The Collectivization of GM

President Obama and the 'auto task force' seem to be moving past just having a sacrificial lamb in Wagoner, to wholesale manipulation of production and management decisions. Jim Kuhnhenn writing for the AP today reports:

On Tuesday, Sen. Bob Corker, a Tennessee Republican whose state is home to auto manufacturing plants, said the administration's aggressive intervention in the industry sets "a very dangerous precedent."

It wasn't just the forced ouster of Wagoner that causes him concern, Corker said on CBS's "The Early Show." He accused the administration of taking a "we know best" attitude in connection with the problems in the domestic industry and said that should "send a chill throughout the country."

The president was hardly ambiguous about his desire to use the beleaguered state of the industry to press one of his top policy agendas — an energy policy that emphasizes the manufacture of fuel-efficient, environmentally friendly cars.

"The United States will lead the world in building the next generation of clean cars," he said.

If you're old enough to remember the last decades of the Soviet Union, you should remember the collapse of its state-run collectives and enterprises. These were utterly inefficient affairs, that produced little, polluted much, and often failed to pay their employees. The accompanying long 'bread lines,' that marked the 50s - mid-80s of the Soviet Union were mute testament to the utter failure of that kind of decision-making, but the Politburo continued to run a well-oiled PR campaign that forced citizens to pay lip-service to the 'glorious success' of the USSR.

The Administration's efforts to manipulate the market are no doubt well-intentioned, but they are doomed to failure. Not only does the government lack expertise and experience in these matters, it is trying to force both the supply and demand sides of the economy to meet what it determines is 'good,' rather than allowing demand to drive supply (and cost). Government determination of what products GM can and can not produce, and at what price they sell them, will not help to save the US auto industry, particularly if those products are not wanted by the majority of the public. Most studies indicate that consumers are interested in 'green' products, but that they also demand costs comparable to current prices, improved performance, space, (especially in the US), and power.

Government can play a role, however. Like it or not, fossil fuel supplies are not infinite, nor is their use particularly healthy (economically and otherwise) in the long run. The government can help fund the R&D side of the equation, and can provide tax breaks to encourage buyers. This allows the market to function, while still encouraging long-term changes in behavior and decision-making, and with far less cost to the tax payer.

The bribery of Sen. Dodd

The Washington Times has published an article that walks right up to the line of accusing Sen. Dodd of outright bribery and corruption. According to the article:

'As Democrats prepared to take control of Congress after the 2006 elections, a top boss at the insurance giant American International Group Inc. told colleagues that Sen. Christopher J. Dodd was seeking re-election donations and he implored company executives and their spouses to give.
The message in the Nov. 17, 2006, e-mail from Joseph Cassano, AIG Financial Products chief executive, was unmistakable: Mr. Dodd was "next in line" to be chairman of the Senate Banking, Housing and Urban Affairs Committee, which oversees the insurance industry, and he would "have the opportunity to set the committee's agenda on issues critical to the financial services industry.
Now, two years later, Mr. Dodd has emerged as a central figure in the government's decision to let executives at the now-failing AIG collect more than $218 million in bonuses, according to the Connecticut attorney general - even as the company was receiving billions of dollars in assistance from the Troubled Asset Relief Program (TARP). He acknowledged that he slipped a provision into legislation in February that authorized the bonuses, but said the Treasury Department asked him to do it.'

Sounds like bribery to me. Of course, Dodd blames the whole mess on the hapless Treasury Secretary and Larry Summers. Barney Frank likes to say that the AIG executives took bribes by accepting their bonuses. That's rich coming from Frank, who took large amounts from Fannie, Freddie and AIG, but if one accepts it on its face, then demanding re-election funds surely qualifies as a bribe.

GM's CEO takes the fall - UPDATED UPDATES

GM's CEO, Richard Wagoner, has abruptly resigned at the request of the Obama Administration as a condition of new federal funding. While the recent moves by the Administration toward tighter control of private industry are of great concern, at least this resignation will force some restructuring of the company (along with Chrysler). Of perhaps greater concern, however, is the continued flood of tax dollars to prop up failing industries. The sad truth is that the American auto industry (particularly as centered in Detroit) started failing long before the current recession, and should have restructured themselves years ago. Ford is the closest thing Detroit has to a success story, and that is not saying much.

The newest requests from GM and Chrysler total $21.6 billion, and even before meeting the requirement to present a restructuring plan to Congress, the Obama Administration appears to have promised a new bailout (although a figure has not been named). There is no indication on how far Congress and the Administration are prepared to go with the bailouts, what the final total will be, what the vetting process is, or if there is any kind of a plan whatsoever in place to ensure that the companies will be successful in the end. It all seems a little like fiddling while Rome burns.

