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General Motors: Laissez Mourir

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I’m with Philip Greenspun on the question of whether to bail out the auto industry:

The government has already done everything that it needs to in order to help G.M. […] Chapter 11 was designed specifically so that employees can keep their jobs, albeit possibly at lower salaries, while shareholders and creditors suffer and/or are wiped out.

For me, it’s not a question of what G.M. “deserve[s],” as Greenspun puts it. The banks surely didn’t “deserve” anything; bailing them out made sense in terms of avoiding economic calamity worse than whatever we’re going to face anyway.

The point about G.M. is that Chapter 11 bankruptcy will probably suit the company and the economy better in the long term than will a bailout. The point is that the U.S. auto industry has to change in order to be more competitive at home, and that keeping G.M. afloat at a tiny fraction of last-year’s market cap will not restore value or even necessarily position the company to rebuild in the near future. The point is that this American powerhouse has already failed, and that a bailout now will not retroactively prevent that failure, any more than a bankruptcy proceeding could.

What a bailout will do is protect some employees from hardship and, in doing so, help an entire region see its way through financial crisis. However, this admirable goal would be more effectively served with economic aid programs targeting those without jobs (and not just in Dearborn).

You can’t force a company like G.M. to reinvent itself with a bailout, but you can spend that same money on the creation of new jobs whose output benefits the entire country—jobs that renovate our infrastructure and reduce our dependence on foreign, exhaustible sources of energy.

To put it another way, the fifty billion dollars’ worth of auto industry loans that we might see in the coming months represents a third of the budget of Obama’s ten-year energy plan. Where will the money be better spent?

Election Coverage Special Effects

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NBC just showed Ann Curry’s green room, as though we though all those graphics she was throwing around were real, solid objects.

CNN pseudo-hologrammically projected Jessica Yellin into the Situation Room on CNN. Now Yellin is explaining that there are 35 HD cameras shooting her in Chicago, and those cameras are somehow tied to cameras in New York, such that the paired cameras’ movements can match. As a result, Yellin can appear in the Sit Room, spatially integrated, if jerky and haloed.

Does any of this add to the broadcast? The Curry bit I almost understand; tighter visual integration between her and the many graphics zipping by maybe helps comprehension or something. But isn’t there value in seeing the hordes lining up to get into Grant Park where Yellin is(n’t)? Wouldn’t it be more informative to hear the crowd behind her, as in a traditional broadcast?

Reminds me of Oswalt: “We’re Science—we’re all about coulda, not shoulda.”

Alisa Miller on the US Media

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In an oldish TED talk I just got around to watching, Alisa Miller, CEO of Public Radio International, begins with an argument I agree with: that US media coverage is heavily weighted towards the trivial and towards a limited range of international stories, and that this is some kind of problem.

But as she goes on, our points of view diverge sharply. She asks, rhetorically, why this problem has come to be, and answers: “The reality is, is that [sic] covering Britney is cheaper” than covering international news. This may be so, but it’s probably more relevant that covering Britney makes way more money.

Let’s go with an overwraught analogy, comparing Britney and international coverage to two very different movies that I love: Halloween (1978) and Sideways (2004). According to Box Office Mojo, the first cost $325,000 to make, and has grossed $47,000,000 domestically. But its 8 franchise films have seen a combined domestic gross of another $228,000,000 or so.1 It’s reasonable to think that more cheap sequels and remakes could profit similarly well.

Sideways, on the other hand, cost $16,000,000 to make and grossed $71,000,000 domestically. Not bad, to be sure, and all the talk of a new mid-cap Hollywood model really came out of Sideways‘s success. But it’s reasonable to assume that, after just four years, the well has run more or less dry. Will Sideways keep earning at the pace Halloween and its franchise have? Will there be a sequel? Will there be a genre of thoughtful boys-will-be-bourgeois romps that emerges around the film’s success, in the way that the modern slasher film really emerges out of Halloween‘s?

To paraphrase the 8 ball, all signs point to no. The difference parallels the one Miller points to, between Britney coverage and international stories. It’s not so much about how much cheaper the one is to make—though the difference betwen $325,000 and $16,000,000 is significant, even adjusted for inflation.

