Thread: Obama is kicking ass!

Originally Posted by Alundil

And those are indicative of a gross failure of the tax system as we know it in the states. But for people reading along, that doesn't mean they paid no taxes or very little $$ amounts in taxes, it just means that it wasn't based on "income (salary)" taxes. There is a big difference between no taxes, and no income taxes. Additionally, the last line there refers to federal income tax liability and compares high earners (not necessarily based on income/payroll) and poverty level incomes. Is there a detailed breakdown of how the author(s) arrives at that conclusion? It is federal income tax "rate" liability? Or dollar on dollar liability? There is sizable difference in those data points.

They devil, as they say, is in the details.

I was using the article for another purpose, and just happened to notice that as I was reading it. The article states that many of those people probably make their money off capital gains and writing off their losses from the year before assured they paid no taxes. Plus, capital gains aren't considered income for tax purposes.

Originally Posted by Alundil

In many cases, the banks did not lend the government money out to private entities that needed it, but rather used it to pay down their own debt and shore up their own finances. Thus not using the government loaned liquidity for the purposes to which it was intended.

Yup, and that was a huge problem.

Originally Posted by Alundil

I disagree with the notion that ANY company is too large to fail. Failure is a penalty of.....failing (in your business model, in your operations, in your planning). If the failure was wholly due to outside (government caused influences) forces, then there is some onus on the government to make that corp/entity whole but that gets settled in court. If, however, the failure is owed to poor planning or poor operation of the company itself then I think that the company ought to "pay the piper" for that. Everyone will be wiser the next time around. As it stands, there are fewer compelling reasons to manage risk now that there were before (for those "too big to fail companies) as they know Uncle Sam will pull their ass out of the fire if necessary and John Q. Public is left holding the bag.

In a vacuum, you might be right. But we don't live in a vacuum. There are extenuating circumstances that have to be taken into account. Two questions: One, would it have been better to let the auto companies fail furing a huge recession, thereby starting a chain reaction of suppliers going out of business and causing over one million people to lose their jobs. Again, that's in the middle of a recession. Two, would we be better off today, right now, economically-speaking, if we had let the auto companies fail? Are you saying the lose of a million plus jobs would not have had a significant impact on the economy?

Originally Posted by Alundil

I disagree with the notion that ANY company is too large to fail. Failure is a penalty of.....failing (in your business model, in your operations, in your planning). If the failure was wholly due to outside (government caused influences) forces, then there is some onus on the government to make that corp/entity whole but that gets settled in court. If, however, the failure is owed to poor planning or poor operation of the company itself then I think that the company ought to "pay the piper" for that. Everyone will be wiser the next time around. As it stands, there are fewer compelling reasons to manage risk now that there were before (for those "too big to fail companies) as they know Uncle Sam will pull their ass out of the fire if necessary and John Q. Public is left holding the bag.

In this particular case I think it was more about timing than anything else. Were we in a period of recovery or a somewhat stable economic period, I think it would've been perfectly fine to let GM fail. With our having been in the middle of a giant downslope leading into a big recession though, it comes down more to mitigating damage than anything else. It's entirely feasible that should GM have failed when it was about to that the recession could have been much worse. Instead GM was able to retool and save thousands of jobs, just on their own production lines, not counting the jobs of their suppliers who would've been hurt by their folding, etc. During periods of economic downturn like we were experiencing, a large corporation like GM going under could have a negative cascading effect upon the economy, setting us even further back than we were.

Originally Posted by Fovezer

In a vacuum, you might be right. But we don't live in a vacuum. There are extenuating circumstances that have to be taken into account. Two questions: One, would it have been better to let the auto companies fail furing a huge recession, thereby starting a chain reaction of suppliers going out of business and causing over one million people to lose their jobs. Again, that's in the middle of a recession. Two, would we be better off today, right now, economically-speaking, if we had let the auto companies fail? Are you saying the lose of a million plus jobs would not have had a significant impact on the economy?

Originally Posted by Morningfrost

In this particular case I think it was more about timing than anything else. Were we in a period of recovery or a somewhat stable economic period, I think it would've been perfectly fine to let GM fail. With our having been in the middle of a giant downslope leading into a big recession though, it comes down more to mitigating damage than anything else. It's entirely feasible that should GM have failed when it was about to that the recession could have been much worse. Instead GM was able to retool and save thousands of jobs, just on their own production lines, not counting the jobs of their suppliers who would've been hurt by their folding, etc. During periods of economic downturn like we were experiencing, a large corporation like GM going under could have a negative cascading effect upon the economy, setting us even further back than we were.

