As Pres-Elect Obama looks at a $500B - (by some estimates) $1trillion rescue package, it's important to look at the fundamental differences between idea of an economic stimulus and a 'bailout.' Obama's plan calls for a massive government jobs creation program (2.5 million on government-funded and regulated infrastructure, green-technologies, and other jobs), a large tax credit program, and a rescue of mortgage-holders going down the river. While Obama wouldn't specify numbers in today's news conference (he says he wants his new economic team to propose to him first), one thing is certain. A stimulus of this size would create a massive deficit and long-term debt, far beyond what we're looking at already. Obama acknowledged this fact in his news conference, but made not commitments as to how this debt would be dealt with, other than the shop-worn promise to look at the budget line-by-line. I don't think he's going to find $2 trillion (an estimate of all of the stimulus & rescue packages combined) to cut from the budget, so several generations are going to be footing this bill. He seems to have moderated his position on eliminating the Bush tax cuts somewhat, hinting that they may be allowed to expire on schedule rather than be eliminated.
Obama was asked about what he thought of the Citigroup bailout and proposed rescue of Detroit, and managed to dance mightily around these questions as well. In case you haven't turned on the news in the last couple of nights, Citigroup lost over half its stock value in less than a week after investors decided they were probably exaggerating the stability of their positions. The government promised to guaranteed a $306-billion loan package, which made Wall-Street happy, but may or may not be of long-term benefit. Sec. Paulson seemed uncertain of why this bailout will work in the long-run, and gave the same basic explanation provided with the AIG rescue - too big to fail. Probably true, but it's a bit disconcerting when there seems to be no clear plan for execution and success. Obama seems to think that as long as it looks like it could be successful, it's worth trying.
When Obama was asked about the Detroit bailout, he took the Nancy Pelosi line of 'we can't let them fail, but they need a good plan.' The Guardian had an interesting look at this on Sunday, comparing the successful rescue of Chrysler in the 1980s with the failed rescue of the UK's Leyland auto company which involved a government takeover. Two important facts jumped out of that article: in the case of Chrysler, Lee Iacocco was an expert who had already cleaned house and made an intensive restructuring plan before coming to Congress for the loan; the Leyland takeover involved major, intensive government-management of all aspects of the company, dooming it to failure. Neither Congress nor the federal government have good track records of managing much of anything. They need to leave that to the experts in individual fields, and deal with basic governance. My problem with the current proposed rescue is that Congress just promised the big-three a $25B loan in September, and rather than justifying how it will be used and how they'll restructure, the auto-industry is turning right around, hat in hand to ask for more. The auto industry has demonstrated failed planning and structure for years now, and shows no sign of turning that around.
There are certainly economists of all stripes right now recommending a further economic stimulus, but there's a big difference between a stimulus and a bailout. A bailout rescues someone or something, maybe with strings attached, but with no real means of ensuring operational change. A stimulus provides incentives to change, maybe with shot of cash, but leaves it to the market, or the individual, to correct mistakes. A stimulus doesn't make the assumption that government can and should be the major employer, manager and baby-sitter of record. That's just what the packages on the table will do - seems like a bailout to me.
24 November 2008
19 November 2008
The Dems Shop 'til We Drop
You have to love the 'audacity of hope' among the Congress and the big-three auto companies. Despite massive resistance nationally, and among many Congressional Republicans and the White House, they are pushing not one, but two competing plans to bail out the auto industry. Wagoner's testimony not-withstanding, the auto industry certainly doesn't deserve the bailout. They've already been bailed out on several occasions, and have continued to waste resources and time. The only ad that was on t.v. for Chevy over the past two weeks was for, you guessed it, a big-ole truck. The industry still doesn't seem to understand that it has dug its own grave and is now heading for the earth's molten core.
Don't get me wrong. It is very clear that bankruptcies among the major auto firms (as GM now claims it is heading for despite claiming adequate cash reserves and predicting a recovery just two months ago) will have a tremendous impact on the economy. But the big-three have become like that annoying uncle who's a hapless (and bad) gambling addict. They just keep coming back for a little more, swearing that this time they'll straighten up and fly right. And if you believe that one, there's a really cool bridge waiting for you in Brooklyn. Mitt Romney is right: bankruptcy is the only thing that will straighten out the industry. Whatever survives will emerge stronger, leaner and ready for competition. That's a much better scenario than the addicted uncle spending the nights on your couch, and it's a whole lot better than bailing him out again and again. Then again, Barney Frank and Harry Reid seems to find the uncle endearing. Maybe they can shop for a new couch on their own - mine's full up and I hate shopping.
