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Have you heard? AIG is using some of its government funds to pay contractual bonuses out. What an unspeakable outrage right? I too am pretty upset with the idea that government money is going to pay the bonuses of employees in a private [edit: public] company, but isn’t it laughable that the same government who insists we rescue AIG because of its “vital importance” to the economy is now enraged by the way they run their business? The problem is irreconcilable conflicts of interest between the employees who can freely work for the company with the best incentives, the corporation that wants to maintain a competitive advantage, the government who wants to control the operational affairs of private enterprise, and the tax payers who don’t want to pay a single penny to save uncompetitive corporations, no matter how “vital.”
Because of these diametrically opposite interests, the government’s plan is beginning to experience stress. Corporations like AIG are frustrated with the bureaucratic impositions on their ability to manage their business (e.g., Chrysler wanting to acquire Fiat). Government involvement requires companies to virtually zero out their risk, meaning less innovation, investment, and a less competitive environment. If you need an example, see Amtrak. The obvious differences between how the government and corporations run their business demonstrates the friction that is occurring between the two. Sure, AIG and GM and the rest may survive extinction, but they will not be any more competitive. Are we better off having used trillions in borrowed money to save them, or should we have let the market do our bidding instead? I bet you know my answer already.
Now, we hear how outraged the President is over AIG’s move to pay these bonuses. Well, if you give whiskey to an alcoholic, what exactly do you expect? The result is completely predictable.
There are public questions over whether Treasury Secretary Geithner knew about AIG’s plans, and if he didn’t, then why not. Is it becoming clear that Geithner is overwhelmed? That’s a subject for a future post. What’s important now is to point out that rescuing failed businesses isn’t healthy for the economy; it isn’t noble, responsible, or even reasonable. This will only become more clear as things play out.
On Fox News Sunday, Austan Goolsbee, chief economist for the President’s Economic Recovery Advisory Board, answered some questions from Mike Wallace. Goolsbee, a decorated orator with several international championships under his belt as a competitive extemporaneous speaker, proved adept at answering questions by saying nothing at all.
Though Goolsbee is a Sloan Fellow, Fulbright Scholar, and has received a Ph.D. in Economics from MIT, he seems to also be educated in purposeful avoidance of important questions. During the interview, Goolsbee struggles with the administrations apparent inability to control unemployment numbers, or the actions of private corporations, despite the promise of endless billions from the Obama administration.
Below are segments of the transcript from Goolsbee’s rope-a-dope. I think you will find Austan Goolsbee says a lot without saying much at all.
WALLACE: The president is also set to announce billions of dollars in federal aid to open up lending to small businesses. What do you hope to accomplish?
GOOLSBEE: The — the market for credit to small businesses is completely frozen in an already terrible credit crisis. […] And so we’re trying to reignite through direct intervention the small business credit market so that they can — so that they can expand.
WALLACE: Last month you gave a magazine interview in which you said that we should see signs the stimulus plan is working within six months, and one of the key indicators, you said […] is if unemployment rises to the 8 percent range rather than the 11 percent that some are predicting.
What’s your revised estimate now that it’s already 8.1 percent for unemployment this year?
GOOLSBEE: I agree we’ve gotten some bad news on the labor market front, so that the — trying to keep the unemployment rate in the 8 percent range — we’re already in the 8 percent range.
I still think it is vital that by the end of the year that we try as hard as we can, through whatever means that we have — and the president has tried to do so — to keep the unemployment rate from getting into the multiple double-digit range that people were forecasting before that policy.
WALLACE: So you’re talking under 10 percent [unemployment].
GOOLSBEE: Ten, 11 percent people were forecasting — what would happen without any policy intervention. Now, we have passed […] the biggest financial rescue package that we have seen in decades, the largest stimulus probably in the history of the country, the biggest home foreclosure prevention and mortgage assistance program since the Depression.
Those three actions together are really very dramatic. They have just — the first checks from the stimulus haven’t even gone out, so I think that it’s, in my view, premature to be talking about what else is going to be necessary until we see how those things have worked.
WALLACE: How much will the government have to spend in guarantees against losses to get those private investors to buy these toxic assets? Geithner, at a hearing talked about another trillion dollars. In the president’s budget, he has a placeholder of $750 billion.
Are we talking about a program in the 7, $8 trillion dollar range?
GOOLSBEE: I’m not going to speculate on that number, because we haven’t done the bank — we have not completed the bank examinations that allow us to answer that question.
WALLACE: But does this mean another, in effect, TARP III, another big relief program?
GOOLSBEE: I’m not going to speculate on that. We have to do the bank examination to answer that question.
WALLACE: Finally, I want to get into a little bit of the Obama budget with you — $3.6 trillion, which calls for major tax increases on the wealthy.
