CEO -- who for all his faults, favored NOT going into bankruptcy -- and now has in place a CEO who favors going into bankruptcy.

And the first thing that will be on the block in any bankruptcy is the UAW contract.

And I take it you will be applauding Obama's action.

[ Parent ]
The Govt Forced A Lot of Chgs on Chrysler (4.00 / 1)
for that money.  It was not a gift.  I have read two books on the Chrysler bailout and turn around and they had to negotiate a new contract with UAW, sell divisions (its foreign car division and its military tank division), close plants and dealerships, layoff people, etc.  Chrysler's board was smart enough to fire most of the senior management prior to asking for the loan and brought in Lee Iacocca and Hal Sperling to turn the company around.  The govt basically put Chrysler into bankruptcy without putting it through the courts.  Chrysler was a much smaller, more focused company in 1983 when it paid off the loans than it was in 1979.  
[ Parent ]
GM got its second chance (4.00 / 1)
last year and GM's plan for long-term profitability evidently consisted of "ask the federal gov't for more money in three months".

So let's deal with reality: GM is a company that has not been profitable for a long time and has been steadily losing marketshare for decades.

How does GM become profitable?

People here keep saying "we have to bailout GM! We have to bail out GM!" but no one's explained how exactly GM is going to ever walk again.

[ Parent ]
Exactly (0.00 / 0)
I wish someone would propose a realistic alternative to what the Obama Admin is suggesting.  I don't want GM to go out of business but I do want them to be a viable business at some point in the near future.  How do we accomplish this?  I am open to realistic suggestions.

[ Parent ]
Sweden? (4.00 / 1)
Remember when people were hoping against all evidence that Obama might pursue the Swedish option for banks?  Nationalize, restrcture, remove executives who caused or allowed the problem and then sell the bank back off, but in peices.  I still think it would have worked, but its not going to happen for banks.

Why can't it work for GM and Chrysler?  A significant goal for anyone who is legitimately progressive is to keep the union jobs that these corporations provide.  Nationalization would do that.  Another goal would be to green these companies up.  Nationalization would allow the government to make the company pursue that strategy while the company was under federal control.  My understanding is that the big three were resistant to higher CAFE standards because of the upfront costs of retooling the production process.  The government can absorb some of those costs (and possibly make that money back when the company is sold) so that when the company is back in private hands what they have is an auto company on track to being profitable and greener.

I don't know enough about the details of the industry to know if there are some special features of GM and Chrysler that would prevent this from working.  But it seems to me to be a good idea, at least compared to bailing them out every couple of months.  For corporations that are suffering mostly from brand image problems (maybe this isn't true of Chrysler, what I am hearing from people in the industry is that GM fixed most of its quality problems over the last few years and is now suffering from the fact that the brand image is being informed by the kind of cars GM produced in the 80's and 90's, which were legitimately garbage.), continual bailouts don't seem like a way to help the American people see the corporation in a good light.

[ Parent ]
It's quickly becoming blue-collar versus white-collar (4.00 / 1)
Obama made a lot of promises to blue-collar Americans to get the job he has. If he continues down this current path he will go only as far as his personal charisma and popularity can take him. Given the fact that he appeals to many conservative as well as liberal elements in this country, his personality and political choices may be enough to take him all the way to 2016.

He's definitely taking the side of the white-collar constituency in most of these decisions. Obama has made a number of popular progressive decisions, but . . . with the increase in the military occupation of Afghanistan and the threats against Medicare and Social Security, it's looking more and more as if the real goal is to preserve the status quo.

P.S. All of this is starting to give me a really bad opinion of Ivy League educated professionals. Whether Harvard or Yale, all this coziness reminds me of the initiation and clubhouse scenes with Matt Damon in The Good Shepherd.

Class War! (0.00 / 0)
And "thePrez?"

Whose side is he on?

Are you fuuuking kidding me?

"Pay no attention to the man behind the Podium..."

[ Parent ]
Quickly? (4.00 / 1)
A lot of people saw this coming like a slow motion crash when he ran Harry and Louise ads, which weren't so much a dog whistle as they were a train air horn signaling that he wouldn't threaten insurance companies, like, say, one we now own 80% of, but is still run by the pirates who torched the world economy.

But now that he's in, he's good. With another billion in campaign money from white collar America sure to come, 2012 looks safe - a lot safer than the future of working class America.

[ Parent ]
And the creeps in "Eyes Wide Shut". (0.00 / 0)

[ Parent ]
It is worthwhile now (4.00 / 7)
to recall the column David Brooks wrote a month ago, reporting on his conversation with "four senior members of the [Obama] administration":

In the first place, they do not see themselves as a group of liberal crusaders. They see themselves as pragmatists who inherited a government and an economy that have been thrown out of whack. They're not engaged in an ideological project to overturn the Reagan Revolution, a fight that was over long ago.

The Obama apologist response at the time was that, yes, these senior members certainly were expressing an outlook that was Reagan revolution friendly and anti-progressive. But, they claimed, these members were some kind of rogue element who differed in outlook dramatically from Obama.

We now know that Obama himself was among those "senior members". Pretty much by their own arguments, he is himself no progressive, and harbors great sympathy with the Reagan revolution.

Given current events, can anyone be any longer surprised at that?

He said so in Nevada and he said so in his book. (0.00 / 0)
Regarding Reagan:
..."I understood his appeal."
It was the same appeal that the military bases back in Hawaii had always held for me as a young boy, with their tidy streets and well-oiled machinery, the crisp uniforms and crisper salutes."

"Tidy?" "machinery?"  That made the hairs on my neck stand up.  

