Stimulus Goals: What are the true causes and effects?

This from RealClearPolitics:

“White House press secretary Jay Carney says the Recovery Act added several million jobs and lowered the unemployment rate. According to Carney, the “goals” of the stimulus package “have been met.”

A reporter asked Carney why unemployment is at 9% and not 7%, the percentage projected if the stimulus worked. Carney dismissed the question. “We’ve said repeatedly that we don’t want to relitigate the battles of the past,” Carney told the reporter.”

But was it the act that added the jobs and lowered the unemployment rate? And if it was is it sustainable?

In order for the politicians in Washington to keep being elected, they have to convince the majority of Americans that they are “doing something”. What exactly they are doing doesn’t matter as long as the results happen. Now some may say that this is good because the results that are all that matter. But would we say the same thing about President George W. Bush running his 2004 campaign on the highest home ownership rate in the history of the United States?

Of course, now we see that it was a bubble that ended up making many Americans bankrupt. So how do we know, again assuming the government stimulus did work, that it too did not also create a bubble that will burst in the face of Barack Obama and Mr. Carney?

The arrogance of politics is that anything a President or Congress does while it is in office makes for whatever the best results in the economy are. Imagine that the boost in GDP and the lowering of unemployment was because of new technological innovation or that the country’s rich saved more money for investment and invested in new business, how would that have anything to do with building new roads by the stimulus?

It wouldn’t.

The American people must wake up first to the fact that politicians cannot create jobs. All they can do is shift valuable labor and materials to a different sector of the economy. That means that more labor and materials are being put in an industry that it would’t be in if it wasn’t for the government entering the market and bidding up the price.

So what are we losing for those falsely allocated materials and labor?

Published in: on February 17, 2011 at 11:03 pm  Leave a Comment  
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Words as Signals and Nothing Else

The old saying goes “A man is only as good as his word.” Wrong, the correct saying is “A man is only as good as his actions.”

Words are simply signals for action. If someone acted like your mortal enemy but said I love you, which side would you err on?

If someone said they were sorry and they did it to you all over again, which side would you err on?

Think of this in a different context: Man asks cute girl on a date. Cute girl says that she will be at coffee shop ‘A’ at 11 am. Man shows up and hours upon hours tick away. The man can see the whole store, so when the girl says later “Oh, I was there. Where were you?” It would’t hold.

Saying that you are somewhere doesn’t make you there and the same goes for love and apologies.

When thinking about politics the key is to say the right things. “Hope, Change, Political Correctness, etc.” But this is completely backwards compared to the rest of society. The whole problem with everything else in the world is getting people to live up to what they say. Or in other words, make people follow their words through with action.

Why is it that human society has based their politics based upon what people said and not what they do? And do not go off yet, it is on both sides.

If someone stated that Congressman Joe Wilson who shouted “you lie” when President Barack Obama stated that his health care plan wouldn’t cover illegal immigrants had in fact supported a previous bill that did, would many of Wilson’s supporters know the real answer?

And I understand that people are rational ignorant when it comes to politics. But why is the equlibrium at what they say? Why isn’t it at zero? Could it be possible that no listening to a politician at all would give people a better chance at guessing what policies they promote? For example, if you ran the experiment, two citizens in 2001. George W. Bush is elected and now we are in 2002. By the end of his administration, who has a better chance of predicting if George W. Bush will support Medicare expansions? The guy who watched the news and listened to the speeches or someone who paid no attention at all?

The obvious answer here is the person who paid no attention at all. Why? Well, Bush expanded Medicare with part D while claiming to be a fiscal conservative.

There you have it, I support rational absolutely ignorance over rational speech listening only ignorance.

I mean how else are we going to stop the Barack Obamas and the Nancy Pelosis of the world from talking about a bill that hasn’t been finalized… I mean you wouldn’t trust a car salesman who had never seen the car, would you?

