Thursday, July 12, 2012

Mitt Finds a Mate? Michigan Governor Rick Snyder

by Nomad
While nearly every name -except Sarah Palin -has been floated, Michigan Governor Rick Snyder is the latest to be a possible vice-presidential pick for Mitt Romney.

Snyder's not what anybody would call a shining star, something of an unknown, but considering some of the other possible choices, lack of public familiarity isn't such a bad thing. In many ways, the selection of Snyder makes a lot of sense.

Last month, when Romney toured the state, he was joined by Snyder who stated:

“Our comeback is being slowed down by the mess in Washington And if you look at the issues there, they’re the same issues we had here. We need more and better jobs.”
Without question, things in the state have, indeed, been rough, but, as the LA Times reports, the situation is slowly improving:
When Obama took office in January 2009, Michigan’s unemployment rate was 11.3%. It rose to 14.2% in August 2009, but had slid back to 10.9% by the time Snyder took office in January 2011, according to the U.S. Bureau of Labor Statistics. Since then, it has declined further to 8.5%.
That's great news for one of the most desperate areas of the country. But that kind of news is probably not the best news for the Republican campaign. In an effort to find some kind of negative aspect, Snyder blames Washington for the delay in the improvement. Blaming Washington plays well, of course. 
However, when it comes to how the problem developed in the first place, some people thing, Snyder has a few fingers pointed in his direction.

Picking Winners and Losers
During the gubernatorial race, the governor’s critics claimed that Snyder as CEO of Gateway, a computer firm, outsourced jobs to China. In 1991, Snyder joined the Irvine, California-based company as the executive vice president, then served as president and chief operating officer from 1996 to 1997, and finally sat on the board of directors until 2007. In his defense, Snyder stated that, while sitting on the board, he did not vote for outsourcing and that, in any case, it is unfair for the blame him alone for the outsourcing that occurred as Gateway shed thousands of jobs.

After leaving Gateway, Snyder established two venture capitalist firms, Avalon Investments and Ardesta,. Like Romney, Snyder likes to boast of being “The Job Creator” on his Web site. 
The Wall Street Journal took a closer look at the claim:
He often talks about his short-lived venture-capital experience in public, as he did at a recent town-hall meeting: “The state has a broken system of trying to pick winners and losers too often, saying ‘This industry is good, this industry is bad,’” he said. “I’ve been doing venture capital for a lot of years. I’ve been picking winners and losers for a living. It’s hard work. The government isn’t competent to do that work.”
As far as the job creation boast, the WSJ is skeptical. As the writer says,
(V)enture capitalists don’t actually create jobs – the companies they invest in do the hiring. As for his funds’ success in Michigan, the results, you might say, are too close to call.Of the 20 companies that Avalon invested in, only seven of those companies are from Michigan. Half of them are actually in California.
Regarding the Ardesta investments,
“According to VentureSource, just three out of 16 portfolio companies hailed from Michigan. The remainder were spread across Massachusetts, New Mexico, Tennessee and Washington.
After reviewing each of the companies, the writer seems less than impressed. The final verdict must be delayed.
We may never know exactly how well his investments have panned out, unless he’s compelled to release that information during his campaign.
If that's indication, then Snyder might be a good choice as Romney's running mate. He, like Romney, has a lot of similar qualms of frankness.

It's Getting Better All the Time, Damn it
The good news for Michigan is that things are improving for the state. While the economy is far from booming, there are signs of growth. For example, tax revenues have jumped so dramatically that Michigan now enjoys a $457 million budget surplus. Much of it has to do with auto manufacturing.
ABC news reports:
The auto industry is driving the nascent recovery in Michigan, where manufacturing accounts for more than 20 percent of the state’s economy. Indeed, U.S. car sales are revving up at the fastest rate in nearly four years, rising 11 percent in January over a year ago. The state’s unemployment rate, while still higher than the national average,has dropped from 12.6 percent, in March 2009, to 9.3 percent in December.
The improving economy, while far from robust, has breathed real life into many small and medium sized companies that supply the auto industry.
The question is, of course, who should take credit for the improvement. Both sides would like to take full credit for the salvaging of the auto industry.

