Monday, July 14, 2014
In Defense of General Motors Receiving Major Government Refinancing Aid
In Defense of General Motors Receiving Major Government Refinancing Aid: An Alternative Perspective Novel Perspective on the Rational for Massive Goverment Aid to General Motors in Their Time of Need Lex Loeb Contributor Network . When it comes to pinning blame on what actually caused the present financial catastrophe at General Motors almost everyone engaged in the argument on all sides lacks any longer term historic perspective. Yes clearly Management and the Unions were ultimately responsible for destroying the company in the short term and under conditions that were imposed by a higher power. What was once the biggest most profitable industrial corporation on earth fell victim to government intervention and greed. Here is the longer term perspective on what caused General Motors to become an unsustainable business: Government imposed labor laws on the company. Without government rules that favored union politics over many years the company might have had a lot more control over some of their basic long term business relationships with labor. General motors suffered more than other companies because of it's profitability and apparent success. Government including the State of Michigan, The Cities where its factories were based and the Federal Government saw the major success of General Motors as a major cash cow for the milking. In due time over more than 50 years, the Milking became bleeding. That was abusive to the company's viability over many years. General Motors was not a company victimized by it's own success. It was victimized by Government because it was successful. The funny thing about a theory like this is that it can lead to the conclusion that maybe the government owes the company a lot more than many people think. General Motors was a major factor in the success of America in World War 2 and all subsequent wars that can't be forgotten. On an economic basis the company was harmed over time because of its success and profitability. The United States is one of the largest industrial countries with both a corporate income tax and high corporate capital gains taxes. For years and years General motors as the most profitable largest American Company was taxed at the highest rate. These taxes were imposed on the company by a government that said it was doing it for re-distribution purposes. High taxes hurt general motor's shareholders who as it happened were also subject to secondary taxes on their gains beyond the company taxes paid. The company's capital was being spent on Government services for everything and anything that congress wanted to spend it on so the company had a lot less money invest in its own future capital expenditures. When General Motors was most profitable it was forced by coercive taxation to provide for "the public good" what ever that was leaving it in need of going out and borrowing funds in the private market to compensate for what they were giving away in taxes thanks to government coercion. Foreign automobile manufacturers have had a long term advantage because these taxes were not imposed on them. Only in America is the idea that double taxation where first the company is forced to pay out taxes and then the shareholders considered to be a good tax system! Some of their major foreign competitors were not bleed to death in the same manner and are not now suffering the way general motors is. Just on the basis of redistribution taxation one can look back over more than 50 years and say that maybe the government having become such a major sucking parasite on this company ought to give a lot of that benefit they had back when the company is in trouble! It sounds kind of novel as an idea until one considers the re-distribution theory of taxation. If redistribution was supposed to take capital out of the hands of a successful business to give it to the failures of society than it would seem the socialist government owes the company a lot in its time of need. Well, the hell with the shareholders! How can that be fair? These rich shareholders of the past generously gave their taxes voluntarily for redistribution purposes. Each according to his need. Now it seems that government sees its opportunity to take over control of the company as if sucking its capital dry from it over so many years was not enough damage to do. The government also played a more recent role in General Motors inability to compete by creating rules where the company, unlike Walmart, could not import into the USA vehicles and parts that they manufactured or outsourced overseas. The foreign automobile companies could do that but General Motors and the other nationals were forbidden to do so. Management can't be blamed for this. Labor can be because Labor long ago lost its international brotherhood of world workers mentality and became highly nationalized. No one is as much against free trade and against NAFTA as some of the big unions that helped destroy General Motors. Government tilted the playing field to the union side. Government also assisted management in allowing attorneys who work for major public corporations to favor management over share owners. Someone could go out and buy a controlling interest in a company like GM and not be able to fire management nor get seats on the board of directors. This has the tendency to give corporations self serving managements with rubber stamp boards of directors. The SEC has never made it their policy with all the rest of their regulatory overkill to say that management should only take bonuses in company shares that they cannot sell