And I want to read you something from the president’s budget. “While middle-class families have been playing by the rules, living up to their responsibilities as neighbors and citizens, those at the commanding heights of our economy have not.”
Mr. Goolsbee, it’s a blanket statement from the administration. People who make money have not played by the rules?
GOOLSBEE: I think you’re stretching a little bit the blanket statement.
WALLACE: Why make that a moral argument, something wrong?
GOOLSBEE: Well, you’re — you’re taking a line from the introduction that sets the stage for the discussion, which is we need to go back to an issue of balance. So in the ’90s we had a more balanced view. We’ve gotten out of balance.
People at the commanding heights of the economy with incomes over $250,000 a year have been receiving trillions of dollars of tax cuts…
Remember when Bush 43 glibly told liberals, “I won,” after they voiced concerns over his fiscal policy. Yeah, neither could I; however, that is precisely how President Obama responded to concerns over his spending proposals. In other words, Obama seems to be adopting the position on governance that says, ‘I will listen to your ideas, but only if they fit within my narrow set of liberal policy principles.’ Austan Goolsbee, the Chief Economist for Obama’s Economic Recovery Advisory Board recently said with regard to conservative healthcare proposals, “if these ideas can fit in with [Obama’s] principles, then we’ll consider them. And if we go through and they don’t, then he won’t consider them.”
Another aspect of Obama’s “post-partisan” approach is to attack high profile members of the media who dare speak out against his policies, via Press Secretary Robert Gibbs. To date, Gibbs has savaged CNBC Correspondent Rick Santelli for suggesting a modern-day tea party (guess what? they are happening all across the country), Rush Limbaugh was purposefully attacked, “Mad Money” host Jim Cramer, and most recently former VP Dick Cheney.
Between Obama’s penchant for only listening to ideas that fit within his “principles,” and the use of the White House Press Office to publicly attack those with whom they disagree, the empty suit is FINALLY starting to fill in. And is anyone surprised that Obama seems to be trading “hope and change” for fear, loathing, and personal attacks?
While I am not surprised, a question still remains: why? Why would the President feel it is appropriate or necessary to ignore other points of view, even though he often reads from the tele-prompter how important it is to respect them? Why would he feel it is appropriate or necessary to unleash his press secretary to attack any media personality that challenges his policies?
As Obama makes his case for early admittance to the liberal tax and spend hall of fame, his increased attacks on conservative viewpoints begin to make sense. Taking the debate down to a personal level narrows the conversation and serves to distract from the actual policies being implemented. Clever, huh? I’d agree in the short run, but as people begin to understand the Obama administration’s tactics, their prospects for public support will rival that of Nancy Pelosi. Assuming they are preparing for such an outcome, then an approach that attempts to spend all of its political capital in the early run would be understandable. If political suicide could make sense. But these guys are so much smarter than I am. Surely they have considered what happens when you become a lame duck in your first term?
As all conservatives are aware, a problem has developed within the Republican Senate delegation. Well three problems actually: Senators Arlen Specter (PA), Olympia Snowe (ME), and Susan Collins (ME). Senator Specter has the distinction of being first up on the election ballot in 2010 of these three.
When the conservative movement was in its darkest hour, needing direction from its shrinking leadership in Washington the most, the 79-year old Specter failed to answer the call. Specter’s brand of mushy “go along to get along” Republicanism is precisely the type which ensures a minority position in government. Specter is the kid on the school yard who had his lunch taken away, and decided to buddy up with the bully rather than punch the bully squarely in the mouth. In other words, lacking in spine and leadership.
As in the movie “A Knight’s Tale,” Senator Specter has been weighed, measured, and found wanting. To be sure, this is not meant to be a judgment of his personal character, rather his political character. For that reason, Senator Specter MUST and likely will be forced into retirement by the RNC during his primary campaign.
Who’s the man to accept the challenge? Pat Toomey.
Toomey was a U.S. House Representative for the 15th district of Pennsylvania from 1999 until 2005. He ousted the incumbent Democrat, Paul McHale, Jr., by ten percentage points to gain this position. In 2004, he challenged Specter in the Republican primary and narrowly lost with 49.18% of the vote. This after then-President George W. Bush and then-Senator Rick Santorum closed ranks and endorsed Specter.
Since January 2005, Toomey has served as President of the Club for Growth, a 501(c)(4) political organization and PAC which funds the campaigns of various conservatives across the nation.
When examining Toomey’s voting record, several things of note jump out.
He is a strong supporter of:
1. expanding economic development and free trade;
2. prayer in public schools;
3. privatizing social security;
4. school vouchers;
5. tough criminal sentences;
6. second amendment gun ownership;
7. lower taxes; and
8. military spending.
