Monday, December 8, 2008

Better To Laugh Than Cry

We hang the petty thieves and appoint the great ones to public office. 
          — Aesop

Like many people, I spent the weekend in a variety of activities; relaxing with family; preparing for Christmas coming by doing some house cleanup and decorating; shopping; as well as attempting to follow the domestic and international news issues on TV, in the Sunday papers, and on some web sites.  I accomplished just about everything that I wanted to around the house, but continued to be completely amazed by the news reports and statements made by our politicians.

I watched as the same politicians who are responsible for creating the "toxic assets" that have tainted the world's financial securities and caused the current economic recession, sat at their microphones demagoguing the "Big 3" auto execs about how poorly they managed their companies, while allowing the head of the UAW to sit there unscathed despite the UAW contracts being the major causal element of the industries dire straits.

None of the politicians who were skewering the exec's has a business background; none have built or revived companies; none are economists; none are bankers; none have created jobs.  The whole scenario was Kafkaesque.  This weekend, one leading Democrat in Congress, Sen. Christopher Dodd of Connecticut, was blunt: Rick Wagoner, the chief executive of General Motors Corp. "has to move on".  You have to admire this display of Chutzpah from Sen. Dodd.  He's the Senate Banking Chairman who is under investigation for ethics violations.  Given the transgressions by Fannie and Freddie on his watch, he should be under Justice Dept. investigation for his involvement in facilitating and encouraging Fanny and Freddy's push on Sub-Prime Mortgage Loans.  Which, in case you have been on Mars the past few months, are the primary root cause of our current economic troubles.  

Then, Tom Brokaw "interviewing" Barack Obama, continued the levity.  Here's Obama, a man without any business, finance, or economics experience, discussing how he wants to change the industry, and how the current management has had their head in the sand.  But, since he's supposedly capable of being the "CEO of the US", I'm sure that he could also run an auto company profitably too.  His comments:
Well, I, I think that the Big Three U.S. automakers have made repeated strategic mistakes.  They have not managed that industry the way they should have, and I've been a strong critic of the auto industry's failure to adapt to changing times--building small cars and energy efficient cars that are going to adapt to a new market.  But what I've also said is, is that the auto industry is the backbone of American manufacturing.  It is a huge employer across many states.  Millions of people, directly or indirectly, are reliant on that industry, and so I don't think it's an option to simply allow it to collapse.  What we have to do is to provide them with assistance, but that assistance is conditioned on them making significant adjustments. They're going to have to restructure, and all their stakeholders are going to have to restructure.  Labor, management, shareholders, creditors--everybody's going to recognize that they have--they do not have a sustainable business model right now.  And if they expect taxpayers to help in that adjustment process, then they can't keep on putting off the kinds of changes that they, frankly, should have made 20 or 30 years ago.  If, if they want to survive, then they better start building a fuel-efficient car.  And if they want to survive, they, they've got to recognize that the auto market is not going to be as large as some of their rosy scenarios that they've put forward over the last several years.
Guess he doesn't know that they have been building smaller more efficient cars, but because of their disadvantage on wages, they're not as cost attractive as their competitors in that segment. Guess he also doesn't know, or like many Liberals, he just doesn't care that many of his fellow citizens actually want bigger vehicles for a whole variety of reasons.  He's been riding around in an SUV for the past two years, why didn't he use a smaller more fuel efficient car?

Speaking of restructuring, the funny thing is, there is a perfect template to assist the Big 3 in saving their companies.  It's called Chapter 11, and it's set up to do exactly what's needed; restructure the companies and their relationship with all their  stakeholders, including the UAW.  And that's probably exactly why the Democrats are resisting the natural course of events that should have them heading in that direction. It would also restructure the union contracts. In fact, Democrat spokesperson, the Los Angeles Times, has printed an Op-Ed by Jonathan Cutler, a sociology professor at Wesleyan University stating that the real problem was the fact that the non-US automakers operating in the South, aren't unionized.  Pure Kafka!
...there is nothing inherently unsustainable about employing a high-priced, unionized workforce. The crisis of Detroit's wage bill is entirely relative. Specifically, their labor costs far exceed the low-cost, nonunion American workforce at the U.S.-based, foreign-owned plants of competitors Toyota, Honda, Nissan and Subaru.