The Bold and Red items are where I think that the estimates were more doom and gloom that accurate and represented worst case scenarios in order to justify the bailouts, as opposed to more realistic scenarios. I like to think that this is along the same lines (just in reverse) of the "shovel ready" quip used to justify the stimulus. It sounded great and really motivated a lot of support for the stimulus. But in the end it was "all sound and no fury" as there were no (or as near to no/zero) shovel ready jobs to be had.

Additionally and in regards to the broader point of "how well we're doing" over all on the jobs front.
Employment Situation Summary

In January, the number of job losers and persons who completed temporary jobs fell to 7.3 million. The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 5.5 million and accounted for 42.9 percent of the unemployed. (See tables A-11 and A-12.)

After accounting for the annual adjustments to the population controls, the employment-population ratio (58.5 percent) rose in January, while the civilian labor force participation rate held at 63.7 percent. (See table A-1. For additional information about the effects of the population adjustments, see table C.)

The number of persons employed part time for economic reasons, at 8.2 million, changed little in January. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. (See table A-8.)

In January, 2.8 million persons were marginally attached to the labor force, essentially unchanged from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)

Among the marginally attached, there were 1.1 million discouraged workers in January, little different from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.7 million persons marginally attached to the labor force in January had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities. (See table A-16.)

Based on some of the figures listed by the BLS

5.5 million is 42.9% of the unemployed so that means that 5,500,000 * 42.9% = 7,859,500 unemployed.
2.8 million are not counted in the above figure.
1.1 million are "discouraged" and are also not counted

7,859,500 + 2,800,000 + 1,100,000 = 11,759,500 unemployed at best. That's huge and nasty.
The U-6 figures are above 15%. Ugly stuff. Un-reported stuff.

http://portalseven.com/employment/unemployment_rate_u6.jsp

Originally Posted by Alundil

The Bold and Red items are where I think that the estimates were more doom and gloom that accurate and represented worst case scenarios in order to justify the bailouts, as opposed to more realistic scenarios. I like to think that this is along the same lines (just in reverse) of the "shovel ready" quip used to justify the stimulus. It sounded great and really motivated a lot of support for the stimulus. But in the end it was "all sound and no fury" as there were no (or as near to no/zero) shovel ready jobs to be had.

Additionally and in regards to the broader point of "how well we're doing" over all on the jobs front.
Employment Situation Summary


Based on some of the figures listed by the BLS

5.5 million is 42.9% of the unemployed so that means that 5,500,000 * 42.9% = 7,859,500 unemployed.
2.8 million are not counted in the above figure.
1.1 million are "discouraged" and are also not counted

7,859,500 + 2,800,000 + 1,100,000 = 11,759,500 unemployed at best. That's huge and nasty.
The U-6 figures are above 15%. Ugly stuff. Un-reported stuff.

http://portalseven.com/employment/unemployment_rate_u6.jsp

According to the debt clock the actual number of unemployed is a tad over 23 million but the offical number is a bit under 13 million.

I didn't include the part-time employed. Though I realize that they are there. And there are a lot of them.

Thats not counting the part time employed. Its an adjusted number for the red tape keeping the real number down.

stop lying

Originally Posted by Alundil

The Bold and Red items are where I think that the estimates were more doom and gloom that accurate and represented worst case scenarios in order to justify the bailouts, as opposed to more realistic scenarios. I like to think that this is along the same lines (just in reverse) of the "shovel ready" quip used to justify the stimulus. It sounded great and really motivated a lot of support for the stimulus. But in the end it was "all sound and no fury" as there were no (or as near to no/zero) shovel ready jobs to be had.

"The “good bankruptcy” outcome was projected to have avoided a loss of 1.28 million jobs in 2009, and 267,300 in 2010."
http://www.cargroup.org/pdfs/bankruptcy.pdf

So, even with the bailout, an estimated 242,000 jobs were lost. Had we not bailed out the auto industry, and they went through a messy bankruptcy, we would have lost an estimated 1.8 million jobs. In the middle of a recession. Unemployment peaked in the end of 2009 at 10.2%, or 15,700,000 unemployed. (Source.) Add in another 1.5 million that would have been lost. That would have pushed it up to 17,200,000, or 11.2%. The unemployment rate peak in October 2009 at 10.2%, and it is at 8.3% this month. Without the bailout, it could still be at 9.3%. It hasn't been that high since December 2010. Oh, and that possible 11.2% unemployment? That would have been the highest since the Great Depression in the early 1940's.

