Spinning Obama’s record
E. J. Dionne, naturally, makes an effort today in the WaPo to do exactly that. Speaking of Obama and Democrats in Ohio and Colorado, he talks indirectly about the auto bailout:
None of this surprises Sen. Brown, a proud pro-union liberal who campaigned with Obama in Ohio last week. Brown notes that Obama has gained ground in his state both by being tough in enforcing trade rules on behalf of American companies and by pursuing a “high-end manufacturing strategy” that appeals to the nation’s “historical pride in manufacturing, and in making things.”
For Brown, who faces reelection this year, one of the voters he keeps in mind is the “guy in Zanesville who made big things with his hands and now has gone from $17 an hour to $11 an hour.”
The candidate who speaks to voters like Brown’s Zanesville worker — and to his white-collar equivalent in Colorado — is likely to win the election. Mitt Romney hopes the national unemployment rate will get them to vote Republican. Obama’s challenge is to offer an economics of national pride and renewal that answers the sense of betrayal these voters began feeling long before he took office.
That outlines some of the problem the Obama record has. Of course, unspoken here is the auto bailout and how that effected workers. The implication is the bailout was a net positive. Of course Obama, et al, think that workers will reward him for that move.
But the entire record of the auto bailout on the left has been one of spin. And most of that spin has been about as disingenuous as one can imagine. Even Dionne creeps around it by mentioning that the workers took a haircut in average salary (well, at least for new workers).
However, the assumption is that’s the worst that happened (hey, at least they still have a job) and workers will be grateful. Or, business as usual, a politician used taxpayer money and debt to buy votes, you have a problem with that?
Well yes, I do.
In fact, the auto bailout is a case study in crony capitalism. It is a situation where government interfered and overruled normal bankruptcy procedures, reorganized the payback priorities so debt holders were stiffed, bought up the majority of the stock in the new company (GM) and handed much of the control to a favored constituency (labor).
Then they told an absolute lie (GM has paid back its debt) and have consistently pretended that all is well with the company when it is not. This is the real result of the bailout:
General Motors (GM) shares fell to a fresh 2012 closing low of 19.57 on Monday. The stock hit 19 in mid-December, the lowest since the auto giant came public at $33 in November 2010 following its June 2009 bankruptcy.
Normally you might say, tough luck investors. But this is Government Motors. The Treasury still owns 26.5% of GM, or 500 million shares. Taxpayers are still out $26.4 billion in direct aid. Shares would have to hit $53 for the government to break even.
Those shares were worth about $9.8 billion as of Monday. That would leave taxpayers with a loss of $16.6 billion.
But that’s not the full tally. Obama let GM keep $45 billion in past losses to offset future profits. Those are usually wiped out or slashed, along with debts, in bankruptcy. But the administration essentially gifted $45 billion in write-offs (book value $18 billion) to GM. So when GM earned a $7.6 billion profit in 2011 (more on that below), it paid no taxes.
Include that $18 billion gift, and taxpayers’ true loss climbs to nearly $35 billion.
So that’s ground truth on where GM stands today. But that’s not helpful to Obama, is it? So how can Obama and company make this picture seem a little brighter? Well good old crony capitalism, that’s how. We have the end of the 2nd quarter nearing and it is critical to the spin of how well GM is doing to see good 2nd quarter results, no?
The upcoming earnings announcement by GM is, politically, the most important to date. The pressure is on Government Motors to appear financially strong as this may be the last earnings report before November elections and sets the stage for how "successful" GM is.
Well guess who is buying GM vehicles in huge quantities (HT: Steve)?
We now learn that government purchases of GM vehicles rose a whopping 79% in June.
The discovery of the pick-up in government fleet purchases at the taxpayers’ expense comes just weeks before GM announces its second quarter earnings. Overall fleet sales (which are typically less profitable than retail sales) at Government Motors rose a full 36% for the month, helping to drive decent sales improvements year over year.
Wow. What a surprise. Add a few accounting gimmicks:
One of GM’s past tricks to help fudge earnings numbers has been to stuff truck inventory channels. Old habits die hard at GM. According to a Bloomberg report, "GM said inventory of its full-size pickups, which will be refreshed next year, climbed to 238,194 at the end of June, a 135 days supply, up from 116 days at the end of May." 135 days supply is huge, the accepted norm is a 60 day supply. The trick here is that GM records revenue when vehicles go into dealership inventories, not when actually sold to consumers.
And you’re likely to see a “good” earnings report even when the stock is at an all time low, inventories are huge and crony capitalism instead of real sales is the means of spinning the news in a positive direction.
Remember that when you hear the GM “success story”.