White House White Board – Auto Industry

19 Nov

In the fourth edition of White House White Board, Austan Goolsbee, Chairman of the Council of Economic Advisers, discusses the President’s tough decisions on the American auto industry in light of the General Motors IPO.

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While the topic of GM’s bailout and whether it was worthwhile is an interesting discussion, I posted this more to illustrate another point.  President Obama is terrible at politics.  Saving GM should be a slam dunk issue and a huge boon to his approval ratings, especially in rust belt swing states like Ohio, Michigan and Pennsylvania.  Instead, he’s a reactionary politician who spends more time defending and explaining his positions than presenting them.

President Obama's Director of Heavy Political Lifting

It’s something that I didn’t see coming during the 2008 election, Candidate Obama seemed so adept at messaging and politics while President Obama fumfers and compromises and reacts.  What happened?  What’s the difference?

Right now, this cartoon explains where the President is at poltically:

The white board videos that Goolsbee is creating are a return to that simplicity of messaging, but they are on YouTube and not part of a massive messaging effort.  Goolsbee has just the type of demeanor the American public needs to see from this administration.  Get him in front of the media at every opportunity, make him the point man on economic issues and jobs.  He’s smart, funny, and can speak in the bullet point, bumper sticker style most Americans need in order to understand complicated issues.

Republicans are arguing (with a straight face) against extending unemployment benefits for millions of Americans while arguing to keep the tax cuts for the wealthiest 2% of Americans in place.  Doing so in the face of pluralistic public support for the President’s proposal.  He is being outflanked politically, he’s lost his narrative and he’s become the great compromiser.  He’s taken a conciliatory and defeatist approach to policy when we need a leader.  He’s alienating his base and a capitulation on the tax cut issue with the Republicans will only further disenfranchise the liberal and center-left base that got him elected.

This President needs to grow a set and soon or he’s going to find himself out on his ass in 2012.

13 Responses to “White House White Board – Auto Industry”

  1. Chris November 19, 2010 at 2:03 pm #

    Yes, Chris. It’s the message. If only this administration could “message” better, THEN the people would get how smart they are. If only. Sorry, not buying.

    As it turns out, flushing down over $59B (BILLION) to “save” GM and its flawed business model was rightfully seen as the government propping up companies who have no business being saved (ironically, Malcolm Gladwell argued that Waggoner was a flawed CEO who was actually doing some good things to save GM. But that wasn’t good enough for the smartest guys in the room of the likes of Obama, Steve Rattner (who is now under indictment)) and the union cronies who helped elect the President). And this waste of taxpayer money for the favored unions (not the corporate managers who were all fired) is being seen as it is – another case of corporate cronyism. Congrats! Not only has this administration favored Wall Street, they also favor the unions uber alles. And you wonder why people think this administration is a joke. Perhaps more youtube videos with Austan Goolsbee will change the American people’s way of thinking.

    Dragging the Republicans into this piece is a nice touch as well. The Republican position is defensible; paying people to do nothing (unemployment) is not as productive as getting economic producers more capital to, perhaps, hire those unemployed back into service. Of course, with looming questions on health care, tax cuts, inflation, etc why would you hire anyone? The instability produced in the last 2 years of Democratic “leadership” has left the country reeling in the sense they don’t know what the next piece of legislation will be enacted that they will have to react to.

    The progressive argument that the president needs to grow a pair makes me giggle. Hard to take the mantle and run with it when you had it and it was ripped away from you. Your party just lost 60+ seats in the House in an election that was widely seen as referendum on your and your party’s leadership. So, sure. Grow some more balls. All the balls in the last 2 years did this guy quite well. I look forward to more testicular fortitude from progressives in the coming months as they attempt to achieve “ideological purity” to put themselves right out of the mainstream of popular opinion.

