Human Cost Versus Social Cost Of Letting The Big Three Die–UPDATED

In a moving piece, Megan McArdle more eloquently states what I believe and feel. And this whole subject pains me deeply. I still mourn Michigan. She says:

But whatever your feeling about government intervention in the economy, or the correct level of income inequality, I think there’s one thing we can all agree on: for the world to get better, things that don’t work have to fail. We cannot keep alive every company, every car and every job that someone once liked, because that way lies stagnation and death. Places where production decisions are made based on how much labor they can consume, rather than how much value they can produce, make everyone in society worse off in the long run.

So while I fully understand the human cost (I think), it has to be borne, for the same reason we couldn’t save all the folks who loved their gentle home-weaving traditions, or their jobs making buggy whips. This is, of course, easy to say, when I am not bearing it. But I’m not against helping the auto workers transition to doing something else; I think unemployment assistance is a good idea, and should be extended during this crisis to at least 52 weeks. I would be fine with a job training program, if we could find one that works (so far, government training programs seem to run from useless to actively harmful). I’d be happy to take some of the money we aren’t using bailing out auto companies, and offer relocation assistance to people who are trapped in factory towns.

I understand that this is not what the auto workers want; they want their jobs. But while I am happy to help the auto workers, I am not happy to help them manufacture undesireable cars at massive social cost. I too, would have liked to keep my job as a management consultant. But I didn’t have a right to have the job I wanted merely because I liked it. And it wouldn’t have been good for America if I had.

The brutal reality with sick patients is that sometimes the doctors have to talk with all involved and say,”I’m sorry, there is nothing more we can do.” Every once in a while, a patient manages to survive, sometimes by going alternative routes. It would be a great thing for the American car companies to survive, but it would be rewarding corporations that have spent a lifetime living with very bad habits and suffering slowly degenerative disease to attempt to save them. Rehabilitation is unlikely and the taxpayer shouldn’t be paying the bills. (Although, in the interest in accuracy, the car companies are asking for low-interest loans, not free money.)

Ironically, now, as the car companies lay gasping on the gurneys, the Union bosses note that it’s not management that has killed the patient, but external bugs–like high gas prices and the economic downturn. From the Wall Street Journal:

For decades, the UAW waged bitter battles with management over wages, benefits, executive pay and jobs. Only a year ago, the union called short strikes against GM and Chrysler during their contract negotiations a year ago, and Mr. Gettelfinger suggested top executives earnings millions were “hogs slopping at the trough of corporate greed” while trying to force workers to bear the brunt of cost cuts.

Now, with GM at risk of collapse, the union representing about 150,000 U.S. auto workers is joining forces with the companies in a blitzkrieg public campaign to plead for a federal bail out. Although Mr. Gettelfinger rarely talks to the media aside from local radio stations in Detroit, he has reached out over the weekend to make the union’s viewpoint clear.

Although GM Chief Executive Rick Wagoner has come under heavy criticism, Mr. Gettelfinger said a change in management is not needed. “”It’s a stretch to say that management is responsible for all of the things happening now that no one anticipated or expected,” he said.

That’s a shift from the past when union rhetoric typically pointed the finger at management mistakes as the main reason for Detroit’s troubles.

Huge shift, indeed. Meanwhile, the Democrats want the government to have a stake in the auto industry. Isn’t socialism state-owned companies? First the financial sector and now the manufacturing sector.

Of course, letting the Big Three go, means that their suppliers go, their employees go, the union goes, etc. Or, it could mean that. Filing bankruptcy is what an individual in their situation would have to do. How will individuals or corporations modify their behavior if they don’t pay the consequences for their behavior?

If I had to wager, I’d bet that the car companies get their money. It’s symbolic, even if Americans don’t want it. Will the UAW finally recognize that their practices kill productivity? Will executives slash the bureaucracy? Will Detroit finally build a BMW-esque engineered car with Apple like innovation?