So this was NOT an unrealistic scenario. It was very real, and losing those jobs and industry would have been devastating and probably had an exponentially damaging effect on the economy.

The biggest problem with the stimulus was they cut out a lot of the most stimulative measures and threw in pointless tax cuts. Even then, it still was a modest success according to the CBO. The stimulus increase the third quarter of 2011 by up to as many as 3.3 million full-time jobs. Did it add that many? Doubt it, but there is no denying that it had a positive effect.
CBO: Stimulus added up to 3.3M jobs - Josh Boak - POLITICO.com

Originally Posted by Fovezer

"The “good bankruptcy” outcome was projected to have avoided a loss of 1.28 million jobs in 2009, and 267,300 in 2010."
http://www.cargroup.org/pdfs/bankruptcy.pdf

So, even with the bailout, an estimated 242,000 jobs were lost. Had we not bailed out the auto industry, and they went through a messy bankruptcy, we would have lost an estimated 1.8 million jobs. In the middle of a recession. Unemployment peaked in the end of 2009 at 10.2%, or 15,700,000 unemployed. (Source.) Add in another 1.5 million that would have been lost. That would have pushed it up to 17,200,000, or 11.2%. The unemployment rate peak in October 2009 at 10.2%, and it is at 8.3% this month. Without the bailout, it could still be at 9.3%. It hasn't been that high since December 2010. Oh, and that possible 11.2% unemployment? That would have been the highest since the Great Depression in the early 1940's.

So this was NOT an unrealistic scenario. It was very real, and losing those jobs and industry would have been devastating and probably had an exponentially damaging effect on the economy.

The biggest problem with the stimulus was they cut out a lot of the most stimulative measures and threw in pointless tax cuts. Even then, it still was a modest success according to the CBO. The stimulus increase the third quarter of 2011 by up to as many as 3.3 million full-time jobs. Did it add that many? Doubt it, but there is no denying that it had a positive effect.
CBO: Stimulus added up to 3.3M jobs - Josh Boak - POLITICO.com

I am thinking that there's some serious deja vu going on here, however, I think that this will be a agree/disagree line of reasoning in this thread.
Nevertheless, the true unemployment rate is huge and unreported. U-6 rate, as I mentioned, is above 15%. It's been dipping and rising and dipping and rising since 2008-ish but in large variances since late 2008/early 2009.

I also don't think that the auto bailout was the panacea that a lot of people believe it to be. There were, and still are, some fundamental "bad" practices in the automotive industry. Specifically the Big 3.
Automotive industry crisis of 2008

While the "Big Three" U.S. market share declined from 70% in 1998 to 53% in 2008, global volume increased particularly in Asia and Europe.^[61] The U.S. auto industry was profitable in every year since 1955, except those years following U.S. recessions and involvement in wars. U.S. auto industry profits suffered from 1971-73 during the Vietnam War, during the recession in the late 1970s which impacted auto industry profits from 1981–83, during and after the Gulf War when industry profits declined from 1991–93, and during the Iraq War from 2001–03 and 2006-09. During these periods the companies incurred much legacy debt.^[62]

They were having issues in the late 90's that went unaddressed. Issues that were very noticeable on a macro level. Kind of hard to completely miss a drastic drop in market share and then take steps to rectify that. Yet that is exactly what happened. They were bleeding market share. For years. Instead of making fundamental changes in their business model, they chose instead to continue the poor practices that put them in that place, and used their own liquidity to do so.

Falling sales resulted in the Big Three's plants operating below capacity. GM's plants were operating at 85% in November 2005, well below the plants of its Asian competitors, and was only maintained by relying on cash incentives and subsidized leases.^[80] Rebates, employee pricing, and 0% financing boosted sales but drained the automaker's cash reserves. The subprime mortgage crisis and high oil prices of 2008 caused the popularity of once best-selling trucks and SUVs to plummet. Automakers were forced to continue offering heavy incentives to help clear excess inventory.^[81] Due to the declining residual value of their vehicles, Chrysler and GM stopped offering leases on a most of their vehicles in 2008.^[82]

Any other industry/companies that committed this "epic" a fail deserved to pay the penalty of that failure. Instead we, the taxpayers, insulated them from the repercussions of their own folly.