  2. Christopher Smith November 19, 2010 at 2:26 pm #

    “not as productive as getting economic producers more capital to, perhaps, hire those unemployed back into service”

    They have the personal income tax cuts in place now (and throughout the recession), they weren’t hiring people in 2008, they aren’t hiring people now, and indicators show that they won’t be hiring people in the near future.  This, of course, comes with a booming equity market and the biggest economic disparity since the Great Depression.

    Also, the unemployed people I know aren’t sitting at home on their ass counting the huge checks they receive.  They’re out pounding the pavement looking for work in an economy which is geared to increasing corporate profits as companies look to “do more with less”. My company made nearly a 4 billion dollar profit last year, and then laid off nearly 10K workers, even though the pipeline for business is more robust than it has been in 7 years.  The whole trickle down theory is such crap, I tired of arguing it back in college.

    As for the President growing balls, exit polls indicated that candidates who ran on their record in the House did very well.  Blue dogs in red districts who ran away from the congressional record got their ass kicked.  Not a big surprise.  The President has lost his motivated base by compromising on every single issue and never taking control of the narrative.  The American people like fighters, they like ideological purity, which is why the Republicans were successful in the mid-terms, they ran to the right, built a narrative, kept the messaging simple and went on offense.

    To compare, you know what President Bush did in the week immediately following his 2006 ass kicking in the House and Senate?  He told the American people who resoundingly voted to end the war to go fuck themselves and announced a surge.  Obama could take a few points on how to stay on the offensive from “The Decider”.

  3. Eric Saldanha November 19, 2010 at 2:56 pm #

    Another GOP zombie lie about Bush tax cuts spurring economic growth, jobs, etc. put to rest.

    And, by the way, it’s not “paying people to do nothing.” Unemployment insurance is just that…people who have paid into UI during their careers deserve that money now to live. Sorry if that doesn’t jibe with your “welfare queens driving Cadillacs” fantasy.

  4. Yoko Ono's iTunes Money November 19, 2010 at 4:19 pm #

    This is for the Chris who isn’t “Chris Smith”.  

    I’d like to tell you a story about someone close to me who recently lost his job.  He had 15 years of experience in his field and was summarily replaced with someone right out of school for less than half the salary.  

    Unemployment pays just over $400 per week, and he’s been out looking for work in a hard-hit, specialized field ever since.  $400 per week doesn’t pay for a whole lot, and it’s a small fraction of what he used to earn on a weekly basis.  He spends every day looking for work or investigating business opportunities, not sitting around watching Springer. 

    He’s also got a wife and kids.  They had all been on his health insurance plan when he lost his job, and his wife’s work has a plan that has no Buffalo-based providers; they’re all in Genesee and Monroe Counties.  So, the choice was to pay COBRA well over $1600 per month thus more than eating up every last cent of unemployment insurance, or else driving 100 miles round trip for an ear infection.  Luckily, the federal government passed a law to help the unemployed by subsidizing a large chunk of the COBRA outlay, so maintaining local health insurance was economically feasible.  For now. Supposedly, everything is going to change soon as the Republicans throw him and his family, as well as thousands of other families, off extended UI, thus making it even harder for them to make it in a tough economy.  I guess someone with a doctorate could just go work at Kohls and earn even less than what UI pays, or something.  The American Dream.  

    Meanwhile, as Chris points out, the Republicans are pushing to maintain existing tax cuts for millionaires under the pretense that NOW they’ll start creating jobs.  The rates have been at 35% for them (not counting their offshore accounts) for a decade, and now they may suffer having to pay a whopping 39% in income tax! The socialist horror!  For the past 2 years, the Republicans in Congress have told Obama to go fuck himself.  Now that Boehner is speaker of the house, it’s my sincere hope that the Democrats in Congress give the Republicans a taste of their own retarded medicine.  And I hope the Democrats do grow a pair and put the Republicans on the defensive, for once. 