Don't get me wrong. It is very clear that bankruptcies among the major auto firms (as GM now claims it is heading for despite claiming adequate cash reserves and predicting a recovery just two months ago) will have a tremendous impact on the economy. But the big-three have become like that annoying uncle who's a hapless (and bad) gambling addict. They just keep coming back for a little more, swearing that this time they'll straighten up and fly right. And if you believe that one, there's a really cool bridge waiting for you in Brooklyn. Mitt Romney is right: bankruptcy is the only thing that will straighten out the industry. Whatever survives will emerge stronger, leaner and ready for competition. That's a much better scenario than the addicted uncle spending the nights on your couch, and it's a whole lot better than bailing him out again and again. Then again, Barney Frank and Harry Reid seems to find the uncle endearing. Maybe they can shop for a new couch on their own - mine's full up and I hate shopping.
12 November 2008
Fluidity: The Ever Changing Bailout Plan
Henry Paulson defended himself before Congress today, arguing that the original concept of the bailout plan (excuse me, economic recovery plan), which largely involved buying up 'toxic securities' (tied to unknown amounts of bad mortgages), is no longer the best solution to the credit and financial crises. Paulson now argues that $700 billion in tax dollars should be used to buy partial ownership stakes in the banks themselves. Nationalization of banks in the good 'ole USA? The idea boggles the mind. Perhaps it'll mean better management; at least AIG won't use any more of the loan to take its Exec's on nice spa trips; but I can't help thinking that this trip down socialism's memory lane it just going to keep getting darker.
In the meanwhile, AIG is getting another $40B, while American Express convinced the Fed. to allow them to become a real bank in record time, which may now use that status to request a share of the pie. And to top it all off, the Dynamic Duo of Henry Reid and Nancy Pelosi, backed by that happy socialist, Barney Franks, is demanding to bailout the auto industry, mortgage-holders, and just about anything not nailed down, while increasing spending at an enormous pace, deficit-be-damned.
Most of us are sensible enough to cut back on spending when times get tough - to be a little more thrifty. Not the Congress. They seem to think that increasing spending, increasing taxes, and taking over private industry is just the ticket to fix the economy. Now where have we heard this before?
In the meanwhile, AIG is getting another $40B, while American Express convinced the Fed. to allow them to become a real bank in record time, which may now use that status to request a share of the pie. And to top it all off, the Dynamic Duo of Henry Reid and Nancy Pelosi, backed by that happy socialist, Barney Franks, is demanding to bailout the auto industry, mortgage-holders, and just about anything not nailed down, while increasing spending at an enormous pace, deficit-be-damned.
Most of us are sensible enough to cut back on spending when times get tough - to be a little more thrifty. Not the Congress. They seem to think that increasing spending, increasing taxes, and taking over private industry is just the ticket to fix the economy. Now where have we heard this before?
11 November 2008
How nice: a bald, toothless, hypoallergenic dog for the Obamas
Well now, don't you think this is just a perfect fit for the President-Elect, who is about to meet a manufactured challenge brought on by a world eager to test the new kid on the block? Gird your loins, puppy!
If you can read this, thank a veteran
No, I'm not slamming teachers with the article title. I'm grateful for my daughter's teacher, and all she does. But I'd like you to think for a minute about what today's remembrance means. From the sacrifice of citizen-soldiers, we gained a country to call our own. From the sacrifice of our armed forces in WWI and WWII, Europe was freed from tryanny. From the sacrifice of our service members, people all over the world were kept safe. If it weren't for the willingness of ordinary men and women to defend their country and her liberty, we would not have the right to vote as we choose, read what we will, speak what we think, believe, worship or learn. These rights were bought, and bought dearly.Thank a veteran today.
07 November 2008
The Chicago Machine Rolls On: MSM Finally Does Some Reporting
In a sign that the MSM may be recovering a modicum of dignity, reporting on the appointment of Rahm Emanuel as the next Chief of Staff is not nearly all rosy. The Chicago Tribune (title article) reported on his deep ties to the corrupt Chicago Daley Machine (you know, the one that produced our President Elect). ABC News reported on the fact that Emanuel was director of Freddie Mac during the time it was cooking the books. Hmmm, since Pres.-Elect Obama is one of the largest recipients of money from them, I guess having the guy who donated to you makes sense. Even the NY Times seems a little troubled. It's a bit late, guys, to convince us you weren't thoroughly rolled, but maybe this indicates the honeymoon won't extend for four years.
Risk sensitivity and voters
While sitting in an Ecological Modeling Class the other day, I had a revelation about why normally sane, rational people were so caught up in the Obamamania. They are economic risk-takers. Risk-sensitivity theory is based on modeling the behavior of consumers based on their preferences when faced with a choice between a 50/50 chance of a high payoff (vs. no or low payoff) and a 100% chance of a moderate payoff. These models are the whole reason for the targeting of low-income and low-education consumers by lotto boards; people with lower incomes and lower educations often (note, not always - no model is perfect) choose the riskier option. They will spend money on the chance of a high payoff, knowing they're more likely to get no or a low payoff. Those who have more, tend to be more cautious and choose the 'certainty' option. They are more likely to choose the 100% option of a moderate payoff.
