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Saturday, May 30, 2009

These Words Will Eventually Haunt President Obama

Those words are pretty clear, "I don't want to run the auto companies". That's what President Obama said on April 30th. Since then, all he has done is run the auto companies.

Right now, the government is deeply involved on facilitating both the bankruptcy of Chrysler and General Motors. As I reported, the government has funded GMAC and in so doing shut down Chrysler's financing arm and mandated to GMAC that they finance all future Chrysler vehicle purchases. (those that need financing of course) Let's put that into perspective. The government is so deeply involved in running the automakers that they are deciding which financing subsidiary should be closed down and what vehicles another financing subsidiary should finance. Furthermore, they provide billions in government money to facilitate this.

The president has already demanded that the CEO of GM step down. Then, using the power he created by loaning billions to both automakers, he orchestrated that the industry agree to new CAFE standards that would significantly increase mileage efficiencies on vehicles going forward. When both GM and Chrysler emerge from bankruptcy, the federal government will be a significant shareholder in on and the overwhelming shareholder in the other.

Let's call this for what it is. The President isn't merely running the auto companies, he's running the entire industry. It is in fact the president and his task force that makes any important decision right now going forward on how to proceed in the auto industry.

By making that statement on April 30th, the president inherently acknowledged that it is a bad idea for the president to take a too active role in the auto makers day to day operations. He has since proceeded to do exactly that.

Now, a simple question must be asked. By November of next year, does anyone really believe that the government won't be even more significantly involved in the day to day operations of running the auto makers? Furthermore, with such an active role in running the auto makers, how exactly will he be managing the economy?

This is not all just merely idle theoretical thought. This is the blue print for an effective electoral strategy in November of 2010. Nothing will more clearly demonstrate the dangers of President Obama's interventionist economics than the manner in which he has totally taken over the auto makers. Nothing will frame that debate better for the Republicans than his own words emphatically denying his intention to do exactly that. The president is allowed to usurp all this power by a rubber stamping Congress that cheerleads while he effectively becomes CEO of the entire auto industry along with being president.

His usurption of the auto makers is all part of his larger economic policy. Everything from the stimulus, to cap and trade, to his massive budget, to universal health care, are all part of a massive increase in government power and reach. This comment can be framed into the context of all Obama domestic policies. When he claims that through universal health care he doesn't want to run health care, the Republicans will point to this comment and question his credibility on such issues.

The thing about massive government activism is that ultimately it is its own worst public relations. By November of 2010, the folks will tire of massive government intervention massive government intervention is inherently a bad idea. Just ask President Obama because his comments inherently admit as much. By November 2010, the U.S. government will put well over $100 billion into both these companies and neither will be anywhere near profitable. The government will have nothing near an exit strategy for removing itself from running these companies, and if the Republicans are wise, they use those words to hang not only Obama's auto policies but his entire economic policy.

3 comments:

Anonymous said...

"The government is deeply involved on facilitating both the bankruptcy of Chrysler and General Motors" to President Obama running the auto industry is quite the leap in logic, don't you think?

Anonymous said...

Thats the statement that stands out to you? This article is ideological tripe written with no research or even independent interpretation, and the part that you complain about is where the author makes a unsubstantiated logical shift?

mike volpe said...

No, not merely being deeply involved in their bankruptcy. Like I said, they are now directing GMAC to take over loans to Chrysler. They have forced CAFE standards down the throats of the automakers. They are going to own 70% of GM. They will own 30% of Chrysler. How much more do I need to show you to prove that they are running the companies?

As for the second comment, if it is ripe with ideological tripe, you didn't mention any of them.