UPDATE 1:
President Obama stated today that a short bankruptcy/restructuring period may be necessary for GM and Chrysler, and is giving them a 30-day extension on the original deadline to present a recovery plan. Additional federal funding is the carrot in all of this. Chrysler is also expected to complete a merger with Fiat within that time-frame. The shotgun wedding is being negotiated, in part, by the Administration, with pot-sweetener of $8-$10-billion likely. GM shares dropped like a rock (22.9%) in response to the firing of Wagoner and today's announcement.

UPDATE 2:
One has to wonder if Wagoner is being punished for funneling more GM pac-money to the GOP instead of the DNC. If they had been more like Sores, would he have survived?

Get me some of the rose-colored glasses!

The CBO is once again screaming (in a nice, polite, rational kind of way) that the Administration's projections of real GDP and annual deficits, over the next ten years, are too high and too low respectively. Last week, the CBO released it's revised estimates of the President's budget proposals. The graph below shows a much larger than expected estimate of deficit-spending resulting from the budget proposal:
You can access the accompanying PDF here.

Now the CBO has released an analysis of the real GDP under the budget proposal. A key point made in the director's blog is:

• CBO’s projection of real GDP is lower than that of the Administration throughout the next 10 years

While the CBO office still advocates stimulus spending, it has consistently assessed the actual legislative proposals as having a moderate detrimental impact. These figures possibly explain the current push by the Administration to promote its budget and tax proposals, and why Congressional members and the public alike are becoming concerned about the long-term impact to the country's economic stability and strength.

Brothers at War

The upcoming documentary, Brothers at War, looks like it will be a powerful and intimate look at the effect of service within a family. The film was made, directed and produced by a brother of two men serving in Iraq. Because this is a low-budget, under-the-radar documentary, you may need to petition to have it shown in your area. The official movie site has a form to promote showings.

editorial: http://www.military.com/entertainment/brothers-at-war/
movie site: http://www.brothersatwarmovie.com/#/Home

Should We Move Away from a Debt-Based Economy?

I'm back after a little break to finish my dissertation proposal with a conundrum: should we move away from our debt (or if you prefer a gentler word, credit)-based society? This question appears to be at the heart of Peter Schiff's commentary in today's Money Morning (not something I normally read, but the article was passed along by someone else). Sure, easy credit allows easy expansion during a growth period, but what happens when growth slows (much less during a major contraction)? That's right, the debt rears up to bite us in the collective butt. The problem with moving to a more fiscally-sound, dare I say prudent, approach of course is that the wild expansion of the last decade would not be possible. I'm not sure Americans can stomach that, even if it's the equivalent of national spinach. What do you think?

A New Element (Re)Discovered

Whole-sale ripped off from an email forwarded to me:

New Element Discovered

Lawrence Livermore Laboratories has discovered the heaviest element yet
known to science. The new element, Governmentium (Gv), has one neutron,
25 assistant neutrons, 88 deputy neutrons, and 198 assistant deputy
neutrons, giving it an atomic mass of 312. These 312 particles are held
together by forces called morons, which are surrounded by vast quantities
of lepton-like particles called peons. Since Governmentium has no
electrons, it is inert; however, it can be detected, because it impedes
detected, because it impedes every reaction with which it comes into
contact. A tiny amount of Governmentium can cause a reaction that would
normally take less than a second, to take from four days to four years
to complete.

Governmentium has a normal half-life of 2- 6 years; it does not decay,
but instead undergoes a reorganization in which a portion of the
assistant neutrons and deputy neutrons exchange places. In fact,
Governmentium's mass will actually increase over time, since each
reorganization will cause more morons to become neutrons, forming isodopes.
This characteristic of moron promotion leads some scientists to believe
that Governmentium is formed whenever morons reach a critical concentration.
This hypothetical quantity is referred to as critical morass.

When catalyzed with money, Governmentium becomes Administratium , an
element that radiates just as much energy as Governmentium since it has
half as many peons but twice as many morons.

May God help us survive this growing mass before it becomes a black hole
that sucks us all in.

Why Politicians Shouldn't Direct Federal Funding

Los Angeles Rep., Maxine Waters, is under investigation for ties to a bank to which she has lobbying ties. According to the LA Times:

A month before Congress enacted the bailout program, Waters helped set up a meeting between the chief executive of the bank, representatives of other financial institutions and Treasury officials. "When a member of the financial services committee calls, you pay special attention," said Jeb Mason, who was a high-ranking Treasury official last fall.

Ms. Water's husband was on the board of the bank until last year, and remains a stock holder (reported holdings as of 2007 were $500,000).