This sounds to me to be very close to what happened on Tuesday. Only in this case, I think we'd have to add into the 'low-income' category, those who perceive themselves (perhaps 2nd hand) as suffering. These voters were willing to take a gamble on someone who has no experience, a murky background, and offers 'pie-in-the-sky' rhetoric over a true American hero with more experience in his little finger. The Obama-lovers were "risk prone." To get themselves away from what they perceive as the source of their woes (the Republican Party), they gambled. Even with this gambling addiction sweeping our country, and the Obama campaign doing its darndest to buy the election, John McCain would still have won if it weren't for the addition of those 'we hate him so much we'll doom the entire country' Republicans who NEVER SHOWED UP TO VOTE. I'm really angriest at them. How dare they thumb their noses at all of us. Now we all have to find out what the gamble will bring us.
This sounds to me to be very close to what happened on Tuesday. Only in this case, I think we'd have to add into the 'low-income' category, those who perceive themselves (perhaps 2nd hand) as suffering. These voters were willing to take a gamble on someone who has no experience, a murky background, and offers 'pie-in-the-sky' rhetoric over a true American hero with more experience in his little finger. The Obama-lovers were "risk prone." To get themselves away from what they perceive as the source of their woes (the Republican Party), they gambled. Even with this gambling addiction sweeping our country, and the Obama campaign doing its darndest to buy the election, John McCain would still have won if it weren't for the addition of those 'we hate him so much we'll doom the entire country' Republicans who NEVER SHOWED UP TO VOTE. I'm really angriest at them. How dare they thumb their noses at all of us. Now we all have to find out what the gamble will bring us.
05 November 2008
John McCain's Concession Speech and National Results
The National Results are as follows (pasted from Real Clear Politics). MO and NC were too close to call for the Presidential race as of last posting.
Thanks to Bitten and Bound for the video posting, since I couldn't grab it directly from MSNBC for some reason. This has got to be the most generous, and truly loving, concession speech I've ever heard, and is an eloquent demonstration of why I voted for Sen. McCain. Fortunately, he returns to the Senate, so we'll still have his leadership. Now we all have to work hard to keep government accountable and work for a unified country.
· President ·
Obama/Biden 52% (349) McCain/Palin 46% (163)
| 7:00 ET | Obama | McCain | Obama | McCain | |||
|---|---|---|---|---|---|---|---|
 Georgia (15) | 46% | 53% | (99%) | South Carolina (8) | 45% | 54% | (94%) |
 Indiana (11) | 50% | 49% | (99%) | Vermont (3) | 67% | 31% | (89%) |
| Kentucky (8) | 41% | 58% | (100%) | Virginia (13) | 52% | 47% | (99%) |
| 7:30 ET | Obama | McCain | Obama | McCain | |||
 North Carolina (15) | 50% | 49% | (100%) | Ohio (20) | 51% | 47% | (96%) |
| West Virginia (5) | 43% | 56% | (99%) | ||||
| 8:00 ET | Obama | McCain | Obama | McCain | |||
| Alabama (9) | 39% | 61% | (99%) | Massachusetts (12) | 62% | 36% | (96%) |
| Connecticut (7) | 60% | 39% | (96%) | Mississippi (6) | 43% | 57% | (99%) |
| Delaware (3) | 62% | 37% | (100%) | Missouri (11) | 49% | 50% | (100%) |
| DC (3) | 93% | 7% | (100%) | New Hampshire (4) | 55% | 44% | (85%) |
| Florida (27) | 51% | 49% | (99%) | New Jersey (15) | 57% | 42% | (98%) |
| Illinois (21) | 61% | 38% | (95%) | Oklahoma (7) | 34% | 66% | (99%) |
| Maine (4) | 58% | 40% | (78%) | Pennsylvania (21) | 55% | 44% | (99%) |
| Maryland (10) | 61% | 38% | (97%) | Tennessee (11) | 42% | 57% | (98%) |