Color me cynical, but my guess is no. And that’s why, the patient should be allowed to die.

UPDATED: More here.

Posted in Show Me The Money | 8 Comments »

MSNBC Gets Government Payout

MSNBC functioned as an Obama public relations arm this election season and it now seems their sycophancy had a self-serving purpose as well. Newsbusters reports:

Is MSNBC being rewarded for having supported Obama? That’s what Jim Pinkerton suggests. On this evening’s Fox News Watch, the columnist and New America Foundation fellow cited the news that GE Capital, a subsidiary of MSNBC’s parent company GE, has received a $139 billion government loan guarantee.

To my Lefty readers and friends who loathed the Republicans unholy alliance with disgusting capitalist pigs, I’d like to suggest they might want to get to work at keeping Obama’s house in order. Preemptively.

And it would seem to me that this incestuous relationship would be worrying from a free speech perspective. Nah…..It’s Democrats.

Posted in Political Animals, Show Me The Money | 4 Comments »

Why The Economy Will Get Worse

I’m just full of joi de vivre. The economy will get worse. It just makes sense. Car companies are in long term trouble because people can drive older used cars. Retailers are in long term trouble because people can buy cute enough clothes at Wal-Mart and Target. The housing market won’t rebound for a while because people are already in more house than they need.

And as all these businesses constrict, people will lose jobs because their employers can’t pay them.

Everyone, lenders, businesses and individuals are holding onto cash and paying down debt. Why? Because the rate of return for paying off the debt is greater than the market. The market will hurt for a while. Maybe.

The New York Times has an article about the economy:

But even as worry about gas prices fades, it is being replaced by fear about the broader economy. Each 10-cent drop in gasoline prices puts $12 billion a year back in consumers’ pockets. Instead of spending that cash, people are trying to save it or cut their debt, many said in interviews.

“All that money is going right into paying off my credit cards,” said Jose Martinez, 33, as he pumped gas into his Dodge Charger at Ohio Gas Station No. 1 in Cleveland.

Moreover, the fall in gasoline prices is not translating into improved fortunes for automakers, at least not yet. Consumers said they remained wary of gas-guzzling cars on the theory that prices would rise again.

Can you blame consumers for battening down the hatches after all the fear talk? On the other hand, it’s not really so awful that Americans might be getting back to more reasonable spending. However, as people lose jobs, they’ll live on credit cards deepening the crisis.

And it’s a worldwide phenomenon, lest the Germans engage in too much schadenfreude.

Cross-posted at RightWingNews and the Houston Chronicle

Posted in Show Me The Money | 2 Comments »

A Moderate Depression?–UPDATED

American Express became a bank today. Yes, indeed. They want their fists on that super-secret Fed money–also known as your tax dollars.

Just so we’re clear: These would be the institutions that lobbied Congress to make filing bankruptcy more difficult and getting a fresh start nearly impossible. And Congress passed the law. And President Bush signed it.

Now, these same institutions, who have been stupid about their money, want your money. Meanwhile, the market continues to tank. And banks refuse to lend to all but the very best bets. That’s not very helpful to struggling businesses.

MaxedOutMama’s solution long-term doesn’t mesh with the nature of Democrats:

A depression lasts longer than a recesssion and so the net drop in GDP is more; I am expecting to see that annualized drop head down around the 5% range. So it would be very severe and an unprecedented event.

Most of this is going to come from a massive drop in real incomes for the lower half of the income range, which will destroy a lot of jobs and then continue to inflict damage to higher incomes.

The key to avoiding this is to subsidize the really lower income groups, dump all the effing alternative energy crap and instead do what we can now do, not try to institute any new entitlement programs, reform bankruptcy reform to something reasonable, and control the necessary tax increases to keep them moderate and beginning around the 80K range. Doing that will be challenge enough! If Obama and the Dems could pull that off they’d be doing wonderfully. However we have got to cut federal spending pretty significantly over the next few years. It’s time to cut out a lot of the fluff, and Lord knows there is a lot of it.

