Chicago Republicans

That's a featured story headline from the July 8, 2009 edition of USA Today.  While only about $17 billion of Porkzilla, I mean, the American Recovery and Reinvestment Act of 2009, better known simply as, the Stimulus Bill, has actually been delivered to local governments, the vast majority has gone to areas that supported the President last November.  Keep in mind that the Stimulus Bill contained $787 billion in spending which means that five months after being signed into law just over 2% has actually been delivered.  Can someone explain to me, coherently, why we had to rush this through Congress?  I digress.

USA Today performed an analysis of the money delivered thus far.  Counties that supported Obama last year have reaped twice as much money per person from the administration's stimulus package as those that voted for his Republican rival.  The reports show 872 counties that supported Obama received about $69 per person, on average. The 2,234 that supported McCain received about $34.

However, we have no need to worry - "There's no politics at work when it comes to spending for the recovery," White House spokesman Robert Gibbs says.  This boggles the mind and begs the question, "Just how dumb does Obama think we are?"

Perhaps we're not dumb, but, he knows that the state run media (ABC, CBS, NBC, CNN, MSNBC, NY Times, etc.) will overlook this story.  Kudos to USA Today for digging to learn the truth about stimulus spending and for having the onions to print a story that casts aspersions on the President.

However, it didn't begin and won't end with the Stimulus Bill.  USA Today also looked into existing federal allocations and changes Obama made.  They found that, according to spending reports from the U.S. Census Burea, the counties that voted for Obama collected about 50% more government aid than those that supported McCain.

What's really at work here?  For anyone who grew up in Illinois, especially around Chicago, it's simple - payoffs.  Obama is rewarding those counties that supported him in hopes of getting their vote again and punishing into submission those that didn't.  Whenever the discussion among friends leads to the dirty style of Chicago politics I counter with, "Thank goodness no one from Chicago ever rose to national political prominence!  Oh, wait . . ."  I think I'll bring this article along for the next dialogue.

Sources:

http://www.usatoday.com/news/washington/2009-07-08-redblue_N.htm

http://www.usatoday.com/news/nation/2009-07-07-stimulus_N.htm

http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009

By now you've probably heard about "Newsweek" editor-in-chief, Evan Thomas, literally calling Barrack Obama "God" on MSNBC's show "Hardball" with Chris Matthews.  You'll find the video embedded below - see it for yourself.  He made the comment in reaction to the President's speech in Normandy commemorating the 64th anniversary of D-Day.  As shocking and outrageous, however, note the thirty-three second point where Chris Mathews agrees using the intonation of a freshman girl with a crush on the senior basketball team star.  If you recall, Mathews was the journalist who reported a "thrill going up his leg" when listening to Obama speak. Dim lights Clearly objective, professional journalism in the print and broadcast media is almost dead.  To assist American journalists who wish to be closer to God but still say their nightly prayers, I offer the following.  My apologies to St. Matthew . . .

Barrack Obama, who art in D.C.

I'll ignore your Muslim name

Thy liberal kingdom, which failed in Europe

I'll blindly push for here

Provide for us, the fairness doctrine

So we may kill Fox News

Forgive us for ever being objective

And we'll silence all your critiques

Lead me not to independent thinking

Just tell me what to do

Though I've never thought it through

Yours is the radical, socialist agenda

I will lie for, now and forever, Amen

- by Joe Dusek

 

The story of the new Detroit continues to be told.  Last week, President Obama boasted that his team had achieved a wonderful success by bringing together all the parties and reaching a compromise that keeps Chrysler in business and preserves jobs.  He emphasized that all parties had ‘sacrificed' and that he stands with the people willing to make sacrifices, and does not stand with those unwilling to make sacrifices.

 

Since when does the President play the role of choosing sides in a commercial dispute?  Why isn't the role of government to merely enforce existing laws and contracts instead of negotiating and advocating on behalf of disputing parties?  By the way, those he "does not stand with" are the private equity investors who have watched their investment decline over the years.  Another word for private equity investor is owner.  The president does not stand with the owners of Chrysler.  Instead, he stands with labor.  If anyone tells you that this presidency is not about socialism, then ask them what it means when the president opposes property owners in favor of labor?  What does it mean when the federal government micromanages strategy of a private sector company in order to manipulate labor unions?

