TARP - Keeping Them Honest About It

On October 3^rd, 2008, President George W. Bush signed into law TARP i.e. the Troubled Asset Relief Program consisting of $700 billion to bailout fledgling banks and auto companies.  TARP continued with slight alterations under President Obama’s presidency. Propublica (www.propublica.org) claims to have kept track of every single dollar of the bailout since then.  At the time, it was heavily criticized as unnecessary government intervention; the costliest since World War 2.  However, two and a half years later, its success is becoming more and more apparent.

USA Today on February 23, 2012 posted an editorial on their website (www.usatoday.com) titled Editorial: Auto bailout worked, candidates should admit it.  The editorial speaks about how politicians find it difficult to admit mistakes.  The editorial mentions President Obama’s opposition to President Bush’s troop surges in Iraq, but admitted later it worked.  However, one thing to keep in mind is that Obama’s admission did not alter his opposition to the Iraq war altogether.  Obama had opposed the war right from its onset calling it a “dumb war.”

Back to the issue of bailouts, the editorial piece mentions that one of the key bailout recipients, GM sold more vehicles last year than any other automobile manufacturer in the world.  Moreover, it added 207,000 jobs last year.  GM has returned to profitability and it has repaid its loan to the U.S. and Canadian governments.  Chrysler, another key recipient also returned to profitability and has repaid its loans.  Most other recipients have also repaid their loans.  The editorial puts forth a very important and key argument in defense of the bailouts’ successes.  It states,

And the cost to taxpayers has been far less than it would have been had the companies collapsed and the government was forced to partially bail out their pension funds, as well as pay for unemployment benefits and other assistance to displaced workers.

I believe the above is the most effective and persuasive part of the argument in favor of the bailouts.

             The two leading candidates for the Republican nomination on the other hand vehemently continue to criticize the bailouts.  While admitting that a government bailout is not a good thing and should only be a last resort, the editorial states that their criticism and arguments against it reflects how poorly connected they are to reality.  Rick Santorum argues that all the fledgling companies would have survived without any bailouts.  Romney argues that the government should have insured loans provided by private companies instead the government directly lending to them.  The editorial argues it is highly unlikely that any of these options would have worked.

            On the other hand, however, the government did lose quite a bit.  The government lost 1.3 billion in its investment in Chrysler because it sold its 6% stock to FIAT at a 1.3 billion loss.  The government would suffer a 13 billion loss if it was to sell its stock today.  However, despite all this, it is about time the two leading Republican nominees admitted the effectiveness of the decision upheld by the Obama administration. 

USA Today has also published an editorial consisting of an opposing view titled Opposing view: Auto bailout leaves a dangerous legacy.  Only in Washingtoncan you call losing billions a success. This editorial claims that though some successes are apparent, these successes are overshadowed by the fact the government has set a very dangerous precedence of government intervention; a concept antithetical to democracy and capitalism.  The editorial maintains that if all companies went through the proper bankruptcy avenues provided by law, the outcome would have been much better, and additionally, the values of democracy and capitalism would not have been compromised.   The editorial concludes with the following admission:

No one knows precisely what would have happened had policymakers pursued a less interventionist road. But the road that was chosen — putting politicians in the driver's seat of a major American industry — was the more dangerous. "Successful" or not, it's no model for the future.  

A Critique of President Obama's State of the Union Address 2012 - Part 1

     I chose to write about President Barack Obama’s State of the Union Address because of the fact that it is one of the most important speeches given by presidents annually.  The importance is magnified by the fact that 2012 is a presidential election year and the Republican primaries are under way.  The address outlines what the president has in mind for congress to deliberate on for that year.  This is based on Article II, Sec. 3, of the U.S. Constitution that states, 

The President shall from time to time give to Congress information of the State of the Union and recommend to their Consideration such measures as he shall judge necessary and expedient.

     President Barack Obama delivered his annual State of the Union address Tuesday night January 25^th, 2012 in Washington D.C.  CNN.com has the full coverage of the speech in two parts; Part 1 and Part 2.  In this speech, the text of which can be found here, the President laid out many current issues and challenges facing the American people today and provided solutions while invoking Congress to pass them and calling on the American people to support him.

     The President began his speech by paying tribute to our heroes in uniform; the United States military, and their brave accomplishments and sacrifice.  He acknowledged credit for ending a war that stretched almost 10 years and took a heavy toll on the lives of those whose loved ones were killed in action.  He also spoke about the killing of Osama Bin Laden and top leaders of Al-Qaedah.  He proclaimed, "For the first time in two decades, Osama bin Laden is not a threat to this country."  Until here, he received a standing ovation from everyone in the audience and I join them in full agreement.  

     However, what he forgot to mention was the unnecessary killing of innocent Iraqi men, women, and children.  I say unnecessary due to the fact that the war was justified on the grounds that Saddam Husain had weapons of mass destruction.  It is now known to the general public, thanks to our media reports, that there were no weapons of mass destruction.  Obama had initially opposed any attack on Iraq calling it a “dumb war” and in his landmark speech on June 4, 2009 in Cairo, Egypt, he said, “Iraq was a war of choice that provoked strong differences in my country and around the world."  

     Then the President touched on some key economic issues like unemployment, taxes and Wall Street’s unbridled power.  He encouraged bringing jobs back to the U.S. and discouraged outsourcing of jobs.  He said that it was unfair that those who outsource jobs are able to circumvent taxes while those who hire inland are taxed.  He proposed that both should be taxed fairly.  He said, “It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America.”  I totally agree with that because this is what is best for the American people. 

     He also mentioned that the wealthy have to pay their share of taxes.  He outlined that with an eye-opening example of Warren Buffet paying the same rate of taxes as his secretary.  This is known as the Buffet Rule. Any sane and sensible person would agree that it is far more difficult for a person earning $50k a year to pay 30% compared to a person earning $10 million.  He also supported tax breaks for small businesses so that they can prosper and hire more.

     He condemned unfair trade practices conducted by multinational companies in China and elsewhere, and promised to curb them.  He also promised to sign into law any legislation that would help put an end to pirated American goods and the proliferation of foreign products that lead to the loss of American jobs.  He proclaimed that he is willing to take any steps necessary to open up trade in any place on earth and that he will pass any law that will deter foreign companies gaining advantage over American companies.  He promised more inspection to prevent unsafe and counterfeit goods from entering the country.

To be continued…