Another Mitch Daniels financial prediction is wrong
I’m thinking of starting a futures fund betting against Mitch Daniels’ predictions.
You see, Mitch Daniels has a problem with predictions. Given his famous “misunderestimations” of the cost of the Iraq War, the trends of health care costs, and the benefits of his FSSA privatization scheme, you’d think he’d give it up. But he just can’t help himself.
Back in 2008, when it became apparent that GM and Chrysler would become victims of the economic collapse, taking more than a million jobs with them, Daniels confidently predicted that efforts to save them would fail:
“Let’s give Congress a chance, but there’s nothing in recent history that suggests they have an answer for this,” Daniels said. “The only thing we know for certain is the way they’ve been doing business does not work and throwing taxpayer dollars after it won’t make it work.” (emphasis added)
And he was wrong, as President Obama told workers at a GM plant in Detroit yesterday:
Now, that was a tough decision and let’s face it, a lot of people were skeptical. I don’t know if you all remember, but I remember how last year there were a whole bunch of folks who said, well, that makes no sense. There’s the “just say no” crowd in Washington — they’re still saying no — who basically said, well, this is a terrible investment. We should just let the market take its course, let GM, let Chrysler go bankrupt. So there was a lot of skepticism out there. […]
And now here we are a year later. And a year later, GM and Chrysler, along with Ford, are all posting a profit. The U.S. auto industry has hired 55,000 workers, the most job growth in a decade. And not only that, but you’re producing the cars of the future right here at this plant, producing cars that are going to reduce our dependence on foreign oil. This car right here doesn’t need a sip of gasoline for 40 miles and then keeps on going after that. (Full transcript here)
While speaking to a crowd of workers at a Chrysler plant earlier in the day, Obama challenged critics of the plan to come and see the good that its done.
I wish they were standing here today. I wish they could see what I’m seeing in this plant and talk to the workers who are here taking pride in building a world-class vehicle. I don’t think they’d be willing to look you in the eye and say that you were a bad investment. They might just come around if they were standing here and admit that by standing by a great American industry and the good people who work for it, that we did the right thing. (Full transcript here)
And you don’t have to take Obama’s word for it. Washington Post business columnist Steven Pearlstein wrote of the auto industry plan’s “unqualified success”:
Perhaps none was more controversial than the decision to rescue Chrysler and General Motors, using $86 billion in taxpayer funds and an expedited bankruptcy process that wiped out shareholders, brought in new executives and directors, forced creditors to take a financial haircut, closed dealerships and factories and imposed painful cuts in wages and benefits on unionized workers. It was an extraordinary and heavy-handed government intervention into the market economy that left the Treasury owning a majority of both companies. […]
A year later, the auto bailout is an unqualified success. The government used its leverage to force the companies to make the painful changes they should have made years before, and then backed off and let the companies run themselves without any noticeable interference.
The results, which President Obama will tout on a visit to Michigan on Friday: For the first time since 2004, GM and Chrysler, along with Ford, all reported operating profits in their U.S. businesses last quarter. The domestic auto industry added 55,000 jobs last year, ending a decade-long string of declines. Auto sector exports are up 57 percent so far this year and, thanks largely to new government regulations, the industry is moving quickly to introduce more fuel-efficient vehicles. Most surprising of all, GM and Chrysler have already repaid more than $8 billion in government loans, while GM is preparing for an initial stock offering later this year that would allow the government to recoup most, if not all, of its investment.
And Ezra Klein posted this graph, illustrating the point more succinctly:
You can see the White House’s full report here, but you can really get a good picture of the scope of the investment by looking at the interactive map. There’s a nice cluster of dots trailing down from Lake Michigan, each representing a plant expansion, electrification, “supertruck”, or green vehicle project – you can hardly see an empty spot in the state of Indiana.