Everyone Wants To Keep Their Cake

If you didn’t know, we’re in some pretty tough economic times.  Oh, you’ve heard?  Because, obviously, many people have not… or at least that’s the conclusion you could draw, if you’ve been following some of the big developments, lately.  Exhibit A:  The auto follies.  The headlines this week tell of how GM and Chrysler will now have to defend their decisions on dealership closings before the senate.

Because the federal government is slated to own most of General Motors and 8 percent of Chrysler, some of the senators said they have a responsibility, as major shareholders do, to review company decisions.

Oh, sure.  And “as major shareholders do,” I’m sure you’ll be considering what’s best for the company, rather than what’s going to help you look good for voters in your state. Hey folks, welcome to reality!  GM and Chrysler are bankrupt.  They are restructuring, under the direction of the courts and the federal government.  They were told to trim their product lines, eliminate brands, and ratchet down their operations, in order to achieve something like sustainability.  This has to happen.  If it doesn’t, GM and Chrysler die.  And then ALL of their dealers will be out of luck.

“Let me be very clear — I don’t believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help. It’s just plain wrong,” [Sen. Rockefeller] said.

Just plain wrong?  The whole idea here is to try to save an American industry so that it can again become a job creator, and so that it can again support the businesses built up around it (parts suppliers, tool makers, dealerships, etc).  Is there to be no pain?  Should we be bailing out the auto dealerships, too?  Yeah, let’s send ‘em all a check for the money they would have made had GM and Chrysler not gone belly-up.  The Fed can print more money.  Who cares?

Exhibit B:  The (Once) Golden State.  California is on the brink of bankruptcy.  Years of free spending in fat times have finally caught up to the state, and now, if it is to have any hope of avoiding a financial collapse, meaningful cuts have got to be made.  But, surprise surprise, no one wants to be on the receiving end of those cuts.  The California state government worked out a plan that would have involved trimming the state contribution to home healthcare workers’ wages, and the SEIU (which represents those workers) rebelled, taking the case to Washington.  The Obama administration decided to use the stimulus money slated for California as a stick (another big surprise) to bully the state into undoing the wage cutbacks.  So, instead of a $2 per hour cut, the SEIU would prefer to have the state go bankrupt.  Another example comes with California’s decision to close ~220 state parks — people are rallying against it.  Sure, there’s a potentially legitimate argument to be made that shutting down the parks will impact economic activity to such an extent that the move defeats its own purpose.  But there are still plenty of reasons for tourists to visit the state — and something has to be cut.  If California cannot close it’s budget gap, destroys its credit rating, and cannot secure the funds it need to keep operating, more than just the state parks will be closing.

I hate to resort to generational generalizations, but it’s hard not to see that Americans have become incredibly spoiled.  We can’t all have everything we want, all the time.  We can’t always expect things to be the same as they are during the best of economic times.  The government can’t artificially support the fat living that we’ve grown accustomed to, when times are lean.  The economy and the financial system have to go through a necessary process to right themselves.  The process can be painful, but if it doesn’t happen, nothing gets fixed.  We simply cannot have our cake and eat it, too.

Because the federal government is slated to own most of General Motors and 8 percent of Chrysler, some of the senators said they have a responsibility, as major shareholders do, to review company decisions.

A Lesson In The Problem Of ‘Big Government’

<sound of cobwebs being cleared…>

Got back from a 2-week semi-vacation (I worked, most of it) about 2 weeks ago.  I had meant to post something sooner, but I couldn’t find much motivation.  But just now I came across an article in Forbes describing what is being done wrong, with respect to the Chrysler bankruptcy.  After reading it, I realized that what’s happening in this case actually illustrates a point about government expansion that I had tried to make in a pre-election post.  Essentially, that point was that handing over more of the private economy to the government is a bad idea, because government agencies do not respond to the realities of the market, and are therefore destined to be inefficient and to exacerbate the problems they’re supposed to be addressing.  Or, more generally, giving more power to the government will inevitably lead to abuse of that power, as well as waste.  The Chrysler saga seems to demonstrate this pretty well.