~PCCapitalist

Glenn Beck on Tipping

Disclaimer: Glenn Beck  has done a lot for the right wing and has done even more at making sure Mr. Barack Obama is in check everyday. But when someone makes a stupid claim you must keep them in check even if they are your friends. I am currently reading his “Inconvenient Book” and a few things have upset me.

Chapter 13 Gratuities: I’ve Reached My Tipping Point is the title of the chapter and rightfully so. This chapter is full of what is a short rant on tipping in America. Mr. Beck is stressed that tipping has now become apart of a social stigma and that it is a must do. This must do then, supposedly, requires those who receive the tips to slack off. Mr. Beck wants to pay for what he gets: the food.

This is why he is wrong…

Tipping is Capitalism and making a statement like “Business owners, let’s make a deal: You pay your staff, and I’ll pay for the food,” shows a complete misunderstanding of Mr. Beck’s views of a) business and b) economics.

Now tell me, why is it that one works for a service in where they make less than minimum wage? It is simple, because of tips.

What happens if you remove tipping from the equation? Well, believe it or not Glenn, the business owners will have to raise their prices in order to get employees.  In other words, customers will now be paying an automatic 18% more whether they want to or not. Just like businessmen cannot just throw some imaginary windfall profits to the exploited worker as Marx would say, businessmen cannot remove tipping and charge the same prices.

So what does tipping do? Tipping not only allows the customer to have a say on whether service is good or bad but it also signals to the business owner who should be fired and who should be kept with accurate counting. Without tipping, how could you tell? By the number of complaints maybe but the right to tip does not remove the right to complain also.

So where has Mr. Beck’s idea(s) on this been employed? Europe.

When visiting Italy, most will find that a 18% service charge will be included along with sometimes another fee all the way at the bottom of the menu. And believe it or not but the service was both slow and horrible.

Now tell me, if you are out with friends and everyone leaves a nice tip for a nice waiter then what is the problem? If you are out with friends and everyone leaves a nice tip for a bad waiter then the problem is not the “tipping mechanism,” the problem is your friends.

It sounds like Glenn Beck has been having dinner with socialists too long and needs to find a way to stand up and say he is not tipping because the service was bad. It seems odd that he can stand up to Obama and many other politicians on every issue under the sun, but  he can not stand up to his friends when it was clear the service was bad?

~PCCapitalist

Published in: on September 8, 2009 at 11:32 pm  Comments (5)  
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Pushing American History in the Wrong Way: The NEH

By Justin Williams

With Barack Obama’s new appointment of former Iowa Congressman Jim Leach to chairman of the National Endowment for the Humanities (NEH), new attention is being brought onto a program called We the People. This program is funded with the purpose for furthering the study of civics and bringing Americans together through their history.

And, perhaps not surprisingly, for Obama’s fiscal budget for 2010, it is the only NEH program that is receiving a cut.

We the People won widespread laud for doing a television documentary on the life and writings of Thomas Paine who said “Government even in its best state, is but a necessary evil, in its worst state, an intolerable one”—which may explain at least in part why the Obama Administration has cut this and increased all other NEH programs.

As with most government proposals, under the fairytale-sounding narrative, there is a paragraph that tells exactly why the Obama NEH intends to expand its own select menu of programming. And just like all the other latest proposals of the Obama administration, once you begin to scratch the surface, all the deep dark matter shows.

The NEH claims that its programs will “Strengthen humanities teaching and learning in the nation’s schools and colleges.” Under that sweet-sounding tripe, it reads that they will fund “outreach programs of Humanities Initiatives for Faculty at Historically Black, Hispanic Serving, and Tribal colleges and universities.”

And there you have it: the Obama administration believes that it can bring Americans closer together by funding only colleges and universities that historically have had only minority students. Obama has chosen to increase this while reducing a program, We the People, which “support(s) enrichment workshops for K-12 school teachers at important historical and cultural sites around the nation.” So much for “cultural sites” where the “wrong” cultures may have lived.