    I don’t really care to explain to you that GM and Chrysler don’t just affect the people they employ, but their families, as well as the families and businesses that supply, feed, clothe, and otherwise provide goods and services to those employees and the car companies themselves.  I know that Republicans like you would have rather there been an historic economic catastrophe / calamity so that we could all go back to being gentleman farmers in Jefferson’s shadow or something, but the welfare queen bullshit you peddle in your comment, and the “let GM fail” idea you propose is just tough-talking silliness. 

    Oh, and as part of its bankruptcy, GM had to completely jettison what you call its “flawed business model” and completely re-make itself.  That’s why there’s no Saturn or Pontiac anymore, and it’s why GM has good products coming off of assembly lines governed by new union agreements.

  5. lefty November 19, 2010 at 5:06 pm #

    @Yoko

    Compelling story. The question I have about your friends situation is the production of the person who replaced him at half the salary. If someone can do the job just as well for half the salary, why should any company pay twice the wage? If the production is different, that is another story.

    The same idea that it’s wrong that a company can shrink its labor force while increasing the profit margin. Just where do you draw the line? Is it 200 jobs or $1b in profits?

    As for the tax cuts to the 2% and return to the economy before the Bush cuts, one thing that I hardly ever find mentioned is the Spending v. GDP under President Clinton. For his two terms, it averaged 16% of GDP. Under Obama it is averaging 24%. So if the left is looking for the infallible argument…simply go after the 39.6% rate but cut spending to 17% of GDP.

    It was the complementary nature of these two items, not just the taxes on those rich mother fuckers, that lead to the growth and payment on the debt.

  6. Eric Saldanha November 19, 2010 at 7:41 pm #

    @ lefty – are you seriously comparing the situation Clinton inherited from the first Bush failure to the utter shitshow Obama inherited from the second Bush failure?

    Spending must increase because the Bush administration and its Republican cronies in Congress left us with a collapsing economy and squandered the budget surplus Clinton left them. We should be beyond the point where we’re listening to any Republican lecture on responsible spending.

  7. Mike In WNY November 19, 2010 at 8:04 pm #

    The shitshow Obama inherited from Bush was in the making years ago and given a boost by the Clinton administration and Cuomo’s HUD disaster.

    The threat of letting the tax cuts expire is causing financial uncertainty that is the foundation of companies with current healthy bottom lines failing to positively impact the employment picture.

  8. Jim From Accounting November 19, 2010 at 8:24 pm #

    Mike, I wasn’t aware that a return to Clinton era rates in the personal income tax schedule prohibited corporations (that fall under an entirely different tax structure) from hiring.  So, the fact that Bill Gates will pay an additional 3% serves as a disincentive for Microsoft to hire anyone?  If you think it does, well, I guess you need to study up on how corporations hide income from taxation and increase revenues for shareholders through creative offshore accounting.  I know a thing or two, I’m a CPA.

    As for the income disparity in America, it’s an insult to banana republics to call America a banana republic.

    http://www.nytimes.com/2010/11/18/opinion/18kristof.html?_r=1&src=me&ref=homepage

  9. lefty November 19, 2010 at 8:31 pm #

    @ Eric

    Yes. It is all of those fucking Republicans. None of the challenges in the economy were due to the dot com bubble, 9/11 and the housing collapse. Even if it did, everything is the fault of Republicans. Nothing to do with the reality that the rest of the world caught up to the US in terms of production of labor. It was all those fucking right wing rich people.

    BOO! Did a CEO scare you? Fucking simpleton. Nothing is ever the fault of Democrats. They are for the people!

    Back to my point…what worked under Clinton was a combination of getting those taxes AND having low spending. But hey, why look at the big picture when you can just blame a Republican.

    Maybe we are getting the idea of war all wrong? We should fucking bomb China and India back to the stone ages, similar to what Europe looked like after WWII. Then we can have another 30 years hearing about how fucking great the American worker is, while ignoring they have no fucking competition, until they build up their economies again. Yay unions!

