Where is the US economy headed?

A good way to see the problems with a fingers-in-the-dikes strategy is to look back to the first big bailout of modern times. Before A.I.G., before Fannie and Freddie, before Bear Stearns, there was Chrysler.

In 1979, when it was still the 10th largest company in the country, Chrysler found itself on the verge of collapse, largely because high oil prices had made its gas guzzlers unappealing. Company executives and union leaders came to Washington, hat in hand, arguing that Chrysler’s demise would wreak unacceptable damage on the American economy. Congress and the Carter administration responded by arranging for $1.2 billion in subsidized loans. The Reagan administration helped further in 1981 by restricting Japanese imports.

On its face, the Chrysler rescue was a huge success. Under Lee Iacocca, the company came out with the K-car line of smaller vehicles, like the Dodge Aries, as well as the original minivan. By the mid-’80s, Chrysler had repaid the loans. Mr. Iacocca appeared on the cover of Time magazine as “Detroit’s comeback kid,” and his autobiography became a No. 1 best seller.

You can draw a clear line from the Chrysler bailout to the recent attempts to steady Wall Street. Back then, Washington insisted on a few pounds of flesh, like a wage freeze for Chrysler workers, in exchange for aid. Mr. Paulson has done something similar by insisting that shareholders of the Wall Street firms benefit little from any bailout.

In 1979, the government structured the Chrysler deal so that taxpayers might earn a profit from it (which they did). This year, the Fed effectively purchased securities from Bear Stearns that it hopes to sell for a gain when the financial markets calm down. While it’s way too early to know if the strategy will succeed as well as it did three decades ago, it’s certainly conceivable.

But if you take a moment to think through the full Chrysler story, you start to realize that it’s setting a really low bar. The Chrysler bailout may have saved the company, but it did nothing, after all, to stop Detroit’s long, sad decline

okie wrote:

One more comment, cyclops, your post supporting lotteries was PATHETIC, PATHETIC, PATHETIC! You can do better than that.

Bull ****, Okie. When you say 'down the drain,' what do you mean? The money didn't disappear. It didn't get spent on the cost of running the lottery. Where did it go? Explain. Because to me, it seems that the vast amount of money is... returned to some of those who play. Given to private citizens. That money is then funneled back into the economy. At what point is it wasted, exactly?

It's crazy to me, that you, a Republican, would seek to ban a voluntary activity, one which raises funds for the government on a voluntary basis. Nobody is forced to play the lottery. Aren't you a captain of personal responsibility? Do you really want things banned just b/c you don't agree with them?

You didn't respond to my post about earmarks on the other thread, and how ridiculous it is to target something which makes up less then 1 percent of our budget, as an area for serious reform.

Cycloptichorn

The problem with bailouts (subsidy) is that the new growth areas are stunted. They are anti-capitalist.

They only like Darwin in the abstract.

I agree with you that bankruptcies needs to be allowed, because it's cause is mismanagement and greed. Bailouts of any commercial business by the government only causes more pain later, because it doesn't let the competitive market play itself out. Greed should never be rewarded by a bailout. Never.

Chris Dodd and Barney Frank should resign today, and go home.

And I hope the FBI does its job investigating these firms, and throw the crooks in jail that cooked the books.

Chris Dodd and Barney Frank should resign today, and go home.

And I hope the FBI does its job investigating these firms, and throw the crooks in jail that cooked the books.

September 19, 2008 12:46 PM

ABC News' David Wright and Jennifer Parker report: Republican John McCain's campaign sparked a furious exchange of campaign attacks with the release of an ad linking Democratic presidential candidate Barack Obama to a former Fannie Mae chief who was forced out by an accounting scandal.

The 30-second ad released Thursday titled "Advice" quotes the Washington Post as saying Obama got advice on housing and mortgage policy from Franklin Raines, who happens to be African American.

The McCain campaign ad said Raines made millions and then left Fannie Mae while it was under investigation for accounting irregularities.

The government took control of Fannie Mae earlier this month in an attempt to stabilize the housing market.

"Bad advice. Bad instincts. Not ready to lead," the McCain ad said of Obama.

The Obama campaign disputes that Raines ever advised Obama or the campaign, circulating an email to reporters Friday from Raines to McCain economic adviser Carly Fiorina stating that he is not an adviser.

"Carly: Is this true?" Raines asks above a forwarded note informing him that Fiorina was on television saying he was an Obama housing adviser. "I am not an adviser to the Obama campaign. Frank."

Obama's campaign said Fiorina did not respond.

Final bottom line, 700 BILLION is at risk, and McCain is correct to go back to Washington and try to fix this problem, not just an ordinary problem.

What has McCain ever fixed?