You get much more net economic stimulus from subsidies like unemployment and energy to low income groups. They will spend it. In a recession, the higher income groups save more because they can and because they are worried.

I do know this: The drop in gas prices have been a huge relief. Talking about windmills is just stupid, right now. Sorry T. Boone. What we need is cheap fuel. Now.

Recession? Moderate depression? It’s not 1929, but the next year could be a lot more challenging for a lot more people.

Cross-posted at RightWingNews and The Houston Chronicle.

UPDATE: More from Michelle Malkin

Posted in America, Corrupted Culture, Show Me The Money | 1 Comment »

Time To Have The Money Talk: Bad News, There Is None

Pre-post caveat: I am not a financial adviser, so this is for what it’s worth.

The New York Times has an unintentionally funny article about talking to family members about their finances:

It’s started coming up in asides I hear from middle-aged friends who are concerned about their parents ending up in the poorhouse. And I see it in e-mail from people in their 60s and 70s, who can’t believe their offspring got mixed up in funny mortgages and wallets full of credit cards.

But often, the grown children don’t know precisely how the devastation in the markets has affected their parents’ portfolio, and the older parents don’t know what their children’s monthly debt payments are.

What the writer fails to mention is the obvious: If Obama follows through with his plans, children who receive an inheritance from their parents will likely be taxed into oblivion. The so-called death tax will be back. Capital gains taxes will increase. So, the smart thing for families would be to transfer the deed, sell the house to the kid, whatever, to avoid the taxes in the future. And it would be smart to do it now. In addition, if an older family member intends to sell the house and move into special housing, doing it now would be a good idea. Only problem? In many parts of the country, you can’t sell a house if you want to.

And then, of course, the elderly have lost their portfolios in the latest stock dive. And their kids are mortgaged to the hilt and losing their job. To help matters, Obama has promised to let the Bush tax cuts go away. So for all Obama’s opining about lowering taxes, they’re going to increase and not just for so-called rich people.

Bottom line: People are stuck. The Baby Boomers, the biggest generation, march ever closer to retirement. They care for their elderly parents who are living longer due to medical advances, and that’s a good thing. But there are financial realities.

Obama will bailout the car companies. He voted for the Wall Street bailout. Who will bailout the taxpayer?

H/T Instapundit

Posted in Show Me The Money | 1 Comment »

Does Socialism Scare The Market?–UPDATED Iowahawk’s Tour Of Socialist Celebration

Nah.

What little capital gains you made, you might want to take, right? Nah.

UPDATED:

Somebody’s happy. Lots of somebodies.

Posted in Isms, Show Me The Money | 3 Comments »

What Americans Want: Save Me!

This election means change, alright, but it’s not the changes that seem evident at first blush.The Wall Street Journal’s Daniel Henniger gets down to what this election means for America:

Push past the historic candidacy, however, and one sees something even larger at stake in this vote. One sees what Joe (The Plumber) Wurzelbacher saw. The real “change” being put to a vote for the American people in 2008 is not simply a break from the economic policies of “the past eight years” but with the American economic philosophy of the past 200 years. This election is about a long-term change in America’s idea of itself.

I don’t agree with the argument that an Obama-Pelosi-Reid government is a one-off, that good old nonideological American pragmatism will temper their ambitions. Not true. With this election, the U.S. is at a philosophical tipping point.

The goal of Sen. Obama and the modern, “progressive” Democratic Party is to move the U.S. in the direction of Western Europe, the so-called German model and its “social market economy.” Under this notion, business is highly regulated, as it would be in the next Congress under Democratic House committee chairmen Markey, Frank and Waxman. Business is allowed to create “wealth” so long as its utility is not primarily to create new jobs or economic growth but to support a deep welfare system.