  10. Mike In WNY November 19, 2010 at 9:15 pm #

    Jim, I didn’t say the return to higher personal tax rates prohibit corporations from hiring. I said that the government has created an atmosphere of financial uncertainty related to uncertain changes in the tax structure. Health care costs, due to Obamacare, have also fed in to this uncertainty. Already, waivers have been granted that exclude over 1 million people from being affected by Obamacare regulations.

    The simple truth is that a regulatory structure exists that favors large corporations by making it financially improbable for potential competitors to compete in the screwed up market we have have.

  11. Brian Castner November 20, 2010 at 8:16 pm #

    Back to the original point, the GM pay back is fascinating for a number of reasons. We had a number of “bailouts” in a short period of time, and they’ve all become intertwined in people’s minds.

    The original brokerage firm private/gov’t bailouts were a terrible idea because they broke the fundamental rule of capitalism: that private enterprise must be allowed to fail. Contrast this with the TARP program, that bought into a number of companies, didn’t pick winners, and bet on the entire industry. Contrast again with bailout #3 – picking a winner again in GM. At least the gov’t invested in the company, and will see most of its money back. The cost of the GM bailout in the end was worth the result (propping up the entire auto industry), and Obama deserves credit for its success. But it was no sure thing, and we could easily have not only lost all our money, but GM as well.

    In the future, the TARP is the model to use if (and when) a crisis returns. Investing in an entire industry, and letting the chips fall where they may, helped recapitalize the banks but also didn’t risk much for the government. We were never going to lose an entire industry, even if a few banks crumbled. So buy into the whole sector, and if banks fail, then the buyers of those banks take on the TARP payback responsibility – M&T is doing this with Wilmington Trust as we speak.

    • Christopher Smith November 20, 2010 at 8:53 pm #

      I’d agree that TARP is the best theoretical model (albeit with additional transparency and accountability) and we should hope it never has to be implemented again.

      The GM bailout is fascinating, isn’t it?

      Without the intercession of the federal government, an American institution would have fallen into liquidation, affecting hundreds of thousands of jobs at GM and suppliers, partners, vendors, service companies and regions where GM was still a major vendor. The economy was still staggering from the bank meltdown and a GM liquidation could have landed a huge hit to any chance of economic recovery, specifically to the middle class in the rust belt states. While it ended up being a policy which essentially picked a winner, the original idea was to give money to all American car companies (Ford turned it down and Chrysler went into its own tailspin). It was paired with the cash for clunkers law which was to stimulate demand to get short term operating capital into the hands of the companies as they began retooling and reorganizing. If that law had specifically targeted American cars and not included foreign cars (as the MI delgation originally wanted), it would have even been more effective in that goal.

      However, what was lacking from all of that was encouragement for GM to open itself to more innovation through new partner companies. The feds could have offered additional incentives for them to bring technology in house from hundreds of innovative startups. This is an article I go back to often when the subject of the auto bailouts comes up, because the innovation in the auto industry has never been stronger. Offering incentives to bring this stuff into the mainstream consumer lines would have been ideal. However, that’s nuanced and Congress sometimes struggles with nuance…

  12. Brian Castner November 20, 2010 at 9:35 pm #

    My problem with the GM bailout is theoretical, not practical. Obviously, practically, every thinking person should be able to say a billion dollars to save many hundreds of thousands of jobs is a good thing, especially in an industry key to national security. But the theoretical reasons to dislike it are innumerable! It didn’t force enough union concessions, didn’t encourage enough change in GM, it picked a winner in GM (though, to be fair, there are 3 auto companies and hundreds of banks), and cash for clunkers merely moved up demand (and didn’t increase it). Worst of all, it cemented the unsustainable status quo – what if the government had invested $20B in renewable or electric technology at GM? What if it made GM its pet Manhattan Project? Obama said the Great Recession would be a great reset of the economy and we’d have to rethink how we do everything. This was his chance to put his money where mouth was. Total failure of imagination – all the GM bailout did was figure out a way to get us back in our SUVs as quickly as possible. If the government was going to take this unprecendented step, it should have gotten a better outcome than 2001 GM.

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