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Thursday, November 18, 2010

Imagine If Private Business Allowed $10 billion Losses

As you all know, the GM stock offering was a rampant success.  In fact, President (I don't even know why I bother capitalizing it anymore…) Obama announced the IPO as a significant milestone for GM, as well as signs of the improved economy.

As I can see, the only success from this is the government is no longer the majority shareholder.  Now, American taxpayers only own about 500 million shares of GM, according to this Yahoo Finance Article, worth about $17 billion as of today.  

So let's do the math.  GM get's $49.5 billion from the government, has "paid back or committed to pay back" $9.5 billion, earned $13.6 billion with its IPO, leaving a net of $27 billion owed to the government.  With US taxpayers still owning that projected $17 billion, it leaves us a net of $10 billion GM owes, but has not committed to paying back.  Now, if you ask Barry, he'd probably tell you he "saved or created $39.5 billion. 

With success like that, the US should be the third largest economy in 5 years, not 40.

But why does it have to be claimed as a success?  Why can't Barry come out and say "we did what we had to do to prop up the automobile industry, and we recognized in doing this that the taxpayers would sustain a net loss?  Would we be happy with that?  Probably not. But at least I wouldn't feel like I was being treated like a 6 year old.  Perhaps Barry is hoping that the stock price will rise 65% so that we break even.  

It all comes back to the fiscal irresponsibility of the government.  They spend money using what I will deem the "it's only $20" rule.  It's a rule often used by a spouse, respective steady, or child.  It's based on the premise that if something only costs $20, then it's reasonably priced and certainly worth buying.  Here's the problem with the thought process though.  Imagine you're out shopping, and your spouse finds a nice shirt that he or she wants to get.  After all, it's only $20.  But it doesn't stop there.  All of the "only $20s" all of a sudden run you a tab of $500.  And I lose another drawer in the house.

All kidding aside though, look no further than the recent vote in the house to extend jobless benefits.  I mean, come on, we just spent $1 trillion on health care, another $800 billion on the stimulus.  What's another $34 billion (or $20, relatively speaking)? 

And boom! It hits you like a ton of bricks.  $34 billion here, $34 billion there.  And that's how, in a span of 150 years, you run a debt of $13 trillion, are adding an additional $1 trillion to the debt annually, and are paying about $500 billion in INTEREST alone each year.  That's the last time I go to J Crew.

Now most of you probably think I'm an ass for saying that we should be looking to cut funding for the jobless.  After all, I recently posted on how the unemployment rate is the most important issue we're facing right now.  But you'd be mistaken.  Well, in this case anyway.  I'm only asking that we fund it.  What is the reluctance to use unused stimulus funds?  Funds gained in interest when TARP was paid back?  There are ways to extend the benefits without buying another t-shirt.  

But as usual, Washington plays the partisan game. Instead of extending the benefits for six months which would cost $34 billion, a proposal costing $12.5 billion that needed 275 votes was voted down.  Make no mistake, it will get passed (probably retroactively), and rather than fund it, we'll add $12.5 billion to our debt.  Based on Obama's logic, I can tout that as a success.

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