As we all know, the federal government got involved in the “rescue” of GM and Chrysler, by loaning them billions of dollars, intended to give them a chance to fix themselves.  At the time, there were some voices saying that the companies should be allowed to go into bankruptcy, if they were not able to fix themselves without government help.  But, mostly, what we heard were things like, “Bankruptcy is not an option!” and “They’re too big to fail!”  President Obama promised to “save” the US auto industry (yes, I know the Bush administration started the ball rolling), while also saying he had no interest in running the car companies.

And where are we now?  The president has demanded that Chrysler and GM submit to his administration plans to achieve viability — and has rejected parts of the plans, demanding revisions  (so much for “no interest” in running the companies).  In the case of Chrysler, after dumping billions more in taxpayers’ money into the company (read: waste), he has forced it into bankruptcy (not an option?) and into a deal that will divide ownership of the company among Fiat, the US and Canadian governments, and the UAW — with the union getting the majority stake in the company.  In the process, the administration is strong-arming Chrysler’s creditors into taking a much less equitable deal than they would expect under the law, in a normal bankruptcy (read: abusing power).  He has allegedly used the TARP money awarded to many of those creditors as leverage to get them to agree to the deal.  (Funny thing here, he’s actually forcing TARP-receiving creditors to further hurt their own balance sheets by giving up money to which they are legally entitled.)

Why are things being done this way, when Chrysler declaring bankruptcy months ago would have saved billions in taxpayer money, and left legal decisions in the hands of the courts, where they belong?  Well, the two reasons I can come up with are foolishness: the president believes he knows better than the bankruptcy courts and people with relevant industry experience; and politics: the president gets to claim that he’s “doing something,” he gets to tilt the deal to favor a major constituent group (unions), and he gets to gain more leverage over private industry, and therefore more political power.  This is exactly the problem with expanding the role of government further into the private sector.  The motivations and accountability are very different, and most often are not focused on or responsive to the true needs of the market, a.k.a., the people.  Instead of getting the most efficient solution to the problem at hand, we get grandstanding, power-grabbing, and billions more dollars wasted.

Now, let’s get the government into the health care business….

Brilliant!

This is absolutely fantastic.

… But He Doesn’t Like Big Government

“Let me be clear: the United States government has no interest or intention of running GM. What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company.”

These words are from President Obama’s address about his plans for the auto industry.  We don’t want to run the auto companies… aside from maybe making some staffing decisions, exercising veto power over restructuring plans, providing “guidance” in developing such plans, and being directly involved in negotiations with potential partners. That’s all. Oh, and we’ll back the warranties. But that’s it. Oh yeah, and we’ll fund operations for a while.

This tendency of Obama’s to do one thing and then say the total opposite brings to mind an old Eddie Murphy bit, in which a woman catches her man coming out of another woman’s house, confronts him about it, and he just says, “Wasn’t me.” She keeps after him, but he just keeps saying, “Wasn’t me,” until she comes around: “Well, maybe it wasn’t you.”

But more than the sheer audacity of his double-speak, the real problem is with what Obama’s administration is actually trying to do here.  They are doing nothing short of attempting to take over for the free market and the existing legal system.  The US auto companies are “too big to fail,” so, we can’t let them go bankrupt, so, we’ll loan them money to give them a chance to fix themselves.  But then we’re going to treat them pretty much the same as if they had declared bankruptcy –  force everyone involved to renegotiate contracts, force them to come up with a recovery plan that meets an outside party’s criteria, involving selling off parts of the companies, and consolidating (eliminating) brands — but with the administration running the show, instead of a court.  In the case of Chrysler, at least, the government will even mandate what kinds of cars the company can produce!

What the hell is going on, here!?

