"What's good for General Motors is good for America," so a saying goes. I believe that statement is truer today than when it was first said some years ago.

Right now, the carmaker is struggling. "The reason GM is in trouble is because its cars aren't that good," commented a friend of mine. I replied: "GM's problems go deeper than its cars. GM's problems begin with how it is managed."

The company's problems strike me as very similar to those of the U.S. government -- management, or rather, mismanagement.

Fuzzy Math

In the book Buffettology, about Warren Buffett's approach to investing, a passage illuminates clearly GM's problems:

"This same phenomenon [a company growing only because money is being borrowed] can be seen in the financial records of the General Motors Company, which indicate that between the beginning of 1985 and the end of 1994 it earned in total, approximately $17.92 a share and paid out in dividends approximately $20.60 a share. During this same time period the company spent approximately $102.34 a share on capital improvements. The question that should be running through your mind is, if Generals Motors' earnings during this time period totaled $17.92 a share and it paid out as dividends $20.60, where did the extra $2.68 that it paid out in dividends and the $102.34 that it spent on capital improvements come from?"

Talk about fuzzy math. Ask any 10-year-old, and the kid will tell you that you cannot take $20 from $17. And how can you spend $102 if you've only earned $17?

Personally, I like GM cars. My first new car was a 1969 Corvette. It cost $6,000. And although my monthly payments left me with little to live on, my love of the car made the pain of the monthly payments worth it. I wish I had it today. Since then I have owned GM SUVs and Chevy trucks. So I'm not a critic of their products. I like some of them.

Bitter Cure

In my opinion, the problem with GM and the U.S. government is that both have gotten too big, and their managements have not been doing a good job solving the problems at hand. Instead, both have traded on their size and past glory and tried to borrow their way out of some of their troubles.

According to the U.S. Treasury Department, America's first 42 Presidents, from George Washington (1789) to Bill Clinton (2000), borrowed a combined total of $1.01 trillion from foreign governments and financial institutions. From 2000 to 2006, the Bush White House has borrowed $1.05 trillion alone. Yes, that means we have borrowed in the last 5 years what we had previously borrowed in the first 211 years of our country.

So is what's good for GM also good for America? I'm afraid if both GM and America did what they need to do to bring their affairs in line -- to put the organizations back on solid financial ground -- the world economy might collapse.

Can We Keep Growing?

But the soaring price of oil might force GM and the U.S. government to face financial reality anyway, eroding the environment of cheap energy and easy money for borrowing that fueled corporate and U.S. growth. I believe the climb in crude prices won't stop anytime soon since the problem is one of supply and demand more than political.

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