Rather, it’s about whether the body of films or news that will emerge from one investment can sustain itself. In Hollywood, the question is answered by moviegoers, represented by box office figures. In the network media, the question is answered, by and large, by the complex relationship between stories, ratings, and advertising dollars. I’m very, very confident that the networks have, with a scientific precision Newton would envy, determined that they can make more money with more Britney than with more international coverage.2

And who’s to blame for this? Ultimately, it’s hard to hold the networks responsible, as Miller wants to. If they buck the viewers, they go into crisis. As I recall, this happened a few years back, amid talk one or all of the network news bureaus might collapse. It seems some combination of viewers with bad priorities and our free-market economy is at fault, and that’s too complex a culprit to support the emotional simplicity of blame.

As Miller asks, “Is this distorted view what we really want for Americans in our increasingly interconnected world?” Of course not. So what do we do? We give to NPR and PRI, we watch and read UK publications, which have (depending on which one you look at), government support or a more internationally-minded audience or both. We identify the problem, as is Miller, in public forums. (I shy away from commending her because she is, after all, CEO of an interested party.) We write on our blogs, talk to our friends, join our FaceBook groups. Is all that enough? It’s hard to know, but what good does blaming the networks do? What ends can come from that line of argument?

1: The production budgets of these other Halloween films are mostly irrelevant. First, they are similarly low with one or two exceptions—for example, Halloween H20, which cost $17,000,000 in 1998 and has already outgrossed the original at $55,000,000+. More to the point, though, as each film can be seen as paying for the next out of its profits. [Back to text]

2: I should note Miller does cite a Pew study in which the percentage of “Americans who say they closely follow global news most of the time grew to over 50%.” But surveys are notoriously unreliable indicators of respondent’s actual preferences and behaviors. If there’s one thing the free market does well, it’s tell us where the real money is to be made. [Back to text]

Who Do You Love?

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I know I’m behind on this one, as I’m just catching up with my feeds after a long busy spell. But I thought I’d relate a little story from when I saw Bo Diddley, in 2000 or 2001.

I caught his act at the Iron Horse in Northampton, a little club that seemed like it held no more than 60 or 70. I was seated at a table that had been set up more or less in the middle of an aisle, with a mom, dad, and daughter in from Boston to visit Amherst.

Bo played included all the songs you’d have wanted him to, but many were made slightly unfamiliar. For example, the classic desert-road hambone haunt, “Who Do You Love,” was an extra-long encore with a jumpy, major-key interlude.

I learned a lot from that song in particular. Bo’s tweaks showed a creative passion—an interest in process, in revision—that, culturally, we don’t often attach to the “classic” blues singers. Which is foolish, of course: Bo, for one, famously designed his own boxy guitar, and . In short, with an attention to traditional craft and a ceaseless drive towards innovation, he helped shepherd the blues into rock ‘n’ roll’s growing hands.

Finally, the classic “touching brush with fame” moment: On a break between sets, I was getting a Coke at the Horse’s back bar. Bo walked up next to me—I heard his boots coming before I saw him—and ordered his drink.

I didn’t want to just stare at him, so I said, “Hey—I really love what you’re doing up there, how you’re changing things.” (I’m sure it came out more clunkily.)

Bo glanced over, smiled, and asked, “Do you play, brother?” Then he paid for my Coke.

Myths, Media, Motives: A Cautionary Tale

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Housing Market Media Mayhem

As a homeowner, I have a heightened interest the housing market, to which my financial future is closely tied. But it’s not just “the housing market” in the abstract that makes me nervous right now. More than that, its the ways different media spheres are talking about the market that make me shudder.

Given my position, when I ended up reading the eFinanceDirectory article “Rent Vs. Buy Myths That Ruined the Housing Market,” I got a little sad. For reasons I’ll explain later, I’m confident this deeply troubling article will reach millions of people positioned to read uncritically.

First, Don’t Be Wrong

In short, the article is a run-down of five “myths” that, the unnamed author claims, caused the demise of the housing market. Each piece of the argument has problems, but I’ll focus on two:

“Myth #1: Renting is Like Throwing Your Money Away”

The argument here is that renters, unlike homeowners, “pay for one thing every month: shelter. They don’t pay interest to the bank, property taxes, or maintenance fees.” With “the money they save by renting,” they can “invest in stocks, bonds and other vehicles.” This argument—that renters pay less money, all else being equal, than owners—is echoed throughout the piece.