This country was conceived around the idea of freedom.  Freedom meant that no authority could tell you how to live, force you to follow a particular religion, keep you from seeking to rise up from the “class” into which you were born.  There were to be no noble lords, here.  Anyone, through hard work, dedication, and luck, would be free to succeed.  That freedom includes — necessarily! — the freedom to fail.  Our history is littered with failures, big and small.  But it is also littered with successes, most of which have come out of the failures.  And, on balance, the successes have vastly outweighed the failures — which is why ours has been the most successful country in human history.

Does the President of the United States not know this?  Can he really believe that bankruptcy at GM and/or Chrysler would mean the “disappearance” of the auto industry from the US?  That entrepreneurs would not find opportunities in the ashes of the old, burnt out, auto companies?  Does he really believe that government agencies and politicians can force businesses to be successful?  (It is pretty obvious that he does.)  Just think about the audacity involved here.  What his actions are saying is that he, with the experience of his 47 years of life, never running any business, can manage not one company to success, but entire industries!  He knows better.  He knows who can do the best job.  He can identify the best course.  It is absolutely insane!

I’ve said this before:  Either you believe in free-market capitalism, or you do not.  So, when the president says he doesn’t “like big government, ” and when he says he doesn’t want government running the auto companies, and when he says that he’s not interested in nationalizing the banks, but then he turns around and explodes the size of government, and tells the auto companies and banks how they’re going to run their business, the truth is pretty obvious.  It doesn’t matter what he says about these measures being temporary –  he simply does not trust free-market capitalism.  Period.  And that means that he doesn’t really trust freedom, because the two are inextricably intertwined.

When Obama was elected, I was more worried about congress running right over him, with spending on all kinds of big-government projects, than I was about him.  Though he had promised everything to everyone, in his nomination acceptance speech, I still thought that maybe he really could be something different — that maybe he would try to exercise some restraint in his application of government power.  But in just a couple of months, he has shattered any illusions I had about him.  He is a man who absolutely believes that the government — better than the mass of the free people, better than the free market — can solve all of our problems.  He truly believes in a very different America than the one in which I believe.

Give Them Enough Power And They *Will* Abuse It

This is just beautiful.  Because they are so outraged at the AIG bonuses, members of the US Congress are seeking ways to “get the money back.”

Still, lawmakers are moving quickly to take the initiative in responding to the public outcry. Montana Democrat Max Baucus and Iowa Republican Charles Grassley, the leaders of the Senate Finance Committee, proposed taxes totaling 70 percent on companies and individuals getting bonuses at firms that receive federal aid.

The tax would apply to bonuses over $50,000 paid out beginning on Jan. 1, 2009, and to the full amount of any retention bonuses, the two senators said.

Pelosi directed House committees to draft several alternatives and said her chamber may consider a bill as early as this week. Other lawmakers introduced their own plans.

Using the power it has to manipulate the tax code, and to make changes to tax law retroactive, the government is going after a very small set of citizens for political reasons.  That’s not supposed to happen.  What about “equal protection under the law” (i.e., not targeting specific citizens) and due process (meaningless, in light of retroactive laws)?

This demonstrates exactly why we should be very wary of transferring ever more power to the government.  Once they have it, regardless under what pretense they request and are granted it, it is inevitable that they will use it in ways that were never intended.  In the heat of a political moment, they will twist their power to advance their current agenda.  In this case, they’re not taxing specific citizens by name — a power they do not have — but they are using the power they do have to manipulate the tax code to achieve the same effect — exacting retribution on law-abiding citizens to placate the angry hoard.

UPDATE (3/19): I’m happy to see people with more knowledge of constitutional law than I have, pointing out the issues with this approach:

Two of those difficulties, lawyers say, lie in Article I of the U.S. Constitution — a section stating Congress cannot pass any “Bill of Attainder” or “ex post facto” law.

A Bill of Attainder is an act of the legislature that singles out and punishes a group or individual without trial. An ex post facto law retroactively changes the legal consequences of an act.

But hey, we’re talking about Congress, here. Why would they let a little thing like the US Constitution get in the way of political opportunism?

It’s An OutrAIG!

