Informed Speculation

I’ve been quite content with most of Obama’s early decisions in the transition period.  I criticized his choice of Hillary, admittedly not on her own merits, but because of her association with her increasingly buffoonish husband.  The first real danger sign I saw was Obama’s choice of Bill Richardson for Secretary of Commerce (confirmed today).  Richardson is a vocal supporter of ‘fair trade’ (i.e., he wants to make sure that any trade agreements are bundled with inefficient labor agreements like the sort that have made Detroit’s Big 3 so productive and healthy).

Further worrisome economic signs come from suggestions that Xavier Becerra is up for the slot of U.S. Trade Representative.  This would be an unmitigated disaster, as you can clearly see from the snippet below:

California Democratic Rep. Xavier Becerra, a strong proponent of labor protections in free trade pacts, is in discussions with the Obama transition team about taking the job of U.S. trade representative.

Two Democratic officials confirmed Wednesday that Becerra was a contender for the job. The officials spoke on condition of anonymity because no official announcement has been made.

…The U.S. trade representative is responsible for negotiating trade deals and overseeing trade policy. The job would be important in the administration of Barack Obama, who’s called for renegotiating the 1994 North American Free Trade Agreement with Canada and Mexico.

Becerra was elected to the House in 1992 from Los Angeles and sits on the Ways & Means panel that oversees trade issues. He voted for NAFTA but later said he regretted the vote. He opposed giving the White House fast-track negotiating authority in 2002 and led opposition to the 2005 Central American Free Trade Agreement, citing what he called “sub-par labor standards.”

Yes, by all means, let’s dig up that crap about renegotiating NAFTA during the worst economic crisis since the Great Depression.  If anyone has any illusions about what this would do to U.S. exporters, ask yourself how you would feel if you signed a contract on the dotted line and the other party unilaterally changed the rules.  Only an idiot could support such a move in this climate.  I had thought Obama was NOT an idiot, and that he only said these things in the heat of the campaign.

Am I being too hard on Obama (he did, after all, wisely decide against pushing a windfall profits tax on big oil, to the chagrin of the Far Left)?  Well, perhaps it’s because I am further disgusted by another affirmation he has made of another stupid campaign position, support for the end of the secret ballot in voting for unionization (of course, this is the guy who gutted campaign finance reform – his first real broken promise, not the windfall profits backtrack- and called it a victory for democracy, so I shouldn’t be surprised he’s about to do the same at the bidding of big labor):

An aide to Barack Obama reaffirmed the President-elect’s support for the labor movement’s chief legislative priority in a one-word statement issued to the Huffington Post on late Tuesday.

Asked if Obama’s support for the Employee Free Choice Act remained as strong as his public proclamations suggested on the campaign trail, transition spokesman Dan Pfeiffer responded, succinctly, “Yes.”

If Obama really wants to do big labor a favor, and the rest of the country as well, he can stop the impending catastrophe of an auto-industry meltdown and the subsequent loss of tens of thousands, if not hundreds of thousands, of jobs, by pressuring gasbags like Harry Reid to quit playing politics with the Big 3 bailout:

Senate Majority Leader Harry Reid says the Democrats’ plan to tap the Wall Street rescue fund to save U.S. automakers doesn’t have the votes to pass.

One day after Detroit’s Big Three sent survival plans to Capitol Hill in an urgent plea for $34 billion in government aid, Reid said there’s still not enough support in Congress for using some of the $700 billion bailout to help the teetering carmakers.

He told The Associated Press in an interview, “I just don’t think we have the votes to do that now.”

Of course, the votes are not there – because the package Reid is proposing is sheer nonsense.  The $700 billion in the TARP program was specifically earmarked for the financial industry in response to the credit market freeze.  That money is spoken for, and it was never intended for a bailout of industrial companies.  What the Bush administration, and Michigan lawmakers of both parties, are pushing for, on the other hand, makes perfect sense: use the $25 billion already promised the auto industry for efficiency upgrades, and let them use the money to survive.  There will be NO efficiency upgrades made by a company that is no longer in business, of that you can be sure.  Those funds were earmarked in a different economic climate altogether – right now, GM and Chrysler say they need a combined $11 billion just to make it through the month of December.