An Obama presidency would lead America towards a European “social market economy.” (Oct. 30)

The political planets are aligned to make this achievable. In the aftermath of the financial crisis, prominent Democrats, European leaders in France and Germany and more U.S. newspaper articles than one can count have said that the crisis proves the need to permanently tame the American “free-market” model. P.O.W. Alan Greenspan is broadcasting confessions. The question is: Are the American people of a mind to throw in the towel on the system that got them here?

While Europeans seem eager to for Americans to follow them into mediocrity, they ignore what that will mean for them personally. They have had the luxury of depending on American magnanimity for security so they could have universal health care and long vacations. That will likely soon change.

Americans, many of them, see these realities:

The world seems increasingly beyond everyone’s control. Part of the reason that George W. Bush backed the Paulson Plan is because he knows that world-wide panic can cause economic and social chaos. Too many moving parts, too many decisions, too much confusing information.

State control saves a person the trouble of having to think or having to be uncomfortable. Well, that’s the idea anyway.

Americans have traditionally chosen the vicissitudes of a free market because they could see the personal benefit. There is less security, but there is much more reward. When people feel that the reward is out of reach or impossible, they turn to guaranteed not-too-awfulness–socialism. It’s better than destitution or the fear that one may end up destitute. Venezuela is Exhibit “A”, at the moment.

MaxedOutMama, wrote an excellent post in this regard. There is a WHY here and Republicans are not blameless. In fact, a whole host of uncomfortable economic information points to why Americans are where they are at. She says:

I’ll tell you what’s so insane about this election. First, neither candidate is addressing the real US problem, which are policies that have driven the bottom 60% of the US income pyramid into financial difficulty. The 80-90% segment of the pyramid is a derivative of the bottom 60%. The 90-95% segment is a derivative of the 80-90%. The 60-80% plus the 95-100% wedges are too little to carry the rest. What we need to do is subsidize the bottom 5-15%, take some of the tax load off the 15-30%, and increase taxation on the 80% - 100%. The best way to stimulate the middle is to spark corporate growth, which can best be done by going to a moderate flat tax on corporations. I’d suggest 18%.

Those destructive policies are policies of energy starvation, which destroys economies, and industrial starvation, which destroys economies, and a regressive taxation policy which increases the relative load on the bottom of the pyramid. Second, neither candidate is willing to really address the future compounding of our current problems, which is the coming retirement boom. Third, neither candidate is willing to address the nearly global changes in the business climate, which have combined to decrease US ability to compete. Fourth, both candidates advocate a carbon cap and trade policy which would be economic suicide if applied mainly to the US, and global economic suicide if applied fairly.

The bozo election will not end well. It is true that Obama is worse, because McCain’s energy policy is a lot more realistic.

When the bottom 60% feel unstable, even when they have a job, even a regular paycheck, but they live precariously, socialist policies–which would be the exact worst thing for them ultimately but sound good in the short term–become appealing.

The problem with this socialistic impulse: America just can’t do it. With Baby Boomers who have never known a challenging economic moment retiring, there are going to have to be cuts not expansion of the government. But I fear that’s exactly what both candidate will attempt.

These next four years, the next fifteen, are going to be challenging. Looking at all this, the words of Mr. T come to mind: “I pity the fool” who will be facing this mess.

Cross-posted at RightWingNews

Posted in America, Political Animals, Show Me The Money | No Comments »

Even Businesses Foist Their Bias–UPDATED

When I was in Destin a week or so ago, I stopped by the Barnes-n-Noble to pick up, hopefully, Jonah Goldberg’s book Liberal Fascism (a must read, by the way).

Here is what I saw:

To calm down from the irritating book display: a walk on the beach.

And this picture I uploaded for my own amusement. Have you ever seen a more hideous lamp? This was the lamp that was in the house we rented. There is no accounting for taste, I’ll tell you that. That thing probably cost a lot of money. It’s more than a little frightening. Don’t you find monkeys as decorative objects freaky?