Ah, the bailout follies continue.  In the past few days, we’ve been hearing about how “insurance giant, AIG,” has supposedly misused the bailout funds given to it by the government (aka, you and me), paying out a ton of money to foreign banks, and millions in executive bonuses.  If you hadn’t heard, President Obama himself called the bonuses an “outrage,” and now members of Congress are following suit.  You know, when the word “outrage” gets thrown around by politicians, that the BS will be coming pretty thick.  I hadn’t posted on this subject before now, because I had a feeling we weren’t hearing the whole story.

First of all, specific language was intentionally added into the bailout bill, by Senator Dodd, to allow the recipients of the funds to pay out bonuses for which they were contractually obligated.  Second of all, the bonuses in question, at least in AIG’s case, are not performance based — they’re something called “retention” bonuses (which I learned from the linked AP article) and are used to keep highly-valued employees from jumping ship.   I know that past employers of mine did offer bonuses that were not wholly based on the performance of the company, and I suspected that might be the case here, too.  Basically, depending on the position, employers often include a guaranteed “bonus” as part of the overall compensation package.  The money is essentially the same as salary, though my guess is that it’s kept separate to allow for some flexibility.   So, going into the year, the employee knows that he will be paid X dollars in salary, plus Y in a guaranteed bonus, plus perhaps a potential extra percentage based on a formula that takes performance into account.  So, all of those politicians screaming that AIG should not have paid these bonuses are basically saying that AIG should not be paying employees their full salaries.

But the government has been giving out these bailouts so that companies such as AIG can meet their financial obligations and not have to file for bankruptcy.  As I understand it, the outrageous AIG bonuses are exactly that — a contractual financial obligation.  I don’t for a second believe that the furious politicians do not understand this (which is probably why they were not outraged when the bonuses were first disclosed, months ago).  What they’re seeing here is an opportunity to deflect some of the anger that has been directed at them for pushing these bailouts though in the first place, toward some convenient bogeymen — the evil corporate execs.

Should the government should have bailed out AIG (or any other company)?  Had AIG been forced to file for bankruptcy protection, they would have been able to modify or eliminate the very bonuses at the center of all the current furor.  Attempting to shift the focus by demonizing them now, for not doing something that violates their contractual obligations to their employees, is what’s really outrageous.

UPDATE (3/18): What I did not mention is that the press has been complicit in this phony outrage.  Even in a story about the AIG CEO explaining to Congress that the bonuses were required, Reuters neglects (refuses?) to make clear that the bonuses have nothing to do with performance.

Republicans Take My Advice On Stimulus?

In my post about the recent Democrat-led spending spree, I suggested that there were plenty of things the government could do to stimulate the economy without spending a ton of (borrowed) money.  My first example was opening up domestic energy production, by making it easier to build refineries and nuclear plants in the US, thus creating jobs here, and potentially lowering the cost of energy — an effective “tax cut” for every single person and business in the US.  Well it seems like maybe someone was listening.  Representative John Shadegg (R-AZ) and Senator David Vitter (R-LA), are planning to propose a “No Cost Stimulus Act,” which aims to create jobs and stimulate the economy by promoting domestic energy production.  They say they’re sticking to the “all of the above” (I hate that slogan) approach, meaning their bill would be aimed at the promotion of domestic drilling for, and refining of, oil and natural gas, plus nuclear power and alternative energy development and production.  They would do this by getting the government out of the way, not by spending a bunch of money.  Hey!  What a novel idea!

Of course I don’t really think they got the idea from me.  But it’s nice to see that some of our politicians can stumble across the obvious solutions, too, once in a while.

Cheering Experimentation On Embryos

As expected, President Obama has reversed the Bush administration policy limiting federal funding for embryonic stem cell research.  No surprise, as the issue was cast as a right vs. left fight, with the supposedly “anti-science” right standing against “progress” and the “rational” left standing for those who might one day be helped by the results of such research.

