14 Comments

Ah, thanks. Looks to me like no one *gave* Chrysler to the UAW (rather, it bought 55% of Chrysler, the price being that the UAW gave up its claim to $10bn that Chrysler owed it for healthcare payments or something of the kind) and it's perfectly permissible for a company in chapter-11 bankruptcy to sell assets to whoever will buy them. It seems unconventional for a company in chapter 11 to be selling debts that would have lower priority than those of its senior creditors, but it seems to be legal (the case has, after all, been before multiple courts, and none of them has objected). So, strange though the Chrysler deal is, it doesn't seem to involve "overruling bankruptcy law".

Still, just as it's unsurprising when politicians try to take credit for popular actions and deflect blame for unpopular ones, it's unsurprising when political partisans try to describe the actions of politicians they dislike in negative terms...

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> A carbon tax would make price blame clearer, so they are going with tradable permits, which also lets them play more favorites with who gets permits.

How do you figure that? Countries with a carbon tax will still need to protect trade exposed industries in the short term, so the problem of who gets the tax breaks is virtually the same as the free permits problem.

> Permits also make it harder to notice if they actually cut carbon, vs. preserving business as usual.

The 'cap' in 'cap and trade' makes it dead easy to notice if carbon has actually been cut (illegal emissions aside). That's the whole point of a cap. Predicting the effect of a centrally fixed carbon price (which is what a tax amounts to more or less) is a much harder problem. You would get the same short term blame dodging with a tax too - start low, forcing future governments to ramp it up in order to meet long term targets.

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Fairly accurate except that 'overruling bankruptcy law'. A government bailout, yes, but otherwise nothing that hasn't been in numerous other bankruptcies without government intervention. Somewhat sad they don't provide much leadership and statesmanship, but that is most of politics.

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You are right that I erred; I should have said Chrysler instead of GM. I've edited the post to correct it.

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Robin, CNN Money says "Taxpayers will end up with a 60% stake in GM, with the union, its creditors and federal and provincial governments in Canada owning the remainder of the company." (Presumably "taxpayers" is a positive-spin way of saying "the government".)

The Guardian says the US government gets 60%, the Canadian government gets 12.5%, and "unions and bondholders" get the rest.

Reuters says 60% for the US government, 12%-ish for the Canadian government, 17.5% for the UAW, and 10% for bondholders. It also says that the deal had the support of the majority (though a slender majority) of bondholders.

CNN Money (another story) has the same numbers plus some further details: it's not the UAW as such but a fund for its retired members' pensions (which to my mind puts quite a different spin on it); the UAW has the right to buy another 2.5% (presumably from the US government), and the bondholders have the right to buy another 15% (ditto).

Are these all disastrously wrong? Or does "give GM to unions at the expense of bondholders" really mean "give 17.5% of GM to provide pensions for retired GM workers at the expense of bondholders, a majority of whom voted for the plan"?

(For the avoidance of doubt: I am not claiming that the GM bankruptcy has been handled wisely or justly or efficiently; I don't know anything like enough about the situation to have an opinion on that that's worth reading. But whatever its merits or demerits, it doesn't look as if your description is within a mile of the truth.)

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Really enjoyed this post as well.

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WOW I never knew the Dems were so smart. Thanks for exposing their evil genius. Now I am torn. I want Government to be smart which was not the case with the Bush Administration but being ruled by super genius Dems might be just as problematic.

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komponisto, kevin, mattmc, Vichy, thanks! I wouldn't have guessed that this post is clearer than most.

g, 55% I heard.

Paul, I've made my proposal.

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Robin, what fraction of GM's assets are owned by unions now that GM has been given to the unions?

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Interesting post. I think a lot of the reason these plans are all flash and no bang, though, is that the systems which produce them are kind of blind and incestuous. A lot of them probably think their hacked-together legalese is "better than nothing" or "a good attempt", if they're even close enough to the ground to realise it doesn't work.

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Wow, very clearly explained. It sort of leads me back to the position where a split government is actually better for the country because it can do less harm. I'd like to see a spending rule that says we have to pay some percentage of what we've already bought before we add new spending.

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Of course, there's no point in getting angry at the politicians for behaving this way; they will continue to do so for as long as people prefer to vote for those who say they'll "make tough choices" over those who actually do so. What can be done to change it?

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Great post. Still, I wonder if even a neutral, cautiously balanced meta-criticism like this can prevent the inevitable political/tribal flame-war.

This site is better than 99% of sites in this regard, but not even OB is completely immune.

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Wow -- that's the way to write about politics, if one must. Both insightful and non-inflammatory. Well done.

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