Waters was a senior member of the congressional committee dealing with the financial crisis when OneUnited Bank -- one of the nation's largest minority-owned institutions -- received $12 million in bailout funds.

This type of corruption is a perfect illustration for the long-standing argument on this blog: earmarks or any other Congressional authority that allows Congress to specifically direct federal funds to individuals, special projects, particular contractors, etc. will inevitably lead to corruption. At the very least: contracts should undergo a competitive and transparent bidding process, Congressional members must be required to disclose any financial or lobbying ties, and local and state governments should have some control over dissemination of funds.

In 2007, that most liberal of publications, The Nation, fully agreed that earmarks lead to corruption. Now? - nary a peep. Most of the media has been able to realize that at the least, President Obama isn't bringing pledged change to the system. Change can always come later, right? The champion of this issue, Sen. McCain, understands that we are still in a 'business as usual' mode in Washington, and that is unlikely to change.

Record Jobless Claims

New unemployment filings for February were 667,000, while the total continuing claims were in excess of 5-million as of the end of the month.

It doesn't look like consumer confidence is coming back anytime soon. Poor Andre will continue to bear the brunt of it all.

Pretty Soon, We'll be Talkin' Real Money

Last night, the Senate passed the omnibus spending bill, allowing the measure to move to President Obama's desk where he's expected to immediately sign it. The bill is only a budget-filler to take the government through until September, when the trillion-dollar-plus budget for 2010 is expected to come up.

I don't object to passing a budget - it's a necessary exercise. But the $8-billion in pet projects really bug me, and the fact that a number of prominent Republicans/traitors support the earmark process makes it doubly hard to swallow.

The big immediate excuse by all for those earmarks?
"It is in America's best interest to close the book on the last administration and let the new one hit the ground running," said Sen. Daniel Inouye, the Democratic chairman of the Senate Appropriations Committee.

Please; Congress holds the purse-strings and determines what is in and out of the budget. Even if President Bush had personally requested each and every earmark (the largest requester by dollar value is Murtha, and the largest by number of earmarks is Shelby), blaming what is chosen today on something that originally came up for debate on a prior Administration (Bush refused to sign this bill until some of the earmarks were removed) is the height of childishness.

Here is a list of all the earmarks by dollar value. Strangely, one of the other reasons offered up for allowing the bill to pass as is, is that the earmark dollar value, as a percent of the total budget, is small, and that focus on that small amount is simply diversionary. Wow! $8-billion is such a small amount that you shouldn't worry your pretty little head about it. Now go back to the corner and play with your dolls. Here's a thought - I don't care if the amount is only $1-million. It's the corruption and waste that bothers me.

The long-term excuse for continuing the earmark culture is that the money would be spent anyway, and Congressional members are simply ensuring a 'fair share' for their individual states. This is an amazingly duplicitous argument. It would be reasonable to fight for a block of money to go to one's state or district, and then let the local and state governments go through their normal budgeting and allocation process. Instead, by having Congress decide which individuals projects are funded, local and state governments, and the normal bidding process are circumvented. This power can only lead to corruption in the end, and that end result is the reason McCain has been screaming about earmarks for twenty years.

Female force

So perhaps I'm behind the times, but I'd never heard of Bluewater Production's graphic novel series, Female Force, until this morning. Apparently they started with Hillary Clinton, are now profiling Sarah Palin, and will then move on to Michelle Obama and Princess Di. I love graphic novels, and I suppose the relatively neutral and respectful treatment in a 'bio-lite' setting will at least get younger readers to find out a little about some of these women, but I wonder if it doesn't just encourage a decline in reading and thinking.

What do you think?

Fairy-Tale Land

Here's the latest news from Fairy-Tale-Land (sometimes known as Washington):

Treasury Secretary Tim Taxes-Are-For-Everyone-Else Geithner, Ben Bernanke and Peter Orszag all testified at Capitol Hill this week, defending the now $3.6 trillion omnibus spending bill, otherwise called a budget. Forbes writes:

According to the Treasury chief, the tax increases, which help offset the tax cuts contained in the stimulus bill, are motivated by more than just balancing the budget. Geithner says the administration feels a "moral imperative to make our society more just." It's good economic policy too, he adds: "It will mean there is again a fairer, more equitably shared tax burden on the vast majority of Americans."

Sounds like redistribution to me, with a tax cheat at the helm. (Not that there's anything wrong with tax cheats in Fairy-Tale Land. In fact, it's becoming a job requirement. The new nominese for US Trade Rep meets the basic requirement of failing to pay taxes). The article goes on:

Upon its release last week, the budget was criticized for its optimistic outlook on the economy. Christina Romer, chair of the Council of Economic Advisers, says projections about future government spending and tax revenues are based on an assumption that the economy will shrink by 1.2% in 2009 but return to strong growth of 3.2% in 2010.