so that management comes to understand that they have the same interests as shareholders. No one is considering drafting shareholder protection laws because the lawyers don't feel they will benefit? Over the many years General Motors success they paid enormous corporate taxes to various governments , they created the worker's paradise that the government wanted them to and also they were subject to double taxation of their share owners. The company abides by a multitude of costly regulations from environmental ones to work place safety rules. GM also went to the trouble to go along with social attitude that "they should give back to the community" donating to non profit organizations of various sorts in the millions or billions of dollars over many years. The company happily abides by all rules and regulations most of the time that were imposed and they were forced to give up their international free market advantages for the sake of national feelings that their US employees should not be forced to compete against their foreign workers with is absurd. If one were to take the time and calculate how much General Motors paid in taxes over the years and how many costly rules and regulations they complied with and what sacrifices they made to help win a few major wars in a big way and then adjust all those figures for inflation then the government may owe them more than a trillion dollars. Unfortunately this thesis and argument is complete heresy. What government owe a big mean ugly corporation like General Motors something? In point of fact they do. A lot of general revenue came directly and indirectly from GM. 1 in 6 jobs in the country were once related to the automobile. It is positively amazing how much the country does owe General Motors. GM Shareholders tended to be losers over many years but still government profited. Now the workers and the Share owners at GM are on the verge of having nothing to show for many years of what should have remained success. The costs imposed by government clearly did more to hobble the company than errors of management or greedy share owners as they could sell out and a new owner would buy the shares. Some years the dividends paid out to share owners were not as high as the taxes paid to the government! So how come GM is getting all the blame? The government put the company in debt when it did not have to be. A lot of US companies pay high tax rates and then have to go back to borrow money from private sources. Someone should figure out what GM was forced to give over the years for the good cause of government just to let government know what we think we might owe the company. My attitude now is like most others who thing GM needs to go bankrupt at this point but Oh it it were possible to sue the government---and a court made the government pay up then maybe an argument can be made that we all owe this company. GM is not an unsustainable business if it can just start importing its products from overseas to the US immediately. The company was viable just two years ago. There is a lot of fiction and story telling about how we should think about this company having failed and most of it is only part true or a short term perspective or entirely political and anti scientific. The strange thing about this argument is If it were made about say something like a dam on a river the environmental kooks would all be nodding their head and saying , "Yes, the government owes the wild and scenic river--its freedom from the dam and all of the costs of regulating the river with the dam over many years. yes yes yes..." But the same people have just the opposite view of government's responsibility to harming once free enterprises like general motors over a long period of time. General Motors was was more damned by government than any river with a dam. The republicans voted down the death tax that was doing harm to small private family enterprises in the same manner as what they did to general motors and the government destroyed these small enterprises by forcing the owners to have to sell them off to pay the taxes due. Government believes its responsibility is to be the king of the parasite beasts and take the biggest cut of anything they want for any reason without having any obligations to the consequences. General Motors may be the poster child for this royal attitude. Behind the scenes people in government are plotting a demise of General Motors this very minute because they intend to get instant gratification in getting their piece of it or to be sure their friends get what they want out of the carcass. Government is convinced that it owes General Motors to the people and the bankruptcy lawyer vultures who will charge $2000 an hour fees because of how much they love the management, share owners and union that loose most everything. This is why it is absolutely impossible to believe that what is happening to general motors is not fully intentional. If it was the goodness of government that destroyed the company in the long term it is the goodness of government self interest that will soon be serving the dead body of the company as a hot dish at their party to celebrate the killing of their parasitic host. Hey if all those taxes and costly regulations were all for the public good than GM complied with all that for the public good. That really naturally means that the government should owe it a hell of a lot. This is just an unpopular alternative theory. Had General Motors been the parasite off the US government for as many years as it was the other way around GM would be universally condemned for not giving back. So what gives the government a pass? .