The NEH also believes that it could “Preserve and increase access to cultural and intellectual resources essential for the American people” by supporting programs that “preserve and provide access” to “information relating to the estimated 3,000 of the world’s 6,000-7,000 current spoken languages that are on the verge of extinction.”

In other words, the program in We the People that worked at preserving “U.S. newspapers from 1836 to 1922” was not apt at doing this. And neither apparently did providing “free sets of classic works of literature” to libraries.

Americans for Limited Government has always been a supporter of rolling back government and, of course, the budget increases for the NEH continue to add more and more to the already deep hole of U.S. national debt. But the move by the Obama administration to shift policies away from these that seem to achieve goals that bring Americans together to those that seem to discriminately fund small groups is not only wrongful; it’s shameful.

And then, of course, there is the overt attack on Thomas Paine. It begs the question, why is it that the Obama administration is not showing signs of slowing down government spending on various issues (i.e. bailouts, “stimuli,” health care, etc.) but the one program cut in the NEH is the one that supported freedom fighters—and not so coincidently—treasured “that government which governs least.”

One would have hoped that the Obama Administration after inheriting a trillion-dollar deficit would have pursued a limited government budget, in order to prevent the U.S. from going deeper and deeper in debt. No matter what the cost.

Instead, the policies seem to be more of a ploy to divide the country and skew American history. All the while, of course, Obama creates new voting blocs for the Democratic Party—while making certain that those victimized by such reckless, ruthless political chicanery remain are nary once reminded that, indeed, “These are times that try men’s souls.”

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 25, 2009 at 12:49 pm  Leave a Comment  
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Mr. Crassus, Meet the Federal Reserve


Print

Marcus Licinus Crassus became the 8th richest person world history by hiring arsonists to set fire to houses in Rome while waiting around the corner with firemen. When the fire appeared uncontrollable, Crassus would approach the owner of the house with his firemen, giving them the ultimatum, “Give me your house at below market value or watch it burn to the ground.” Only then, if the owner agreed would he put out the fire.
Marcus, meet the Federal Reserve.

The Federal Reserve, who were the arsonists that started this financial fire with their loose monetary policies causing the current financial crisis, have now become the new firemen in charge of the financial markets.

Yesterday, Barack Obama announced that he was going to put the Fed in charge of overseeing systemic risk in the economy, derivatives, executive pay, the mortgage-backed securities (which were the primary fuel the housing boom and the credit crisis), and hedge and private equity funds for the first time.

And, all the while, the Fed Board of Governors stood in the background yelling, “Burn baby, burn!”

Once again, the government’s policies are directed at creating another short-term unsustainable bubble instead of trying to fix the long-term problem that put America into this mess in the first place, loose credit. Now even more loose credit is what the American people are going to get.

Ever since Rahm Emanuel uttered the words, “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before,” the Obama Administration has pushed for more government spending along with (as ALG has reported) pressuring the Federal Reserve to use the printing press to help ease the enormous debt.

What will the Federal Reserve do when their own policies delude the banks into once again issuing loans that they shouldn’t have? Most likely, they will take a page out of the Obama playbook and divert the blame.

After the Obama Administration’s attack yesterday on the private sector, it is clear that the blame is put on market “recklessness and greed” and not the bumbling Fed bureaucrats who birthed this mess.

When the next bubble bursts in the Fed’s lap, they too will divert the blame toward market “recklessness and greed,” and God only knows what will come next. (Can you say “Novaya Ekonomicheskaya Politika?”)

The real answer, of course, in preventing another financial crisis is government transparency paired with less regulation, not more. With transparency, less regulation will follow. But there is one major obstacle stands in the way, government granted monopolies.

When the Fed was setting fire to the U.S. economy, they had (and still have) a monopoly on the U.S. currency. Just as when Crassus’ men were setting fire to Roman houses, he had a monopoly on the fire-fighting equipment.