All photos taken with my 3G iPhone.

UPDATED: This B&N was located in Destin, Florida. There were few conservative books at all. I found one copy of “Liberal Fascism” and one copy of John Fund’s “Stealing Elections” nestled in the Current Events section. One would think, from a business perspective, that the goal would be to cater to the clientele–which in the panhandle is predominantly conservative. But, no.

I can safely guesstimate that the ratio of liberal to conservative books was at least 3:1, probably more like 4:1. That included the table displays (where a tiny corner of the other side of the table pictured had like four obscure–not best seller–books) and the book shelves.

Cross-posted at RightWingNews

Posted in Entertain Me, Political Animals, Show Me The Money | 15 Comments »

The Tax Code Explained…

I got this in an email today and because I’m too lazy to reformat it, I’m printing it as is. But it nicely explains the system of progressive taxation.

TAX System Explained In Simple Terms

Sometimes politicians, journalists and others exclaim; ‘It’s just a tax cut for the rich!’ and it is just accepted to be fact. But what does that really mean? Just in case you are not completely clear on this issue, I hope the following will help. Please read it carefully.

Let’s put tax cuts in terms everyone can understand.

Suppose that every day, ten men go out for dinner and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this:

a.. The first four men (the poorest) would pay nothing.
b.. The fifth would pay $1.
c.. The sixth would pay $3.
d.. The seventh would pay $7.
e.. The eighth would pay $12.
f.. The ninth would pay $18.
g.. The tenth man (the richest) would pay $59.

So, that’s what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

‘Since you are all such good customers,’ he said,’I'm going to reduce the cost of your daily meal by $20.’ Dinner for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still eat for free, but what about the other six men, the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair
share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to eat their meal. So, the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

a.. The fifth man, like the first four, now paid nothing (100% savings).
b.. The sixth now paid $2 instead of $3 (33% savings).
c.. The seventh now paid $5 instead of $7 (28% savings).
d.. The eighth now paid $9 instead of $12 (25% savings)
e.. The ninth now paid $14 instead of $18 (22% savings).
f.. The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.

‘I only got a dollar out of the $20,’ declared the sixth man. He pointed to the tenth man, ‘but he got $10!’

‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than me!’

‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

The nine men surrounded the tenth and beat him up. The next night the tenth man didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start eating overseas where the atmosphere is somewhat friendlier.

Posted in Show Me The Money | 2 Comments »

Screwing Small Business People

Do you have an employee or two? Are you an employee at a small business? If you answer yes to either question, you’ll want to read this from the Wall Street Journal:

Mr. Obama’s tax increase would hit the bottom line of small businesses in three direct ways. First, because 85% of small business owners are taxed at the personal income tax rate, any moderately successful business with an income above as little as $165,000 a year could face a higher tax liability. That’s the income level at which the 33% income tax bracket now phases in for individuals, and Mr. Obama would raise that tax rate for those businesses to 36%.

Second, the Obama plan phases out tax deductions (the so-called PEP and Pease provisions), thus raising tax rates imposed on this group by another 1.5 percentage points. Finally, Mr. Obama would require many small business owners to pay as much as a four-percentage-point payroll tax surcharge on net income above $250,000. All of this would bring the federal marginal small business tax rate up to nearly 45%, while big business would continue to pay the 35% corporate tax rate.

Add that to increasing capital gains taxes and small business owners are doubly punished. They will be taxed more and they will be forced to keep their money stuck.

Guess what will happen? Small business owners will freeze hiring and probably have to fire employees and replace them with cheaper labor or none at all. People employed by small businesses should run from Barack Obama’s plans to help them. Unless a person with a job wants to live on government handouts–you know enjoying the wealth being spread around–vote John McCain.

Obama is right. It’s about J-O-B-S.

Cross-posted at Right Wing News

Posted in Political Animals, Show Me The Money | 1 Comment »