There’s a massive misunderstanding of real estate here, if not of basic capitalist economy. Renters write only one check each month, but it’s a rare landlord who’s not making sure her costs—including mortgage, taxes, insurance, and upkeep—are covered, and indeed that she’s making a profit. If I can rent an apartment for $850 each month, my landlord’s monthly PITI payment is perhaps hundreds of dollars less than that. In other words, landlords, in the interest of making money at their jobs, take a profit.

So, in seeking shelter, my choices are to come up with some initial capital (a noteworthy hurdle, to be sure) for the privilege of building equity with, let’s say, a $550 payment each month. Initially, only a small portion of my payment goes towards the principal of my loan, but out of an $850 rent check, none of it builds equity. Ever. So not only am I spending more for shelter if I’m renting, but I don’t get to keep any of my money. If I am lucky enough to have the choice, then renting is, indeed, throwing my money away (unless I really like my landlord).

“Myth #2: There are Tax Benefits to Owning”

There’s more weird logic here: “Mortgage interest can only be deducted from taxable income. This essentially means that buyers pay a dollar just to save 30 cents.”

The first sentence is true, but what it “essentially means” is that homeowners save “30 cents” on the dollars that they have to spend anyway for shelter. Again, given two equal payments, the renter comes out behind, every time. (And again, the payments, rent and PITI, are never equal.)

But it doesn’t end there: “Furthermore, deducting interest has no tax advantage unless a buyer pays so much in interest that the amount exceeds the standard deduction that everyone—including renter—is allowed to take.”

The first sentence is false. Deducting interest has no tax advantage unless the interest combined with all the myriad other deductions one can itemize exceeds the standard deduction. I should note here that I’m a homeowner in Pittsburgh, a city with relatively low property tax, and that I bought when the market last bottomed out, so I pay about as little interest as one can in this country (5.625%).

Despite the insane bargain I’ve got, I’ve itemized my deductions every year since I bought the house, and not once before. In other words, my mortgage interest presents a significant tax advantage, as it would for just about everybody out there.

Beyond Wrong: Myths and Motives

The “Myths” article is worse than just being inaccurate, though. There is, in the end, a particular political agenda advanced in the piece, one that ought not be part of something that projects itself as impartial financial advice. (“Our goal is to provide you non-biased original articles about the housing and mortgage issues that matter to you most,” reads introductory copy on the site’s home page.)

The piece reads, “Potential buyers bought into all sorts of rent vs. buy myths to justify buying houses that they could not afford during the boom.” Placing blame on the buyers make a certain amount of sense, on the face of it: Why didn’t they understand that an adustable-rate mortgage, for example, would come back to bite them?

That’s a valid point. However, holding buyers solely responsible is also a tactic that conservative pundits often use to keep government spending down. Proposed ARM bailouts, for many conservatives, aren’t appropriate use of tax money. If you blame the borrowers, then you don’t have to give them anything. For me, that argument doesn’t hold, as it’s unclear how the history of the situation should have anything to do with economic arguments for and against bailouts. The point is, it’s a popular argument for a conservative position on the mortgage crisis.

(Another article on the site, “The Truth About Home Prices and Mortgage Bailouts,” makes good on this hidden motive, with falsehoods more problematic than in the “Myths” piece.)

Reader Beware

There’s an obvious problem with purportedly “unbiased” advice that’s so deeply biased. Notwithstanding that issue, there’s a larger lesson here. As readers, we have to look out for ourselves. I found the “Myths” piece linked to from one of my favorite sites, kottke.org. Though I find absolutely no fault with the site for posting the link, I worry for its visitors, who numbered 600,000 per month two years ago, and who has at least 100,000 subscribers in Google Reader alone.

It’s our human propensity to believe trusted sources—the limits of which can be extreme indeed—that can get us into hot water in situations like this. A site I and many others trust and respect linked to an article that’s misleading, untruthful, and deeply biased. My worry here is that because of our relationship to the site, we might shed our usual skepticism and read a troubling article more favorably than we should. I hate to advocate widespread suspicion, but surely some measure of caution is in order, no matter where we get our reading material.