Clearly, giving any organization a government-granted monopoly to any commodity –be it U.S. dollars or bucket brigades — without any transparency is a policy as duplicitous as it is dangerous. It virtually guarantees miscreance and sows the seeds of its own destruction.

It’s a little late for the good people of Rome. But, it’s not too late for the American taxpayer. Right now, a bill in the House of Representatives — H.R. 1207 — would, for the first time ever, empower Congress to audit the Fed. If passed it will provide much-needed transparency to an inordinately mysterious organization that, after Obama’s plan goes through, will be able to exercise ironclad control over every facet of the United States economy.

Which means that for American taxpayers – forced to watch their meager earnings go up in flames – the price of Obama’s Pyrrhic Victory will be ashes in their mouths.

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 19, 2009 at 5:34 pm  Leave a Comment  
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The Ongoing Presidential Policy of Inflation

In every major United States presidential election until the early 1990’s, monetary policy was a major hot button issue. And believe it or not it even captured the popular fancy. For example, The Wizard of Oz written by L. Frank Baum, a populist sympathizer, portrayed the struggles of the movement to add silver to the American currency in his book with metaphors and symbols.

But what most people do not know is that this movement was actually fomented by a group of people who simply owed a lot of money and decided to lobby for a policy of inflation.

As a result, the Federal Reserve Act of 1913 actually began a new era of monetary policy in the United States with one primary motivation in mind: controlling inflation. The politicians, conniving as usual, had figured out an easy way to finance their debt… the printing press.

So those who wanted to rein in the recklessness decided that by making the Federal Reserve independent from Congress, they could prevent skyrocketing inflation. But, as so often occur with “the best laid plans of mice and men,” what actually happened was an inflationary credit boom that created the “roaring twenties” and a bust which the world coined “the Great Depression.”

Now if you think this sounds familiar to the current financial crisis with the housing boom and bust, you are not alone. Nor are you observing an exception to the rule.

The Federal Reserve, since it’s founding, has fostered a constant uncontrollable policy of inflation. But since they claim that they are independent, they insist that the inflation is not due to political pressures.

This, of course, is completely false.

Economist Thomas DiLorenzo finds that the Federal Reserve board has been little more than the President’s handmaiden time and time again. For example, when President Jimmy Carter wanted a strong growth in the money supply to further social welfare programs, Americans saw a jump in inflation to 8.5 per cent. Later, Ronald Reagan, wanted to stop Carter’s damaging policies and stabilize the American economy. He called in newly appointed Fed Chair Paul Volcker. And lo and behold, the “independent” Fed reversed its policies.

So, if the Federal Reserve gives in to the pressures of the President, then why is it that mainstream scholars believe that the Fed is independent? Well, the confusion begins at the divide between instrumental versus goal independence.

It’s true that the Federal Reserve has the independence to set day-to-day monetary policy without any interference, which is called instrumental independence. But the President can heavily influence and direct the goals of monetary policy, thereby making the instrumental independence worthless.

The President does this by exercising his powers of appointing the members to the Board of Governors. This board is comprised of the most powerful players in the Federal Reserve. With only five of the seven positions filled, President Obama now holds an enormous amount of power because he could add two votes to an already small board, making the current members less powerful and insisting his own appointee further his political goals.

Already, with the massive new amounts of spending, there is no doubt that Obama has been leaning on the Fed Chairman Ben Bernanke to help finance all of the new bailouts and outright spending sprees to pay the debt.

The argument is that the United States needs to provide liquidity, or more cash, to the banks so that they can continue lending out money. What is going to inevitably occur, of course, is another boom period followed by a catastrophic bust.

All the while, the American people sit in the dark, while their money is being continually devalued by the Federal Reserve’s printing press, which will cause an artificial unsustainable boom and allow Obama to claim to be economic savior. Then, when the massive bubble eventually—inevitably—bursts, Obama will be either out of office, or (particularly if the mainstream media shameless idolatry continues) simply out of reach.

