SOPHIE'S CHOICE

Perhaps the best recap of what happened in the 2008 presidential election is the satirical headline, "Black Man Given Nation's Worst Job." Does anyone envy that guy at the moment? Would you do the job at any price even given all the neat perks of being President?

The public, with its drosophilia-like memory capacity, is going to forget that Obama inherited all of these problems and angrily demand to know why he hasn't solved all of them in three or four months. The problem of the problems, of course, is that many of them are no-win propositions. Take, for example, the collapse of the auto industry, which is about to take a poor economic situation and make it much, much worse than anyone is willing to admit.

GM is at the end times; two weeks ago employees leaked a memo revealing that the company has taken away personal wastebaskets and laid off janitorial staff to save money. They are openly conceding that they have "substantial doubts" about their ability to survive without continued (and presumably increased) intervention. The new car market is in free fall and, more importantly from GM's perspective, the market for shitty new cars is even worse.

Obama is faced with a simple fact in light of GM's new request for $30 billion in "loans" less than 90 days after getting $13.7 billion: their survival plan is going to be to ask for $15-20 billion every three months for the forseeable future. His options are two: pay the ransom or let them go bankrupt…at which point they'll have to be provided with tens of billions in Debtor-in-Possession financing by Uncle Sam. What, you think any of the banks are in the position to lend it? Or that they would even if they could? Nope. Either way, this costs us an arm and a leg.

The company and its employees are behaving irrationally only in abstract; in the context of a company that is obviously going to fail, their behavior makes more sense. Fox and its allies have heavily hyped the refusal of unions to make even greater concessions (disregarding those that have been made) but the union likely realizes that the workers only have a few paychecks left no matter what they choose, so why cut them even further? Deep concessions will help the company sputter along for, what, two or three more weeks? And the company has recently announced a 45% increase in production irrespective of the fact that nothing is selling, a decision more reminiscent of a crack addict going on one last spectacular binge than any kind of reasoned corporate strategy.

There is no good option here. The President has little choice but to sit back and supervise the most expensive trainwreck in economic history. Given that bankruptcy and bailout both cost more than anyone can imagine, I guess that Obama's best bet is to figure out which one preserves more jobs and reduces the number of people who will be dumped onto the dole. The company can't raise additional capital – efforts to sell Hummer and Saab have gone absolutely nowhere, the former because the military is holding trials to replace the Humvee and, if another Hummer vehicle isn't selected to replace it, that unit isn't worth a warm bag of spit. The Swedish government will probably take over Saab but they sure as hell aren't going to pay for the privilege. This is it. The company is such a structural mess that they could fire everyone tomorrow, close every division other than Chevy, and still lose billions of dollars per month.

Pour a 40 for GM, and in the meantime try envisioning our current economic situation after another million or two million people with well-paid jobs become unemployed and stop making payments on their debts. Good luck, BO.

8 thoughts on “SOPHIE'S CHOICE”

  • I've seen an uptick in the last few days of "hey, maybe the economy is turning the corner" articles looking for that silver lining (presumably triggered by the markets tracking upward for a week). But the future is full of undropped shoes, from the continuing insolvency of all our major banks (despite the multi-trillions that the Fed and Treasury have flushed down that rathole), to the impending disappearance of two of the Big Three, to the enormous overstock in homes and malls and office space, to the need for a second stimulus package, to predicted failures in credit card lendings, pension crises, states drowning in red ink as property tax revenues plummet, and so on and so on. It's not the beginning of the end of the economic crisis, it might me the end of the beginning. I'll stick with my prediction – made nine months ago – that we'll be lucky to avoid a full-blown depression in 2009 and the economy won't create a new job until sometime in late 2010.

  • I wholly concur with Matthew, so much for my morning laugh with coffee…

    Not to be too retro, but reality bites!

  • I think the best thing Obama can do is make it damn clear WHY the US auto makers failed and WHO is really responsible: Ronald Reagan and his policies and idiots in management who couldn't manage their way out of a wet paper bag. Obama really needs to make it clear that it is not the fault of unions, and he needs to explain what unions actually do and how they have benefited the middle class and America. Ultimately, Obama needs to let America know that he inherited a mess and he is trying to fix this enormous problem. He needs to pound, pound, pound these points home.

    This would place the blame where it belongs (not with Obama and Democrats) and reveal the truth to the demise of the US auto makers, campaign for liberal policies, make the Republicans look even worse, and make the Democratic party the party that is trying to fix America (not tear it down like the Republicans).

  • Seriously? I, for one, would love to hear Obama try to explain all the good that unions have done for the middle class, or any other class for that matter. That would be some wonderful fiction. And further, I think its just great that no matter how wrong he is and he will be, you'll all be just dandy as long as he keeps blaming everything on Obama and clinging to "I inherited these problems" as an excuse.

    Weee!

  • John: Unions have given workers a living wage and brought a lot of humanity to dangerous, tough jobs. Unions helped end despicable child labor practices, improved work safety, raised the standard of living for society, created a reasonable work week, and provided retirees and their families with a pension.

    I don't know if you have ever been in Michigan, Indiana, Ohio, or anywhere else in the rust belt in the 40's-90's, or if you have ever even talked to anybody in a union (I doubt you have). There were good union jobs in the auto industry, steel industry, mining, etc. that MADE these areas and gave workers a great standard of living.

    My question to you would be this: How in the fuck has the Republican party helped the middle class or any other class in America?!? What are you smoking, injecting, or snorting? Reagan and the Republican party's policies have burnt down America, benefited maybe 1% of the population, and all but erased the middle class with bullshit "trickle down" and "deregulation" theories. Are you blind, do you even see the current state of the economy?

    The Republican party actively tries to fuck the middle class. Unions have actively done everything they can to help the middle class, American prosperity, and America's standard of living. Hmm, let's see: I'm going to give the nod to Unions here for benefiting America.

  • What drives me nuts is how the pundits attack the unions unwillingness to make concessions based upon the cost of labor for the Big 3. The largest part of their cost is legacy health care. If this isn't an argument for health care reform, then what is?

    If we can get serious about health care reform and universal coverage, this argument disappears.

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