Altogether the parts makers employ 416,000 people in the U.S. and Canada. General Motors alone is estimated to have lost $51 billion in the three years before the 2008 financial crisis began.

416,000 jobs lost is one bad month of jobs data. For a while there, the US was losing at least that many month after month. It is virtually impossible that the all of those jobs would've been lost had GM and Chrysler failed. Many of those parts makers make parts for FoMoCo and other foreign car manufacturing companies. So, would some of those jobs been lost? Of course. Would it have been the apocalypse that we were lead to believe? No. Not by a long shot.

Here are some slightly different numbers:
Effects of the 2008
But the gist is the same. There are a lot of people employed in the auto and ancillary industries. However, the collapse of two companies would not have spelled doom for all of those employees. It just isn't in the cards.

At the time, the Big Three employees, parts-supplier employees and car-dealer employees totaled approximately 1.6 million.^[19] All auto-related industries and after-market service businesses employed approximately 3.1 million people in the United States. The U.S. Bureau of Labor Statistics breaks down the workers into the following segments, as of September 2008: Parts manufacturing-504,000; Repair operations-864,000; Wholesale operations-340,000; Dealer operations-1.2 million; and Manufacturing-114,000. GM directly employs 123,000 in all of North America.^[20] An estimated two million people relied on the industry for health care and 775,000 retirees collect auto-industry pensions.^[19]

Effects of the 2008

Claims that failure would be harmful to economy

The auto industry is a key component of the U.S. economy. Economists used 2007-2008 data to build estimates of what a shutdown would cost in summer 2008, in order to set benchmarks to help policy makers understand the impact of bankruptcies. Such estimates were widely discussed among policy makers in late 2008.^[43] Closing the Big Three would mean loss of 240,000 very highly-paid jobs at the Big Three,^[44] a loss of 980,000 highly-paid jobs at the suppliers and local dealers, plus the loss of 1.7 million additional jobs throughout the economy—a total loss of 3 million jobs.
Estimates were that a Big Three shutdown would cause a decline in personal income of $151 billion the first year, and $398 billion over three years. The federal, state and local governments would lose tax revenue, and instead spend on welfare programs a total of $156 billion over three years.^[45]
Economist David Wyss of S&P has posited that if GM and Chrysler disappear, there could be an increase of about 1 million imported cars every year, which would remove about $25 billion from the U.S. economy. That would reduce GDP by 0.2 percentage points annually—excluding the impact of lost jobs (higher unemployment) and wages.^[46]
Claims that failure would not be harmful to economy

In a November 19, 2008 CNBC article, Jordan Kimmel, a fund manager at Magnet Investing in Randolph, New Jersey, said that if the Big Three automakers were liquidated or completely shut down, foreign companies such as Honda and Toyota would open up new manufacturing plants in the U.S., and there would be no long term loss in employment or damage to the economy.^[47]
Michael Schuman of Time Magazine stated that although a giant corporation failing would be ugly, it is better than artificially keeping it alive without a prospect of improvement. He compared the possible collapse of the U.S. domestic automakers to the 1999 dismantling of the Daewoo Group in South Korea. Daewoo's proportionate economic impact on Korea was larger than that of the Big Three to the United States. The persistence of the belief that Daewoo and other Korean conglomerates were too big to fail led many bankers and investors to continually waste money on bailouts, despite their poor business plans and unprofitable projects, as Daewoo was unable to repay these loans. Once the too-big-to-fail perception was dispelled, with large conglomerates no longer considered the safest investments, bankers and investors began financing new opportunities in areas which had been starved of capital (small firms, entrepreneurs and consumers), while Korea's GDP actually rose after Daewoo's unwinding. Schuman also noted a similar analogy with Japan during its Lost Decade of the 1990s, where banks kept injecting new funds into unprofitable "zombie firms" to keep them afloat, arguing that they were too big to fail. However, most of these companies were too debt-ridden to do much more than survive on further bailouts, which led to an economist describing Japan as a "loser's paradise." Schuman states that Japan's economy did not begin to recover until this practice had ended. ^[48]

Boy - that Daewoo stuff sounds eerily familiar. As do the Japanese "zombie firms". And since they've done away with both Daewoo and the zombie firms - those countries (and their automotive pieces) are back to kicking the everloving dog shit out of the Big 3 again. I'll go with Option #2 and that the bailout was, and is, simply prolonging the inevitable for some of the Big 3. And it's really shocking how supportive you are of life support for a dying entity. If we renamed one or two of the Big 3 Shiavo would that help you see the light?