Perhaps, the last best hope for preventing all of this is the passage of H.R. 1207. The bill now gathering growing support in Congress to audit the Fed already has a staggering 227 supporters. If it reaches 300, Nancy Pelosi will certainly have to hold a vote.

And the beleaguered American people—victims of the “independent” Fed’s obstinacy for well nigh a full century—will finally have a prayer.

Justin Williams is a Contributing Editor of ALG News Bureau.

Paying a Loan Back Never Felt So Bad…

From NetRightNation:

When the government offered $700 billion dollars to buy trouble assets from many banks across America, some were very hesitant to accept these funds.

For example, BB&T’s former (as of 12/31/09) CEO John Allison wrote a letter to Congress explaining that certain bad governmental policies are to blame for the current financial crisis. BB&T is still strong and lending money according to Allison and now CEO Kelly King.

Later, when BB&T along with many other major financial institutions wanted to wash their hands clean of government funds, they were told that they would not be allowed until they passed strict tests, as ALG News previously reported. Even though Barack Obama said that he has no interest “in managing these banks—or running auto companies or other private institutions, for that matter,” he has now granted a small few the right to repay their TARP loans. Why not all of them?

The ten banks that will be paying back $68 billion dollars include: J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, BB&T, U.S. Bancorp, American Express Co., Capital One Financial Corp. Bank of New York Mellon Corp., Northern Trust Corp. and State Street Corp.

What exactly is the secret recipe that the bureaucrats came up with to allow these banks to repay loans? Nobody knows. Or at least, nobody is saying publicly.

All that Secretary Geithner stated in his release to the press was that the banks’ willingness to pay is “an encouraging sign of financial repair, but we still have work to do.” Barack Obama has not let the banks off the hook either. He said that “the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds.”

And while the government takes their sweet time deciding which banks can and cannot pay back their loans, they continue reap in the dividends from these “troubled” banks. The federal government has already turned a profit of $4.5 billion in dividend payments from all of the banks, including $1.8 billion from the ten banks listed above. That, even though failing businesses do not usually pay out dividends.

Why is it exactly that the banks have to jump through hoops just to pay back loans? Nobody knows. Or at least, nobody is saying.

Banks sometimes discourage early payment of loans with penalties on mortgage contracts, but this is always agreed to beforehand and protects the bank’s profit. There was no announcement at the outset of any penalty for early payment. And it was understood that the government was not a profit-making entity. And yet, the government has saw fit to control arbitrarily who is and is not allowed to pay.

What are the terms and conditions for repayment?

These banks should be allowed to pay back the loans, anytime they deem it necessary. Those bankers should know what’s better for their business than some bureaucrat who has never run a business in his lifetime. It’s not up to the government to tell a bank that it is too fragile to come off government assistance.

President Obama, since day one, has tried to get involved into every aspect of these financial institution’s decisions, where he continues to play up the myth that capitalism is to blame to all of society’s ills. What he—and Congress and the bureaucracy—are still in denial of is that the Federal Reserve was behind the bubble to begin with its policies of loose credit and easy money.

In short, the financial crisis was a governmental failure. Not a market failure.

Finally, to make matters worse, there isn’t even a plan of what to do with the money being repaid from these banks. In the press release issued by the Treasury Department today, Geithner states that “proceeds from repayment will be applied to Treasury’s general account. These repayments help to reduce Treasury’s borrowing and national debt. The repayments also increase Treasury’s cushion to respond to any future financial instability that might otherwise jeopardize economic recovery.”

So, which is it? Does the Treasury keep the cash or run TARP indefinitely? The repayments might be used to pay off the federal debt, or they might get recycled back into the program, and TARP will never end. Again, nobody knows, and nobody’s saying.

