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Location: St. Louis, Missouri, United States

Friday, August 17, 2012

And Down will come GM, Cradle and all

Timothy Birdnow General Motors will be bankrupt if current trends continue. GM's market share continues a steady decline, and car sales are way down - thanks to the mandates imposed by government. What is not stressed enough here is that it will fail after the election. This is important, because it will either simply add to the general decline under Obama, and the Administration will not really lose anything, or it will fail under a Romney presidency. That is critical, because the media will do their best - and likely succeed - to convince the public that Romney wrecked a recovering company. Make no mistake; this will end up on Romney's plate. The public doesn't follow the business news that carefully, and the media reported GM as recovering thanks to the assistance of government. When it files for bankruptcy the Democrats will howl, and the media will ask "what happened to the GM recovery?" and will demand an accounting for the money squandered by the Obama Administration, only now it will be the money "Romney squandered". Romney and Ryan are in a terrible position, as the chickens will come home to roost during their tenure of office, and they will be the ones to take the blame. The economy is like an oil tanker; if you want to turn into the San Francisco Bay you start turning near Bellingham, Washington. Ronald Reagan had a terrible time of it for the first couple of years of his Presidency as Carter had obliterated the economy, and Reagan did not have the problems that Romney will have. Reagan had a terrible economic malaise, but it was at least economic policy that could be corrected. Romney is coming in during a depression that has lasted since 2008 (and if accounting tricks are not used it certainly meets the definition of a depression with real unemployment currently in the mid teens (the U6 is at 15.1%, which calculates the unemployed and not just those applying for or currently receiving unemployment) which places it below the Great Depression peak but still at depression levels. Reagan had stagflation and high interest rates, and Romney will not, but Reagan did not have the catastrophic debt that Romney will have to deal with, and economic growth would have to be unbelievable to get it under control. There will have to be major cuts and high growth rates, and the Democrats will fight budget cuts at every turn and demand tax hikes - something guaranteed to kill economic growth. Romney simply does not have any wiggle room. And the media is going to lay the blame for every problem squarely on his doorstep. A GM collapse will be hung around Romney and Ryan's necks. We need to start warning the public now. The key is to lay the blame where it belongs now, not wait for the fall. The public must know that GM is in trouble, and that thanks to the government's intervention in it's internal affairs. GM has done nothing that any government run industry in any country has done in the past, after all; government run industries cannot compete on a level playing field because they are not subject to market discipline but must kowtow to the hand that feeds, which is government. When it becomes about subsidies rather than profits it quickly degenerates into unresponsiveness and poor workmanship. Take Amtrac; I once rode an Amtrac train on an hour and a half trip to a small town not far from St. Louis. The trip there took over three hours. The trip home? a wait of over four hours past arrival time, a two plus hour train ride with snotty attendants in a car that reeked of disinfectant. It was an unpleasant experience made so by the incompetence and lack of concern for the customers on the part of the whole rail line. It was the DMV of transportation. That is the end product of governmental control and subsidy. And so GM, forced to sink gobs of money and effort into the ridiculous Chevy Volt and make go-carts instead of vehicles sought by consumers, is reaping the rewards of government service. It was inevitable, and the public must be made to understand this now, not later. If GM folds without the public being properly prepared Mitt Romney will take the blame. Obama could not care less, especially a lame-duck Obama. And the media will STILL find a way to blame the GOP.

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