 

The drumbeat of this effort by the Obama team has been to preserve the UAW jobs and protect the sub-suppliers to Chrysler and GM.  Interestingly, there are about 700,000 UAW members currently being paid benefits, but, only about 200,000 are working in factories.  That means that more than ¾ of the UAW beneficiaries are not even working!!!  They would not LOSE a job because they are not currently HOLDING A JOB!!  This is a scam to protect and buy off the retiree vote with federal aid.  It is a transparent power grab, and the presentation to the public has been disingenuous.

 

The obvious and foolish aspect of this plan that the Obama automotive industry team crafted is its total neglect of consumer preferences.  No matter how much money the federal government pours into Chrysler, consumers tastes will not change, and consumers will not start buying Chryslers.  So far, the federal government does not have the power to force consumers to buy Chryslers instead of competitive cars.  Maybe Obama and Pelosi will suggest mandatory car buying laws next, all in the spirit of saving jobs and stimulating the economy.  I fear the endless stream of "great" ideas the Obama team seems to have.

 

So, what happens next?  After they pour the money into Chrysler, and merge with Fiat, and consumers keep buying Toyotas and Hondas because of the stubborn perception that the quality is higher in Japanese cars than Chryslers, what will the Obama administration do to protect your tax dollars?  How do we know that our tax dollars, poured into Chrysler, will be paid back?  The answer is that there is no guarantee, and the federal government is now deep into speculation.  Not only is it speculation, but, it is HIGH RISK speculation.

 

In addition, the Obama administration is apparently circumventing the bankruptcy laws.  In the case of Chrysler, some investors paid a HIGHER price for the privilege of receiving preferential treatment in the event of a bankruptcy, the holders of the secured debt.  Now, however, the Obama administration is demanding that these same investors, the ones who paid MORE for a safer position in the event of a bankruptcy, forfeit this right.  Obama is treating this Chrysler issue the way a frustrated parent would demand that two small children share the last piece of cake regardless of whose birthday it is.

 

The audacity of the Obama administration will be its undoing as he continues to pursue the most activist federal government in our history, and it backfires!  What will they do in 1 year when the consumers continue not to be interested in buying Chryslers and the balance sheet is just as bleak as it is today?  How many bailouts is his political capital worth?

 

2010 could give the answer.

 

Today, the Obama administration revealed that it is committed, apparently any way it can, to GIVE General Motors our tax dollars to preserve the GM operation and cash flow processes of this company.  GM is a business in bad need of restructuring.  It should go into chapter 11, and restructure, and if it meets market needs, it can re-emerge. If it does not meet customer requirements, generate its own positive cash flow, then, it should go away. 

 

The argument for supporting GM is that the subsuppliers and employees will be harmed if GM collapses, calamitous unemployment will ensue, and the American economy will be irreparably damaged.  If we apply some simple common sense, this cannot be the case.  Furthermore, in all the discussions of subsuppliers, I have not heard anybody detail the partitioning between US subsuppliers and Asian subsuppliers.  Remember when the Federal government gave billions to the banks, and they promptly spent billions in overseas investments, including $6B by BankAmerica to buy a Chinese bank, and AIG paid off countless foreign creditors with BILLIONS of YOUR tax dollars?  Why is our Federal government so anxious to send your dollars overseas?

 

The reality is that if GM goes entirely out of business, or survives but declines significantly, the demand for cars will not decrease. The free market does not care whether GM survives or not.  If you need a car, you will buy one, whether it is from GM or someone else.  The market has chosen NOT to buy GM cars in enough volume for GM to maintain its once dominant position in the US auto market. 

 

Worldwide, approximately 50 million cars per year need to be produced by somebody or somebodies, because the market wants them.  And that somebody needs the skills of automotive employees and the capacity of those subsuppliers.  If GM collapses, their demand on subsuppliers will simply be assumed by the surviving car makers.  GM's market share will simply shift to somebody else, and that somebody will do business with the subsuppliers that GM used to do.  To make 50 million cars, you need to make 50 million steering wheels.  If GM is liquidated, then, the competitors will increase their output to meet market demand, and ultimately 50 million steering wheels will be produced.  The only difference is that after the fall of GM, none of those steering wheels will ship to GM.  In a free market economy, GOVERNMENT should not care which of the businesses survive.  The market, the consumer with the freedom of choice, should determine which companies survive, not bureaucrats!