[ Parent ]
Ah, yes, we all look back fondly to PATCO (4.00 / 1)
Obama holds no fondness for workers in unions, whether or not he supports workers' rights in general...

EFCA (0.00 / 0)
The "card check" attempt is the best piece of legislation for union and non-union workers to be proposed in decades, are you saying Obama is just using it for effect?

Government by organized money is just as dangerous as government by organized mob..... FDR
[ Parent ]
I am hearing it will not be passed or signed in its present form. (4.00 / 2)


Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR
[ Parent ]
It's a bargaining chip, at best. (0.00 / 0)
Obama is NOT the friend of the Worker.

He goes into negotiations ALREADY giving shit away, already having inmind what he'll trade away to achieve some specious, spurious 'cooperation.'

And what he's most willing to give up is ANYTHING that offends the Beeg Bidness folks...

And yes, I believe he's a lying fuck...

[ Parent ]
The Financial Bailout, ie. TARP, is not a give away (4.00 / 2)
am I missing something or isn't the TARP money effectively a loan too?  Aren't some banks now wanting to pay back the TARP funds they received?  If it was a "handout" or a "giveaway" with "no strings attached" then why would these banks be giving the government back TARP money?  I think its disingenuous to say that the Obama administration is simply backing up a dump truck of bills and unloading at Wall Street's door without any requirement to pay it back.  Didn't the government give money to AIG and Citigroup in exchange for shares of stock?  Aren't those shares worth something?  Granted, they are worth less now then what Treasury paid for them, but if the economy turns around and the stock increases in value, could the government not expect to at least sell their shares for the value it purchased the stock for?  Under Geitner's toxic asset plan, wouldn't the government get back the money it "loaned" the private investor to purchase the toxic assets?  Doesn't the government receive a portion of the profit off the sale of the asset?  The conversation on this post makes it seem as if none of the financial bailout money is going to be paid back, and I do not think that's accurate.  - that said, I do think Citigroup and BofA's CEO's should've received a pink slip as a condition for their rescue.
government takes all the loss on the loan (4.00 / 3)
What part of "non-recourse" don't you understand?
[ Parent ]
non-recourse loan (0.00 / 0)
is applicable to the Geitner toxic asset plan, not TARP funds nor AIG or Citi stock purchases.  We should be careful when talking about Wall Street Bailouts by being definitive as all bailouts are not equal.  Yes, I understand that if the toxic asset is sold at a loss, then the private investor is not responsible to pay back the government loan used to purchase the toxic asset in the first place; however, you are assuming all toxic assets will be sold for a loss.  If the gov/private investor purchases $100 toxic asset, and the gov put up $85 and the investor put up $15 and the toxic asset is sold for $50, the investor recoups his $15 and the gov gets back the $35, correct? That would mean the gov looses $50 in the deal, but it doesn't loose $85.  Furthermore, some toxic assets may actually increase in value and the government will recoup its $85 plus split whatever profit was made with the investor.  There is a possibility that the losers and the winners cross each other out and the government ends up not loosing anything.  There is a possibility the government actually makes money and there is a possibility that the government looses all of its investment.  My point is that these possibilities should be acknowledged, but instead the postings all take the point of view that the money is gone, never to be recouped, and that there is no difference between AIG, Citi,etc capital injection via stock purchase, TARP, and toxic asset plans.  I don't think its honest.
[ Parent ]
more to the story (4.00 / 1)
Well, remember that the AIG and Citi stock purchases were at their market price as of a date prior to the TARP injections, not at the market price at purchase. Those purchases built in a loss for the government.

Otherwise sure, the Geithner plan uses what is left of the TARP money to leverage a ton of Fed non-recourse loans into losing investments. Seems to me that it would be dishonest to pretend that those loans are anything other than a no-strings capital injection to banks. There is some chance that another housing bubble will pump up the value of the underlying assets to the point where the government makes money on these RMBS, but that seems pretty unlikely given that house prices are still above historic norms.

[ Parent ]
AIG stock is worthless to us (4.00 / 1)

Government can never sell it - it's only government ownership that keeps its value up. AIG has tried to sell some of its assets, can't get anything close to what it wants for them. Already has blown through at least $100 billion of the bailout money, most likely much much more, with little it could possible do to repay the "loan". Only about $100 billion short on assets to handle it. We own 85% of nothing. A real bonanza for the taxpayer. Maybe we'll get a t-shirt.
[ Parent ]
I agree (4.00 / 1)
the governments "investment" in AIG is most likely worthless, but what would've happened if it was never rescued in the first place?  Perhaps the recession would have slipped into Depression...IF, and I acknowledge its a big IF, the government's rescue of AIG prevented total financial meltdown which in turn prevented real human suffering, then it was worth more than a t-shirt; however, the necessity of government intervention does NOT exempt policy makers from enforcing serious restrictions and re-written executive contracts should have been a part of it.  I believe criminal prosecutions are likely (isn't DOJ investigating the guy at AIG believed to have caused this mess in the FP division?) and the real proof of "change we can believe in" will be the financial regulations put in place to prevent this from occurring in the future...these actions have yet to take place.  Hopefully we won't be let down.
[ Parent ]
These sort of details aside… (4.00 / 1)
...the central point is that Obama has put more stringent controls on funds going in smaller amounts (to the auto industry, which employs blue collar workers and has union contracts that are now threatened) than on funds going in larger amounts (to Wall Street, which employs white collar workers and has no union contracts).  Between the UAW and AIG (simplification, but IMO essentially true), I know which side I'm on.  Odollars appears to be on the other side from mine.
[ Parent ]
Reviving the Tactics of Reaganism | 33 comments
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