He is a strong opponent of:
2. expanding healthcare entitlement programs;
3. relaxed enforcement of immigration laws; and
4. UN approval for military action.
He is scored by several special interests as follows:
– 72% by CATO Institute for pro-free trade record;
– 100% by the Federation for American Immigration Reform (FAIR) for protecting legal immigration;
– 80% by the National Taxpayers Union (NTU) for protecting taxpayers;
– “A” by the NRA for second amendment gun ownership protection;
– 17% by the National Education Association for voting against the interests of teachers unions;
– 100% by the Christian Coalition for pro-family voting record;
– 0% by NARAL for voting against pro-abortion interests.
This is a record that conservatives can get behind. If he does decide to enter the fray and run for Specter’s Senate seat, he can expect support from all over the nation. Including this author.
The truest test of good corporate management is its ability to survive through the generations. General Motors has failed that test. GM is 101 years old, and was the global sales leader for nearly eight decades before Toyota overtook the top position in 2008. The global titan owns thirteen brands and claims to employ over 243,000 people across the world. Over the past thirteen years, GM has had two CEOs: Jack Smith, Jr. (96 – 03), and Rick Wagoner (03 – present). During this time period, the GM brand (along with other American brands) has created a brand identity of lower quality and less durability in comparison to similar foreign competitors.
Through this time period, GM has failed to respond to changing global economic pressures. If you have owned a television since the summer of 2005, you have witnessed several commercials touting “GM Employee Pricing.” This type of response to slumping sales exemplifies GM’s short-term fixes for long range problems. Not surprisingly, GM enjoyed a 49.6 percent sales jump during the first month of employee pricing in 2005, and Ford and Chrysler followed suit. This was far from the necessary solution that GM needed to keep positive cash flows.
But, but, but! You can’t blame GM for their troubles during this most recent economic downturn!
Have you heard of GMAC? The General Motors Acceptance Corporation was a wholly-owned subsidiary of GM whose primary business was financing the sale of GM products. In 2004, GMAC was the second-largest auto lender in America. During that year, GMAC was expanding its operations throughout the world in order to secure as many loans as possible. GM’s philosophy was to create as large a stream of capital income (money used to expand operations) as could possibly be amassed.
Even with GMAC’s rapid expansion, GM’s car sales numbers began to show signs of weakness during the fourth quarter of 2003. A full twenty-two quarters later, GM’s sales situation has failed to substantially improve. What’s more, GMAC began making home loans to sub prime borrowers. Though hindsight is a clear 20/20, GM appears to have been legally blind with regard to any foresight. As an example, since the recession began in late 2007, GMAC has lost $7.9 Billion on mortgage defaults and collapsing auto sales. (*It is important to note that GM sold a controlling stake in GMAC in 2006, but this sale has done little to lessen the heavy financial casualties connected to GMAC.)
We have heard an endless blame game from Rick Wagoner as to GM’s unprofitability. These excuses ranged from the Japanese Yen’s relative weakness compared to the dollar, to a laundry list of other external factors which Mr. Wagoner is all too willing to outline, if given an opportunity. Sure, when begging for $34 Billion in Government loans he told the Senate Banking Committee “we are here because we have made mistakes.” His next utterance was, “because some forces beyond our control have pushed us to the brink.” So was it your fault or not, Mr. Wagoner? While it is true that GM is not to blame for the “Great Recession,” they have failed at every instance to roll with the punches and keep a competitive edge.
What you hear the least out of GM is owning up to their failure to remain efficient in terms of labor costs, production costs, and meeting the demands of customers. GM has allowed themselves to be bent over backward by labor unions for years, and now the public is beginning to realize the staggering costs associated with union contracts. But GM workers only make $3 more an hour than Toyota workers, you say? How about comparing the legacy costs between GM and Toyota employees. Not so pretty is it? Sure union laborers will scream that they have made concessions off of an extremely high wage base (the highest in the U.S. economy for their skill set, even after concessions), they will scream about how GM should be forced to honor their labor contracts (which are a major contributor to GM’s insolvency), and have no problem asking the American people to honor these labor contracts between GM and the unions after they help to run GM into the ground.
So here’s an idea, if we are willing to limit the earnings of top executives in financial institutions who take government funds, why not limit the earnings of top executives at GM, and UAW? Or better yet, let them slide into the inevitable bankruptcy that is coming, and force a complete restructuring of GM’s costs. Because of the inevitability of bankruptcy for GM, a handful of Congressmen, led by Senator Jeff Sessions (R-AL), asserted that GM shouldn’t be given the first round of government funds. Now, most of the federal money will be lost as those holding GM’s debt are expected to be offered 30 to 40 cents on the dollar in a bankruptcy. Bankruptcy, obviously, has become the fastest and cheapest scenario left in GM’s playbook. Bankruptcy will restructure GM and allow them to cut the fat in months instead of years under a bailout scenario.