If you think I am being inconsistent here, by bashing big labor on the one hand, then praising them on the other, you’re not reading me closely enough.  Big labor is a big problem for the Big 3 (catchy, eh?) – perhaps the biggest problem.  But even big labor realizes that the auto industry is facing a situation that is near terminal, and they’ve offered significant concessions to help GM and Chrysler just today, if the government will help the auto industry through a very tough patch.

Now, I’m as conservative as the next guy on economic matters, but there is clearly something wrong when we will loan AIG over $100 billion (did they run their business any better than GM? They would be bankrupt without a bailout), when Citibank gets tens of billions over the course of a weekend without so much as a consultation of Congress while the Big 3 CEOs are paraded around like dunces, when we support the financial industry with what is now a combined bailout cost well into the TRILLIONS while begrudging one of the last bastions of U.S. manufacturing what amounts to less than half of what we so cavalierly gave to AIG in its FIRST bailout.

It smells – it smells of a Treasury Secretary too close to his Wall Street buddies, and congressional leaders who care more about fatcats than the working man.  I hate populism with a passion – but that doesn’t mean I like cronyism.  And let’s be crystal clear about one thing – the fall of General Motors will be an economic cataclysm.  This malarkey about a prepackaged bankruptcy for them is just so much hogwash.  They will not be able to sell cars while in bankruptcy, they probably can’t obtain the bridge financing they would need to operate, and not only will they quickly be forced to liquidate at firesale prices, dealerships and suppliers nationwide will go down in flames, too.

I realize that a poll today said that 61% of Americans oppose the bailout – well, fine.  61% of Americans cannot explain the difference between a bond and a stock – they don’t know the first damn thing about finance or economics.  Truth be told, a good chunk of them can’t walk and chew gum at the same time.  They just know they’re tired of giving money away…but who asked them how they felt about AIG?  About Citigroup?  About Bear Sterns? About Morgan Stanley?  Wall Street gets it all, and Detroit gets nothing?  Have you SEEN what’s happened to Detroit already?  Can you imagine what will happen to it if GM goes down?

This is not a moment for Harry Reid’s political shenannigans.  He knows the funds for the auto bailout are desperately needed, and he knows they cannot come from TARP.  Wake up, Harry – this is not about your ego – this is about preventing a severe recession from becoming a depression…

UPDATE 11:40 p.m.: I have strongly registered once again my belief above that a prepackaged bankruptcy will not work for a General Motors…however, so desperate are the Big 3 for some government help that they’re apparently at least giving the idea lip service, if only as a last resort…

UPDATE 11:43 p.m.: Already we are seeing the consequences of Reid’s reckless political gamesmanship.  Market sentiment, held up in no small part lately by a feeling that an auto bailout was on the way, has turned sharply negative on renewed fears of a GM and Chrysler bankruptcy:

Asian stocks fell, erasing earlier gains, and U.S. futures dropped on speculation General Motors Corp. and Chrysler LLC will enter bankruptcy, deepening a global economic recession and reducing demand for auto parts and metals.

Bridgestone Corp., the world’s largest tiremaker by sales, tumbled 10 percent. ..“This reflects the harsh and difficult conditions that the global automotive industry will be facing in this tough economy in the coming months,” said David Leong, who heads the Singapore trading desk at First State Investments Ltd.

Futures on the Standard & Poor’s 500 Index slid 1.2 percent. GM and Chrysler executives are considering accepting a pre- arranged bankruptcy to secure a multibillion-dollar government bailout, a person familiar with internal discussions told Bloomberg News. Auto executives have warned that bankruptcy would lead to liquidation as customers abandoned the companies.

Bridgestone lost 11 percent to 1,336 yen. The tiremaker said this week it may cease production of tires for passenger cars and light trucks at a Tennessee factory. U.S. auto sales plunged 37 percent in November to the lowest annual rate in 26 years as the recession and Detroit automakers’ pleas for government aid kept buyers out of showrooms.

Honda Motor Co. slumped 7.3 percent. Honda president Takeo Fukui said his company is studying ways to minimize the effects of any U.S. carmaker failures. Measures may include increasing its parts inventory, he said.

Our idiot politicians (I’m talking to you, Dirty Harry – and you, too, Chuck Schumer) need to learn that their statements have potentially devastating consequences on the markets.  By prejudging the not-even-convened hearings a failure, Reid has helped to plunge the markets further in the hole.  Nice job!…