Personally, I had a difficult time figuring out what I thought was the right answer.  But when I pose the question to myself in the simplest terms — Am I comfortable with experimentation on human embryos? — the answer I get is “no.”  Sure, I understand the arguments around whether or not an embryo is a “life”  — and I know that reasonable people can disagree about that.  But, after watching the development of my son, from a tiny, pulsating blob on an ultrasound screen, and feeling a connection to him from even that early stage, I cannot see human embryos as anything other than human.  Because that’s the way I see it, I’ve found that it now sickens me to think about embryos being torn apart in order to harvest the stem cells to be used in research.

Again, I understand that others do not see it as I do.  So, that brings us back to the question of what to do about it.  When he announced it, I was not particularly impressed with President Bush’s answer: limit funding to research conducted on existing stem cell lines (already taken from embryos), and otherwise do not allow federal money to be spent on the research.  This seemed like a very uncourageous approach.  It would not stop the research from happening (no outright ban), and, at the same time, would not promote much progress in the field.

But now I understand and appreciate it much more.  Such a policy does not attempt to make a determination as to the humanity of an embryo, thus avoiding the main issue at the core of the abortion debate.  It does not make the research illegal, but, it also doesn’t force someone like me to contribute financial support to something that I have come to find disturbing.  It puts the federal government exactly where it’s supposed to be — out of the picture.

What I don’t understand is, now that President Obama has reversed this policy, why people are cheering.  I mean, yeah, I get it, you didn’t think the government should be trying to stand in the way of science.  But the science was happening anyway.  So, in effect, you are cheering the fact that, now, people who find the idea of destroying embryos for research repugnant are being forced to financially support the practice.  That’s how it comes across.

And another thing, now President Obama is being portrayed as pro-science, as compared to the anti-science Bush.  But, apparently, there are some limits to Obama’s pro-science beliefs:

Obama also said the stem cell policy is designed so that it “never opens the door to the use of cloning for human reproduction.” Such cloning, he said, “is dangerous, profoundly wrong, and has no place in our society or any society.”

So, doesn’t this make Obama “anti-science?”  He set a limit to the type of research that is permitted — because he knows most people wouldn’t want their money spent on something they find morally repugnant.  Is that not pretty much the same thing that Bush did?  Also, “Mr. Obama revoked… the 2007 executive order that encourages the National Institutes of Health to explore non-embryo-destructive sources of stem cells,” (via WSJ).  That’s not anti-science?  Or does the science have to be morally debatable  to be worthy of government support?

President Clinton Redux?

During the presidential campaign, I noticed (and believe I remarked in a post about it) that Barack Obama reminded me an awful lot of President Clinton.  Like Clinton, Obama is a very talented speech maker (probably better than Clinton). As with Clinton, while watching an Obama speech, I find myself wanting to believe him, hoping he’s right, and thinking he’s sincere.  And, just like with Clinton, upon further analysis, I find Obama’s speeches to be empty of anything meaningful, coming down on both sides of the same issue, and full of contradiction.  The other similarity, which I first noticed during the debates, and which has become blatantly obvious lately, is that Obama will say, shamelessly, the exact opposite of what is the obvious truth.

For example, during his address to Congress the other night, he said that there were “no earmarks” in the stimulus bill.  But, if you go by the general understanding of earmarks, you really can’t say that the stimulus bill contained none.  I heard many examples within that bill of dollars directed at very specific spending projects, benefiting a particular state or congressional district.  He also stood there and, with a straight face, said that he did not like big government.  But he’s using big (HUGE) government spending in an effort to revive the economy.  So, obviously he believes in it — but he doesn’t “like” it?  (I made fun of Bush for doing pretty much the same thing, when he claimed to be a “free market guy.”)  And now he’s saying he’s ending the war in Iraq by 2010, even though he plans to leave 35-50k troops beyond his deadline, in part for “conducting targeted counter-terrorism missions.”  Um… yeah.  Maybe President Bush should just have said, “Uh, the war is over.  Yeah.  Uh, just leaving the troops there to fight the terrorists,” and everything would have been OK?