And with the Obama Administration serving notice to banks that they are not off the hook yet—even in repayment—it is no wonder that many of those same banks were reluctant to take the money to begin with.

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 12, 2009 at 12:16 pm  Leave a Comment  
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The Kennedy Socialized Medicine Triple Whammy

From NetRightNation.com

Over the weekend the Kennedy health care bill–aimed at inserting government into the nooks and crannies of every doctor’s office and operating room–was leaked to the press. Not so coincidently, this enormous growth of government comes as Americans celebrate the 60th anniversary of George Orwell’s book 1984.

In this book, Orwell depicts various insidious instances when Big Government engages in what is called “newspeak.” “Newspeak,” of course, is when the words of a language are distorted to fit a totalitarian regime’s plan to restrict liberty.

There is little doubt that when Harry Reid and Ted Kennedy’s people sat down to draft this bill, they took great pride in elevating “newspeak” from cliché to archetype. Doubtlessly laughing up their sleeves all the while, they named the bill that restricts and coerces millions of Americans the “American Choices Health Act.”

This bill, of course, neither improves American’s health, nor their choices in health care.
Its goal is said to be to give all American’s health care. But the only way it can get it done is by forcing individuals to take government-rationed health care while coercing the employers to take money from employees’ paychecks to pay for the restricted coverage.

And that, truly, is a socialist double whammy.

Somehow by giving up their freedom of choice, Americans are supposed to save a heavily overburdened welfare state that already operates dangerously in the red. It is being reported that in the next 10 days, the White House will release how this plan will knock off $200 to $300 billion in Medicare. At the same time, we are informed, people will be lining up to get a taste of this new “free” health care.

In economics, it is said “incentives matter.” And when it comes to health care costs and benefits, incentives often matter most. When the average American is deciding whether to take health care or not, they are weighing the benefits and costs. This is no different than buying milk at the grocery store. Now that the cost is being subsidized to those who are 500 percent above the poverty line, they will be more apt to try and collect their newly distributed benefits.

For America this means longer wait lines for doctors and for surgery, along with radically increased costs to an already overbloated Big Government. But conveniently for them, Kennedy and Reid left out any and all of the accounting costs in the bill. Though, a previous low estimate was in the range of $1.2 to $1.5 trillion over the next 10 years.

But wait, as the TV infomercial hipsters shout, there’s even more!

Just when it couldn’t seem to get any worse, Kennedy and Dodd are proposing yet another new bill that will only clog the major healthcare arteries even more. It is called “The Healthy Families Act.” This bill forces businesses to pay sick leave to all employees–in the name of preventing the swine flu (as well as any other ailment that happen to take an employee’s fancy.)

To prevent abuse of this, employees will have to document their illness, and that, of course, means even more mandatory–and costly–trips to the doctor. Naturally, there will be more than enough people who will volunteer to spend the day reading magazines and waiting for the doctor (or at least they claim they are) then going to work and being a productive member of society. How can we be so sore? Check out the local welfare and unemployment offices.

Which means the entire health care hoax has now become the true socialist triple whammy.

Kennedy, Pelosi, and Obama are not only incentivizing people to overburden the doctor’s offices, but also now they are even paying those who do work to take more time off and spend it in the waiting room. All the while, bringing the U.S. closer and closer to becoming a kissing cousin to the many unsustainable welfare states of Europe.

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 11, 2009 at 8:14 pm  Comments (1)  
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The Obama Motor Co. from WSJ

Today’s article of the day comes from The Wall Street Journal:

Back in December, in an economy far, far away, then-CEO Rick Wagoner tossed out the scary cost to taxpayers of $100 billion if General Motors wasn’t saved by the government. Well, GM was saved in December and again in March, and as early as today the feds will rescue it a third time in a prepackaged bankruptcy that is already costing at least $50 billion, and that’s for starters. Welcome to Obama Motors, and what is likely to be a long, expensive and unhappy exercise in political car making.