If the UAW really is to blame at all, then, it is because of the union's utter failure to unionize any of the transplants. What has the UAW been doing all these years? Isn't it the responsibility of any good union to protect union employers from competitive labor disadvantages by organizing wall to wall, throughout the industry? How could it have left these transplants unorganized?
It is not too late to save the Big Three. But the solution is not to tear down the historic and heroic gains won by prior generations of UAW workers. If there is hope long term -- for the unionized Big Three companies and for the UAW -- it rests in dealing with the unfinished business of the 1980s: unionizing the unorganized transplants.
Cutler's good....his argument kills two birds with one stone; a plug for the Union Card-Check legislation, and absolving the Union for any part in the problem.....beautiful parry!
The Kafka comedy continued....

TOM BROKAW, MODERATOR: Your vice president Joe Biden said during the course of this campaign it would be patriotic for the wealthy to pay more on taxes. In this economy, does he still believe that?
BARACK OBAMA: Well, I think what Joe meant is exactly what I described which is that if, if our entire economic policy is premised on the notion that greed is good and what's in it for me, it turns out that that's not good for anybody. It's not good for the wealthy, it's not good for the poor, and it's not good for the vast majority in the middle.
Let's see, working on one's own self-interest is now a social evil.  What have we been thinking all these years! And of course Barack and Michelle haven't made their decisions based on what was in their best interests for them.  All of those negotiations for his books and her $300,ooo+ salary, I'm sure that they didn't even care how it turned out.

It's amazing.  We have one economic quarter of significant market upset, based on a relatively small section of the economy - actual defaulted mortgage loans, and then a subsequent significant market decline due to SEC regulations to mark assets to market, and the Democrats want to trash Capitalism as a failure. I guess that the entire post WWII expansion of our economy, and the current high level of quality of life in this country was just fluke.  Time to move on past Capitalism to the fairer economic model...Socialism.

It continues to get even funny / Brokaw, a script reader, and Obama, the community organizer, really get deep into macro-economics:

MR. BROKAW:  Why not take this opportunity to put a tax on gasoline, bump it back up to $4 a gallon where people were prepared to pay for that, and use that revenue for alternative energy and as a signal to the consumers those days are gone.
MR. BROKAW:  We're not going to have gasoline that you can just fill up your tank for 20 bucks anymore.

PRES.-ELECT OBAMA:  Well, keep, keep in mind what's happening in--to families all across America.  Yes, gas prices have gone down.  But, in the meantime, maybe somebody in the family's lost their job.  In the meantime, their housing values have plummeted.  In the meantime, maybe their hours have been cut back. Or if they're a small-business owner, their sales have gone down 50, 60, 70 percent.  So putting additional burdens on American families right now, I think, is a mistake.  What we have to do long term is make sure that we have an energy strategy that focuses on fuel-efficient cars, that focuses on providing incentives for fuel-efficient cars.  Same applies to buildings.  We have a enormously inefficient building stock, and we can save huge amounts of energy costs and reduce our dependence on foreign oil by simple things like weatherization and changing the lighting in, in major buildings.  That's going to be part of our economic recovery plan.
Let's see, all that history of free markets...nah!  Let's manage the price of commodities.  That should really work well.  What could go wrong?  And I can't wait to see how much weather stripping it will take to make a major impact.  Time to invest in 3M....

Then they move on to one of my favorite chuckle generators....politicians talking about taxes:

MR. BROKAW:  We're back with President-elect Obama.  We want to talk about taxes....

PRES.-ELECT OBAMA:  Well, as I said, my economic team's taking a look at this right now.  But, but I think the important principle--because sometimes when we start talking about taxes and I say I want a more balanced tax code, people think, well, you know, that's class warfare.  No.  It, it turns out that our economy grows best when the benefits of the economy are most widely spread. And that has been true historically.  And, you know, the real aberration has been over the last 10, 15 years in which you've seen a huge shift in terms of resources to the wealthiest and the vast majority of Americans taking home less and less.  Their incomes, their wages have flatlined at a time that costs of everything have gone up, and we've actually become a more productive society.
So what we want to do is actually go back to what has been the traditional pattern.  We have a broad-based middle class, economic growth from the bottom up.  That, I think, will be the recipe for everybody doing better over the long term.

It seemed to me that the past 15 years have been one's of significantly increasing consumer lifestyle improvements.  That's why so many house were sold (despite the current defaults of sub-prime mortgages), more airline flights, more cars, more food, more of just about everything.  But, I'm willing to learn why I've been mistaken.
I've also never witnessed economic growth from the bottom up; never gotten a job from a poor person; never seen a poor person start a business that hires other people; but I'm willing and interested in watching this happen, it could be very enlightening.  I can't wait to see who's going to have enough risk capital to make the economy grow from the bottom up.  This should be good.  


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