The truth about GM’s payback

Have you seen the ads in which General Motors says that they paid back the government bailout money?  Well, George Will says that this is not exactly correct:

A television commercial featuring CEO Ed Whitacre demonstrates the institutional murkiness and intellectual dishonesty that result when the line between public and private sectors disappears.

In the commercial, Whitacre says GM has “repaid our government loan in full.” Rep. Paul Ryan (R-Wis.) noted that GM used government funds to pay back the government: It “simply transferred $6.7 billion from one taxpayer-funded TARP account to another.” The government still owns 60.8 percent of GM’s common equity, and the Congressional Budget Office projects that the government will lose about $34 billion of the $82 billion of TARP funds disbursed to the automotive industry.

When Ryan and two colleagues asked the Treasury Department for clarification, they got this careful reply: “Treasury has never suggested that the loan repayment represented a full return of all government assistance.” A Treasury news release did say “GM Repays Treasury Loan in Full.” The loan is, however, a small part of taxpayer exposure. Under crony capitalism, when government and corporate America merge, both dissemble.

via George F. Will – Greece and GM: Too weak to fail.

Beware of Greeks receiving gifts

More from George Will on the debacle in Greece:

Greece, whose gross domestic product is below that of the Dallas-Fort Worth metropolitan area, is “too big to fail,” meaning too inconveniently connected to too many big banks. Bailing out Greece really rescues European banks that improvidently bought Greek bonds. Visit http://tinyurl.com/2dzaul2 for a useful New York Times graphic illustrating how European nations borrow from one another. For example, Italy owes France French banks $511 billion, a sum nearly equal to 20 percent of France’s GDP. About one-third of Portugal's debt is held by Spain, which has $238 billion of its debt held by Germany and $220 billion by France. Russell Roberts of George Mason University notes that this “discourages prudence and wariness” because when “everyone has financed everyone else, you can justify bailing everyone out.”

At the Parthenon last week, the Greek Communist Party, which got 8 percent of the vote in the last national election, draped banners emblazoned with the hammer and sickle: “Peoples of Europe Rise Up.” Of course. “Arise ye prisoners of starvation” exhorts “The Internationale,” the left’s ancient anthem. But who is to arise against whom?

Time was, the European left said it spoke for horny-handed sons of toil oppressed in dark Satanic mills. But Athens’ “anti-government mobs” have been composed mostly of government employees going berserk about threats to their entitlements. Even Greek air force pilots went on strike. The government, unable to say how many employees it has, promises to count them. It cannot fire many of them because Article 103, Paragraph 4 of the Greek constitution says: “Civil servants holding posts provided by law shall be permanent so long as these posts exist.”

America’s projected $9.7 trillion in budget deficits in this decade will drive the nation’s debt to 90 percent of GDP Greece’s is 124 percent. So some people say that to avoid a Greek-style crisis, America should adopt a value-added tax VAT. But Europe’s most troubled nations — the PIIGS: Portugal, Ireland, Italy, Greece and Spain — have VATs of 20 percent, 21 percent, 20 percent, 21 percent and 16 percent, respectively. As part of its austerity penance, the Greek government is going to give itself more money by raising its VAT to 23 percent. . . .

Greece now knows the terrific strength of weakness. Beware of Greeks — or any other people — receiving gifts.

via George F. Will – Greece and GM: Too weak to fail.

Bailing out Europe

The American share of the bailout of Europe, due to our involvement in the International Monetary Fund, may be as much as $54 billion.  This will be in the form of loans that might get paid back, but still. . . .

See US Exposure to EU Bailout Is Big But Risk Is Limited – CNBC.

Europe abandoning what America is embracing

From  Europe rewrites its rule book in creating fund to contain financial crisis:

The massive emergency fund assembled to defend the value of the euro is backed by a political gamble with an uncertain outcome: that European governments will rewrite a post-World War II social contract that has been generous to workers and retirees but has become increasingly unaffordable for an aging population.

So Europe is drawing back from the social democratic welfare state JUST AS the United States is adopting the social democratic welfare state.

British coalition talks hinge on cutting the deficit

The efforts of the Brits to forget a coalition government is centering, according to this article, on how to drive down the deficit, avoiding another Greek syndrome.  Notice that the American deficit is just as bad, suggesting that cutting budgets and imposing austerity measures will be the task of all responsible governments:

Inside the stately buildings of Whitehall in the shadow of Big Ben, party leaders trying to forge a government hunkered down for talks this weekend with a 167-billion-pound elephant in the room: the British budget deficit.

Investor panic over Greece’s debt problems is engulfing Spain and Portugal, and political officials here are racing to head off speculation that Britain could be next. Thursday's election yielded no clear majority in Parliament, plunging parties into intense rounds of horse-trading to assemble a workable coalition. Their most critical goal: the creation of a government willing to undertake what is set to be the most painful round of spending cuts in Britain since World War II.

The focus of the coalition talks underscores the rising alarm over yawning deficits and crushing debt in developed nations since the onset of the global economic crisis. In Britain, stimulus spending and collapsing tax rolls have left the budget deficit — the shortfall between what the government takes in and what it spends — set to jump to 12 percent of national income this year, the highest in the European Union and roughly on par with that of the United States.

via British coalition talks continue as parties focus on deficit.

The Greek retirement package

If you are a Greek public service worker, you can retire at age 53, getting 80% of your salary.   If you hold a job officially deemed to be hazarous–including hairdresser (all those chemicals) and broadcaster (bacteria on the microphones), you could retire at 50.

The austerity plan that is the condition for Greece’s bailout requires that the retirement age be raised into the 60s.  This is one reason there is rioting in the streets.

See  this and this .

Interesting linguistic footnote: The Greek word for “crisis” is also the word for judgment.


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