After restructuring, unions can reassume their traditional role of protecting work environments (isn’t this what OSHA is for?), and stay out of the business of forcing major U.S. corporations into uncompetitive situations. Lastly, clean house at GM, after all, the best way to avoid unionization is effective management. Something GM has suffered a lack of for far too long.
What do you think?
For those who can’t see youtube vids at work, try this link.
It appears that the President’s official policy with regard to fixing an ailing economy is to throw in everything including the kitchen sink, and his great grandchildren’s future. This is a terrible situation to put ourselves in after admittedly irresponsible spending by the previous administration. However, two wrongs certainly don’t make a right.
While the President is pursuing historic spending measures, it appears that something else is in the works. The media is giving the President’s spending habits as cursory of a review as they did of his campaign. The official commentary coming out of Washington is to attack anyone who publicly questions Obamanomics. But why? Could it be convenient for them to pursue biting personal attacks in place of honest disagreement, or debate? Further, why isn’t the media upholding its designated reason for existence, to hold government accountable? Sure, we have heard some challenges to the spending, but NOTHING compared to what the broad public is saying. So who does the media represent here anyway? The President, or the People? You decide.
In addition, once the good, hard-working people of America rescue the economy through ingenuity, innovation, and broad retooling of their various industries, who is going to get the credit? I bet Robert Gibbs, the President’s mouthpiece, will let us know. Think of it as President Obama’s own “Mission Accomplished” banner. Wait for it and see. But this time around, don’t expect the media to be so unkind to the President. Quit the opposite, as they will likely canonize him.
This may be my crystal ball gazing moment for the week, but the script seems to be set. Just in time for Tuesday, November 6, 2012…
I had the chance to visit with several people in the Charlotte-Douglas airport on Sunday night after our flights to various locations were cancelled. Having the opportunity to visit with my fellow stranded friends, we tried to pass the time by talking about various topics.
One topic that seemed to draw the most attention from people around us was the President’s handling of the economy. Though the crowd was as diverse as any crowd you may encounter on a flight, the opinions were as homogeneous as your milk. Charlotte was an appropriate setting for this conversation as few other cities in America are suffering worse than Charlotte under the current financial crisis. Yet, not one person we encountered was actually from or currently living in Charlotte.
While it is impossible to be scientific about the opinions I gathered, it was a strong anecdotal indication of the broader populous. We spoke about the issues that matter most: bank bailouts, funding for special spending projects (AKA “Porkulus”), impending tax increases, inflation, the war effort, and the President’s high-flying good times in Washington, D.C., while the rest of us fret over the future. As I said, we had some time to talk.
The gathered crowd concluded that we are on a fast track to a dead end street, driven by a reckless driver, who persuasively tells us it’s better to over-spend [edit: speed], and that everything is ‘okay’ as we race into oncoming traffic. Through this unscientific ‘right track/wrong track’ poll, it became apparent that most were disappointed with the direction we are headed. No one, not even those listening in from the periphery of our conversation could defend the President’s position on spending. How could they? Instead, I heard repeated, sarcastic statements saying, “Obama will fix it.” Some even questioned why President Obama wasn’t fixing our flight situation.
What was the parting impression? There is a solid public sentiment, that surprised even me, to not pursue this policy called, Obamanomics. Why? Because though it has a new name, ‘[socialism] by any other name’ smells just as putrid. A few people even quipped that it was a tall order to make former President Bush’s spending look favorable in such a short time period. I had to agree.
Sound off in the comments box, and let us know whether you think we are on the right track or wrong track.
I’ve spent the last couple of days at a large gathering of conservative legal scholars and law students from across the nation, and I have to say that we are in a prime position to seize the moment and reclaim our position of influence in America. But what is the cost? To not be ashamed.
I can recall being in Washington, D.C., as President George W. Bush entered his lame duck phase. There wasn’t a conservative to be found in that town. Well, they were crawling everywhere, but not a single one would admit it. They seemed ashamed of who they were. It reminded me of seeing American students abroad with Canadian patches on their backpacks, so as to avoid conflict over our war efforts. In a word, gutless. This mentality crept into our collective psyche, and we are beginning to see the after-effects of not standing up for what we represent.
For us to stand a fighting chance, we MUST be willing to speak out, and engage others on the issues that matter to all Americans – jobs, governmental oversight, economics, fiscal policy, monetary policy, taxes, education, charities, and the list goes on. We have a superior, proven set of principles to draw from, and we MUST be knowledgeable regarding these issues. Otherwise, we will continue to watch our principles and values be denigrated by the likes of the hollywood glitterati, CNN, MSNBC, NBC, ABC, and CBS (to name a few, and make no mention of the liberal print media). They are a formidable opponent, but isn’t it better to meet your more powerful adversary eye to eye, and carry the small, but assertive voice of truth?
We can do this. We must do this. If we are to avoid the pitfalls of big government, it is required that we provide a clear, stable alternative. I for one, am charged up.