Taxpayers have so far put up nearly $20 billion, which was supposed to be a loan at market rates but under Treasury’s forced restructuring will mostly be converted into equity in the new GM. The feds are also putting up $30.1 billion in “debtor in possession” financing and will effectively nationalize the once-mighty auto maker by taking roughly 60% ownership. (That’s not counting $12.5 billion to save GMAC, the company’s financing arm.) The Canadian government will go along for the ride for 12% of the new GM, the UAW will get about 17.5%, and the hapless bond holders have to settle for 10%.

The Obama Treasury is portraying this as the best solution to the mess it inherited, leaving GM with much-reduced legacy costs for health care, a cleaned-up balance sheet, a humbler UAW that has forgone some performance pay, and a more efficient dealer network and product line. GM, we are told, will now be able to make a profit and some day even return money to taxpayers. If you close your eyes and imagine that GM’s private managers would be able to make decisions based solely on business judgment, you can even start to believe.

But then you snap out of it.

Every decision the feds have made since December suggests that nonpolitical management will be impossible. First they replaced Mr. Wagoner — whom they are nonetheless still paying — with the more pliable Fritz Henderson as CEO and Kent Kresa as Chairman. The latter are good at playing Washington but unproven in making popular cars. Then Treasury bludgeoned the bond holders in both Chrysler and GM to take pennies on the dollar, which will not make creditors eager to lend to the companies in the future.

There’s also the labor agreement that the UAW approved last week, which goes some way toward reducing costs but probably not enough to make the new, smaller GM competitive. The new agreement simplifies some work rules and job descriptions but makes no reductions in hourly pay, pensions or health care for active workers. The agreement must also be renegotiated in two years by an Obama Administration running for re-election and weighing the need to keep Big Labor happy against the risks to taxpayer-shareholders. Who do you think wins that White House debate?

The Administration’s concessions to the UAW also restrict the company’s ability to import smaller, more fuel-efficient cars that it already makes overseas. UAW President Ron Gettelfinger boasted on PBS’s “NewsHour” last week that “we, quite frankly, put pressure on the White House, the [auto] task force, the corporation” to bar small-car imports from overseas. GM is also selling its Opel operation in Europe as part of this restructuring, and the Washington Post reports that one of Treasury’s sale conditions is that Opel’s new owners must stay out of the U.S., and even out of China, where GM’s business is strong.

This is raw trade protectionism. It is also textbook cartel behavior and would be an antitrust violation if practiced by a business. But the benefits for GM are illusory because the import limits mean the company will have to spend even more to retool its domestic plants to make the little green cars that President Obama and Congress are demanding. No one knows if Americans will buy such cars, even if GM can make them competitively in the U.S.

The Administration promises to wield a light ownership hand, but it’s only a matter of time before Congress starts to micromanage GM’s business judgments. Every decision to close a plant will be second-guessed, much like a military base-closing. And what about buying parts from foreign suppliers? Will those also be banned when Mr. Gettelfinger demands it, even if the costs are lower? GM’s managers and directors will have one eye on enhancing shareholder value, but the other on pleasing their political minders in Washington.

The Obama Administration has been whispering to the press that it could start selling its stake within a year to 18 months, and that it hopes to be out of the business entirely in five years. But even assuming that the taxpayer investment stops at $50 billion, GM would have to be worth a cool $80 billion for taxpayers to break even on their 60% stake. By way of comparison, GM’s market capitalization at its recent peak in 2000 was only $56 billion.

The larger corruption will be when government tries to vindicate its ownership by favoring GM over Ford and the other auto makers that aren’t wards of the state. The TARP legislation contained one blatant example in the form of a $7,500 tax credit for consumers who buy GM’s new electric car, the Chevy Volt. Expect more such favoritism, including huge new subsidies for green cars if consumers prove resistant to their charms.