That's noticeably sunnier than recent forecasts from the Federal Reserve and Congressional Budget Office. But even Bernanke (who before being appointed Fed Chairman by Bush was the chair of his Council of Economic Advisers) defended the forecasts.

"It's true the administration's forecast is a little more optimistic than the Fed and [Congressional Budget Office's] forecasts," he said. "It's important to understand these forecasts are not precise. Although they are on the optimistic side, they are within the range of uncertainty all of us face."

So the budget is based on a fairy-tale made up number that falls within the 'range of uncertainty.' Huh? This is absolutely the first time I've ever heard of a budget being based on the 'optimistic side' of a 'range of uncertainty.' I'm sure that prior budgets have also had a fair bit of magical tweaking, but when we're in the middle of the deepest recession since the late 70's and early 80's, optimistic projection in order to justify both spending and heavier taxation is ludicrous. I like my fairy tales to remain in the world of fiction. They're pretty inconvenient in the real world.

Meanwhile in Fairy-Tale-Land, the President sent a private letter (allowed to leak to the media), to Russia's President Medvedev, which President Obama says did not offer a quid-pro-quo on a missile shield in exchange for help with Iran. Instead, the president corrected himself:

The president said that his recent letter to Moscow expressed his stance that reducing the threat of a nuclear Iran in turn reduces the need for a missile defense shield in Eastern Europe.

Senior U.S. administration officials previously suggested there was a trade-off in the letter, which they said hinted that plans for the defense shield could be unnecessary if Russian President Dmitry Medvedev helped in blocking Iran's progress toward building long-range missiles.

But Obama walked that claim back in a session with reporters following his meeting Tuesday with British Prime Minister Gordon Brown.

"It was simply a statement of fact that I've made previously," he said, stressing that the defense shield would be aimed at Iran, not Russia.

This is ridiculous on so many levels. Even if one truly thinks this would be a fair trade, and in the long-term interests of our country (and it may very well be given the system's frequent test failures), one doesn't announce to the world that we're willing to trade away a piece of our defense network. Nor does a good trade get made by putting all the cards on the table up front. It seems likely that this was essentially a quid-pro-quo offer when Secretary Clinton emphasized that the shield is only for defense against Iran. We certainly need something to deal with Iran, which is now thought to have enough material for nuclear weapon's development, but which may or may not be close to development of an actual weapon.

While kow-towing to Russia and the most liberal, anti-business elements of Fairy-Tale-Land, President Obama managed to diss our nation's closest ally by abruptly canceling a joint-news conference with Prime Minister Gordon Brown. Apparently the White House didn't let Brown's staff know of the change until the last minute.

And finally, the magic of Fairy-Tale-Land has wreaked havoc once again on the stock markets. Almost every time someone on the president's Council of Economic Advisors (or apparently the president himself) opens his mouth on the 'recovery plans,' the markets tank. The DOW plunged below 7000 for the first time since the tech. bubble burst in the late 90's, from its all-time high in 2007 (note to Congress and the President: 2007 is before you got your hands on everything - it might be a sign), and the president now has his very own bear market. But all of this OK in Fairy-Tale-Land since according to the White House, the stock market is no longer a good indicator of economic trends.

Does anyone know the way out of Fairy-Tale Land?

Another speech - another drop

President Obama spoke today about his intentions to reform health care.

While he spoke, the markets took another plunge, ultimately shaking out to between -4 (S&P) to -281.4 (Dow).

I have a solution, Mr. President. You and everyone on your economic team must either focus solely on the economic problems and their solutions, or you must be quiet. The time allotted isn't enough to split the energy and focus of your 'brain-trust' (such as it is). Trying to add on vague statements about reforming, just about everything, dilutes any trust of interest.

Don't buy stuff you cannot afford!

UPDATE: Worth girding your loins over

This posting has been updated to correct viewing problems.

This title and subtitle say it all:

Budget Battle Begins: Historic Ideological Shift

Republicans Pick Apart Obama's Budget, Calling It the Return of Big Government

Rush Limbaugh drew the battle lines:
"What is so strange about being honest and saying I want Barack Obama to fail if his mission is to restructure and reform this country so that capitalism and individual liberty are not its foundations?" Limbaugh said.

While I agree with Eric Cantor, that we shouldn't hope for the total failure of the Obama Administration, Limbaugh has a point: it's OK to hope for the failure of certain policies. In particular, policies that are based on the abandonment of capitalism.

The battle lines are drawn. Where will you fall?