In fact, it was a case in which Washington did something right. President George Bush had, against his conservative principles, abandoned the free-market, and Economic Darwinism by announcing a $17.4 billion bailout for GM and Chrysler in December 2008. The terms of the loan required the firms to restructure and to draw up a detailed business plan. 
At the time, Bush told the American public, which was, as polls showed, against the bailout:
"If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy,. "In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The question is how we can best give it a chance to succeed."
"My economic advisers believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis," he said. "It could send our suffering economy into a deeper and longer recession."
Rescuing the auto industry was, in fact, a move that Congress had specifically voted against. In order to get the money, Bush turned to loopholes in the TARP statute, "which" as Washington Examiner’s David Freddoso states "Congress had passed under extreme duress and threats from Treasury Secretary Hank Paulson that their failure to act would cause financial Armageddon." 

Democrats were behind the President's move, advocating the use of $25 billion of the $700 billion financial industry bailout to help the ailing car manufacturers.

The Republicans? The New York Times from November 16, 2008 gives their reaction:
“Companies fail every day and others take their place. I think this is a road we should not go down,” said Mr. [Richard Shelby of Alabama], the senior Republican on the Senate Banking, Housing and Urban Affairs Committee.
“It’s not the General Motors we grew up with. It’s a General Motors that is headed down this road to oblivion,” said Mr. Shelby. “Should we intervene to slow it down, knowing it’s going to happen? I say no, not for the American taxpayer.”
They’re not building the right products,” he said. “They’ve got good workers, but I don’t believe they’ve got good management. They don’t innovate. They’re a dinosaur in a sense.”
[ Jon Kyl of Arizona] the Senate’s second-ranking Republican, added, “Just giving them $25 billion doesn’t change anything. It just puts off for six months or so the day of reckoning.”
But the most important question is: how did President-elect Obama stand on the issue? We should refer back to the same New York Time piece:
Mr. Obama said he believes that aid is needed but that it should be provided as part of a long-term plan for a “sustainable U.S. auto industry,” not simply as a blank check.

“For the auto industry to completely collapse would be a disaster in this kind of environment,” Obama said in an interview on CBS’s “60 Minutes” .... “So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan — what does a sustainable U.S. auto industry look like?”
Recently Micheline Maynard, writing for Forbes, quotes Candidate Romney attempting to steal credit for the bailout.
“My own view, by the way, was that the auto companies needed to go through bankruptcy before government help. And frankly, that’s finally what the president did. He finally took them through bankruptcy. That was the right course I argued for from the very beginning. It was the UAW and the president that delayed the idea of bankruptcy. I pushed the idea of a managed bankruptcy and finally when that was done, and help was given, the companies got back on their feet. So I’ll take a lot of credit for the fact that this industry’s come back.”
But, as Romney well knows, this was not in any way a "managed" bankruptcy. It was a conditional loan. 

Bankruptcy was the last thing any of the auto makers needed if they wished to restore confidence. Who in their right mind would buy a car from an auto manufacturer that had just declared bankruptcy?

In any case, Romney's remarks left Maynard both perplexed and amused.

I don’t recall any of the lawyers, bankers, lawmakers, union leaders and others we all talked in the course of our reporting bringing up his name. In fact, one of the key bankers I spoke with regularly is a high-powered financier for GOP candidates, and he surely would have detailed Romney’s role, if he played one.
In fact, how Romney felt about the bailout was very clear. As he wrote in the 
New York Times:

If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
In January of this year, President Obama visited Ann Arbor, and to the Michigan crowd he stated things pretty neatly:
“Keep in mind, that the administration before us, they had been writing some checks to the auto industry asking nothing in return. It was just a bailout, straight — straightforward.”
”The American auto industry was on the verge of collapse. And some politicians were willing to let it just die. We said no. We believe in the workers of this state.”
Bottom line: The President and the Democratic party had faith in the American Worker. The Republicans, including the man who wants to take credit, did not and were ready to throw in the towel. Romney and (at least to some degree) Snyder were more interested in searching for new labor markets in other states and other countries. 
So what do you do when you are on the wrong side of history? 
Revise history, erase it, scratch it out and put something flattering in its place and hope voters will be fooled. 

Meanwhile, Governor Rick Snyder is in the faintly embarrassing position of standing at campaign rallies next to a man who would have turned his back on the auto industry and the American worker. Not wishing to disqualify himself as a vice presidential candidate, Snyder has left unanswered the question about deserves most credit for the recovery.   

He says vaguely,
“We’re the comeback state in the United States.”
But please, don't ask him how it happened or who was responsible. He has a career to think of.


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