Mr. Obama likes to say he’s a pragmatist who only prefers a government solution when it will work. But in resurrecting an industrial auto policy that even the French long ago abandoned, the President has made himself GM’s de facto CEO. Our guess is that he’ll come to regret it as much as taxpayers will.

Published in: on June 1, 2009 at 6:02 pm  Comments (2)  
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The ‘Unseen’ Deserve Empathy, Too by John Hasnas

Today’s article of the day comes from the Wall Street Journal:

While announcing Sonia Sotomayor as his nominee to the Supreme Court, President Barack Obama praised her as a judge who combined a mastery of the law with “a common touch, a sense of compassion, and an understanding of how the world works and how ordinary people live.” This is in keeping with his earlier statement that he wanted to appoint a justice who possessed the “quality of empathy, of understanding and identifying with people’s hopes and struggles.”

Without casting aspersions on Judge Sotomayor, we may ask whether these are really the characteristics we want in a judge.

Clearly, a good judge must have “an understanding of how the world works and how ordinary people live.” Judicial decision-making involves the application of abstract rules to concrete facts; it is impossible to render a proper judicial decision without understanding its practical effect on both the litigants and the wider community.

But what about compassion and empathy? Compassion is defined as a feeling of deep sympathy for those stricken by misfortune, accompanied by a strong desire to alleviate the suffering; empathy is the ability to share in another’s emotions, thoughts and feelings. Hence, a compassionate judge would tend to base his or her decisions on sympathy for the unfortunate; an empathetic judge on how the people directly affected by the decision would think and feel. What could be wrong with that?

Frederic Bastiat answered that question in his famous 1850 essay,What is Seen and What is Not Seen.” There the economist and member of the French parliament pointed out that law “produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.” Bastiat further noted that “[t]here is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

This observation is just as true for judges as it is for economists. As important as compassion and empathy are, one can have these feelings only for people that exist and that one knows about — that is, for those who are “seen.”

One can have compassion for workers who lose their jobs when a plant closes. They can be seen. One cannot have compassion for unknown persons in other industries who do not receive job offers when a compassionate government subsidizes an unprofitable plant. The potential employees not hired are unseen.

One can empathize with innocent children born with birth defects. Such children and the adversity they face can be seen. One cannot empathize with as-yet-unborn children in rural communities who may not have access to pediatricians if a judicial decision based on compassion raises the cost of medical malpractice insurance. These children are unseen.

One can feel for unfortunate homeowners about to lose their homes through foreclosure. One cannot feel for unknown individuals who may not be able to afford a home in the future if the compassionate and empathetic protection of current homeowners increases the cost of a mortgage.

In general, one can feel compassion for and empathize with individual plaintiffs in a lawsuit who are facing hardship. They are visible. One cannot feel compassion for or empathize with impersonal corporate defendants, who, should they incur liability, will pass the costs on to consumers, reduce their output, or cut employment. Those who must pay more for products, or are unable to obtain needed goods or services, or cannot find a job are invisible.

The law consists of abstract rules because we know that, as human beings, judges are unable to foresee all of the long-term consequences of their decisions and may be unduly influenced by the immediate, visible effects of these decisions. The rules of law are designed in part to strike the proper balance between the interests of those who are seen and those who are not seen. The purpose of the rules is to enable judges to resist the emotionally engaging temptation to relieve the plight of those they can see and empathize with, even when doing so would be unfair to those they cannot see.

Calling on judges to be compassionate or empathetic is in effect to ask them to undo this balance and favor the seen over the unseen. Paraphrasing Bastiat, if the difference between the bad judge and the good judge is that the bad judge focuses on the visible effects of his or her decisions while the good judge takes into account both the effects that can be seen and those that are unseen, then the compassionate, empathetic judge is very likely to be a bad judge. For this reason, let us hope that Judge Sotomayor proves to be a disappointment to her sponsor.

Published in: on May 29, 2009 at 6:38 pm  Leave a Comment  
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