 

Now, the Obama administration is treading dangerously with something that is illegal for private citizens to do, but, apparently fine for the Federal government to do...manipulate free markets!  The free markets have been saying for 30 years that they do not prefer the GM brand the same way they did in the 50s and 60s.  Pouring federal dollars into GM will temporarily prop up GM, but will not change the tastes of car buyers.

 

This is a massive waste of government money and energy.  The federal government should not meddle in free markets.  GM is proposing to exchange it low value stock in exchange for debt.  Why should we, the taxpayer, be assuming high risk, bad debt, for a business that we, the American consumer market, have been embracing less and less for the past 30 years?

 

I currently enjoy owning a Chevy truck, and before that, a Ford, and before that, a Chrysler.  I have made a choice not to own Japanese cars, preferring to support the home team.  However, that is MY choice. It may not be yours, but, if you support this President's plan, he is not respecting your choice to buy the car of your choice.  If you do not prefer a GM car, too bad, Barack Obama is going to send some of your money to them anyway.  It's a lot like central planning in the old U.S.S.R.  Who needs freedom anymore?  As of today, the federal government will decide which businesses survive and which fail, based on political favoritism.  Good luck to entrepreneurs!

 

The tea parties we saw on April 15 were a positive sign that the desire for non-interventional government in this country is thriving.  As Glenn Beck said, "Democrats suck,... and Republicans suck too.."  reflecting the bipartisan frustration being voiced by participants.  The federal government needs to minimize its spending, and in particular, its involvement in private sector business. 

 

The role of the federal government should be limited to law enforcement to ensure a level playing field for all US businesses.  Reasonable regulation should balance the needs of consumers against abusive practices of large and powerful businesses.  Reasonable regulation could include protection against monopolies, misleading advertising, contract defaults and safety advocacy in very complex markets like health care, pharmaceuticals, weight loss scams etc.  The federal government should NOT be directly involving itself in deciding which businesses should be ‘saved.'  The efficiency and success of a free market place depends on the fact that consumers freely choose the winners, instead of bureaucrats dictating them.

 

When the federal government involves itself, there are almost always unintended consequences, badly underestimated costs, and disappointing outcomes.  For example, the bank bailout, which was urgently required as a necessity to get banks lending again, resulted in deep drops in lending rates by Goldman (down 50%), Chase (down 35%) and Citibank (down 24%).  The federal government provided enormous funds for the banks, and the lending is actually LOWER than it was prior to the bailout.

 

One example of this belief that federal relief is the answer is a recent suggestion by Andy Grove, founder of Intel, and currently professor at Stanford business school.  Andy Grove is concerned that once the world economy recovers and rapid growth resumes, oil will spike again, and the lack of cheap, electric cars and cheap car batteries will be costly to the U.S., and therefore, the federal government needs to take the lead on R&D and early production of the miracle batteries.

 

What a BAD idea but is consistent , sadly, with the increasing belief in socialism for the US!  Suppose oil prices DO spike again and it is painful for US car drivers.  Then, the market condition for battery development will be right.  If Professor Grove believes this will happen, then, he should persuade wealthy private sector visionaries that battery technology is a great opportunity for investment.  Successful R&D that is done by private organizations is much more efficient than federal programs, is more realistic in terms of customer needs, and product valuation.  If it is not good at all three, then, it fails and the investment is lost, but, the loss is incurred by investors.  In the private sector, another word for investor is "volunteer."  We cannot trust the bureaucrats in federal agencies and university professors to write and execute business plans with our money?  If they are so inspired and so able to predict market trends, and willing to put THEIR OWN MONEY at risk, then, they should drop out of government and get rich!  If they love public service so much, they can volunteer to serve unpaid, after they have become rich will all those ‘sure thing' business plans.

 

More importantly, as the scope of federal investment widens, this will have the unintended consequence of disincentivizing private sector investment.  After all, why risk your own money if the federal government is just as likely to take the first step in risk taking?  Increasingly, investors will be more reluctant to take the first step in investment and business development, believing that the federal government will do it for them.  Furthermore, if there is a belief, or more accurately, a fear, that the federal government may step in at anytime and become an investor in some technology, then, private investors will then be competing with their own government!!  This will have a chilling impact on venture capitalization.  This will be absolute poison to growth.

 

Investing federal dollars in bailouts and corporate technology development is making all of us draftees!