| 8:30 ET | Obama | McCain | Obama | McCain | |||
| Arkansas (6) | 39% | 59% | (96%) | ||||
| 9:00 ET | Obama | McCain | Obama | McCain | |||
| Arizona (10) | 45% | 54% | (99%) | New York (31) | 62% | 37% | (99%) |
| Colorado (9) | 53% | 46% | (80%) | North Dakota (3) | 45% | 53% | (97%) |
| Kansas (6) | 42% | 57% | (97%) | Rhode Island (4) | 63% | 35% | (98%) |
| Louisiana (9) | 40% | 59% | (100%) | South Dakota (3) | 45% | 53% | (100%) |
| Michigan (17) | 57% | 41% | (99%) | Texas (34) | 44% | 55% | (99%) |
| Minnesota (10) | 54% | 44% | (99%) | Wisconsin (10) | 56% | 43% | (99%) |
| Nebraska (5) | 41% | 57% | (99%) | Wyoming (3) | 33% | 65% | (100%) |
| New Mexico (5) | 57% | 42% | (99%) | ||||
| 10:00 ET | Obama | McCain | Obama | McCain | |||
| Iowa (7) | 54% | 45% | (99%) | Nevada (5) | 55% | 43% | (100%) |
| Montana (3) | 47% | 50% | (99%) | Utah (5) | 34% | 63% | (99%) |
| 11:00 ET | Obama | McCain | Obama | McCain | |||
| California (55) | 61% | 37% | (91%) | Oregon (7) | 55% | 43% | (62%) |
| Hawaii (4) | 72% | 27% | (99%) | Washington (11) | 58% | 41% | (56%) |
| Idaho (4) | 36% | 61% | (98%) | ||||
| 1:00 ET | Obama | McCain | Obama | McCain | |||
| Alaska (3) | 36% | 62% | (99%) | ||||
· Senate ·
Democrats 56* (+5) Republicans 41 (-5)
| Democrat | Republican | |||
|---|---|---|---|---|
| Alaska | Begich 47% | Stevens 48% | (99%) | - |
| Colorado | Udall 52% | Schaffer 43% | (87%) | Dem Pickup |
| Georgia | Martin 46% | Chambliss 50% | (99%) | - |
| Kentucky | Lunsford 47% | McConnell 53% | (100%) | GOP Hold |
| Maine | Allen 39% | Collins 61% | (99%) | GOP Hold |
| Louisiana | Landrieu 52% | Kennedy 46% | (99%) | Dem Hold |
| Minnesota | Franken 42% | Coleman 42% | (99%) | GOP Hold |
| Mississippi | Musgrove 45% | Wicker 55% | (99%) | GOP Hold |
| Nebraska | Kleeb 40% | Johanns 58% | (99%) | GOP Hold |
| New Hampshire | Shaheen 52% | Sununu 45% | (85%) | Dem Pickup |
| New Jersey | Lautenberg 56% | Zimmer 43% | (99%) | Dem Hold |
| New Mexico | Udall 61% | Pearce 39% | (99%) | Dem Pickup |
| North Carolina | Hagan 53% | Dole 44% | (100%) | Dem Pickup |
| Oregon | Merkley 47% | Smith 48% | (75%) | - |
| Texas | Noriega 43% | Cornyn 55% | (99%) | GOP Hold |
| Virginia | Warner 64% | Gilmore 34% | (98%) | Dem Pickup |
| * Joe Lieberman (CT-ID) and Bernie Sanders (VT-I/S) caucus with Senate Democrats | ||||
· House ·
Democrats 252 (+20) Republicans 173 (-20)
| Democrat | Republican | |||
|---|---|---|---|---|
| Maryland (1) | Kratovil 49% | Harris 49% | (100%) | - |
| Idaho (1) | Minnick 51% | Sali 49% | (96%) | - |
| Virginia (5) | Perriello 50% | Goode 50% | (100%) | - |
| California (4) | Brown 50% | McClintock 50% | (100%) | - |
| New Jersey (3) | Adler 50% | Myers 50% | (93%) | - |
Democrats
| Holds | ||
|---|---|---|
| GA-8 | NH-1 | AL-5 |
| KY-3 | MS-1 | PA-10 |
| PA-11 | WI-8 | IN-2 |
| PA-12 | ||
| Pickups | ||
|---|---|---|
| VA-2 | VA-11 | OH-1 |
| OH-16 | AL-2 | AZ-1 |
| CO-4 | CT-4 | FL-24 |
| FL-8 | IL-11 | MI-7 |
| MI-9 | NV-3 | NM-1 |
| NM-2 | NY-13 | NY-25 |
| NY-29 | NC-8 | PA-3 |
Republicans
| Holds | ||
|---|---|---|
| FL-25 | MN-6 | IN-3 |
| OH-15 | SC-1 | AZ-3 |
| FL-13 | FL-21 | IL-10 |
| KY-2 | MN-3 | MO-6 |
| MO-9 | NJ-7 | OH-2 |
| VA-6 | WY-AL | |
| Pickups | ||||
|---|---|---|---|---|
| FL-16 | KS-2 | LA-6 | ||
| TX-22 | ||||
Thanks to Bitten and Bound for the video posting, since I couldn't grab it directly from MSNBC for some reason. This has got to be the most generous, and truly loving, concession speech I've ever heard, and is an eloquent demonstration of why I voted for Sen. McCain. Fortunately, he returns to the Senate, so we'll still have his leadership. Now we all have to work hard to keep government accountable and work for a unified country.
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