It goes on and on like this.  I wonder how long he’ll be able to keep it up.  I’ve said before that a lot of people who thought they knew what they were voting for when they voted for Obama would eventually be disappointed.  That’s because he cannot possibly be all the different things he made different people believe he was.  And I think it’s only a matter of time before people realize that just because he keeps promising that 3 is 4, it doesn’t mean 3 is 4.  This is the same problem Clinton created for himself.  It got to the point where nobody really believed what he would say.  Sure, people still liked him — he happened to be in office in pretty fat times.  Unfortunately for Obama, with things being as they are, once people begin to not trust him, I can’t see him getting the same kind of pass.

Wow, Mr. Jindal, What Was That?

Louisiana Governor Bobby Jindal has received a lot of attention, over the past few years, first as the first Indian-American elected to the US Congress, then as the first Indian-American (and youngest) Governor of Louisiana, then for his success in tackling corruption in the Louisiana government, and finally for being considered as a possible VP candidate by John McCain.  Because of his youth, rapid rise, and personal history, he’s been compared to Barack Obama — a potential savior of his party.  Because of all this, and because he’s a likely contender for the GOP presidential nomination next time around, he was given the job of responding to the president’s economic address to Congress, last night.  I have to admit, his story is interesting, and offers an opportunity to showcase the ideas of the political right, without much of the image-related baggage that the GOP carries, these days.  I was looking forward to what he had to say.

But what the heck was that?  I know these “responses” are really nothing of the sort.  The remarks are prepared well before the first speech is given, and are really just seen as an opportunity for the “responding” side to lay out it’s own vision, rather than to level criticism at their opponents’ plan.  So, I expected that.  But what I didn’t expect was for the response to be delivered as if the person doing so was reading a book he’d never read before to a group of children.  From the goofy, uncomfortable entrance, to the unnatural-looking smile, to the extremely poor phrasing, the delivery of the message was a disaster. I realize this was probably the first time Jindal has had the national spotlight on him, and I’m sure he was coached like crazy to strike the right tone (positive, patriotic), and to come across as a regular guy.  But if he is to have any hope of getting anywhere in the nominating process, he’s going to have to figure out how to deliver a big-time speech.

The content was OK, but nothing Earth-shattering.  I’ve come to expect great-sounding, but fairly empty, speeches from President Obama.  And Jindal needs to understand (as do Republicans, in general) that he will likely not be able to compete with Obama giving such speeches.  Jindal is a “policy wonk.”  He’s purportedly very intelligent, understands policy details and implications, and his image is that of someone who cuts through the garbage to get the job done.  His repsonse should have been fashioned to take advantage of his strengths.  Obama was expected to be vague on the details of his approach, Jindal should have laid out the details of his (or the Republicans’) own.  Knowing Obama would speak in grand terms about things getting better, Jindal should have explained what will make them better.  And it’s fine to have a theme: “Americans can do anything!”  But rather than focusing the rest of the remarks on setting up repetitions of that line, Jindal should have focused more on making the content meaningful.

Now, the guy is young.  He’s younger than I am, and I don’t think I’m prepared for a presidential campaign.  I think he made the right move in letting McCain know that he was not interested in the VP job.  He knows he needs time to develop his skills and some kind of record of achievement — the press will not be as casual about the inexperience of a Republican presidential candidate as they were about Obama’s very thin record.  And I’m sure that, between now and Campaign 2012, he’ll work on developing his style for national television appearances, campaign speaches, and the like.  So, I haven’t lost all faith in him.  But a good first step would be to make sure your remarks are well-written — and then read them a few times before delivering them.

UPDATE: Just after posting this, I heard Governor Jindal on a radio show, talking about President Obama’s speech and what the Republican approach should be to the economy.  He sounded much more like I was expecting him to sound last night.  Sure a discussion isn’t the same thing as a speech, but the ideas and explanations he was offering on the radio show should have been in his remarks last night.  Time to find a good speechwriter, Bobby.

UPDATE 2: The real Mr. Jindal stands up?