Archive for November, 2008

I hear an awful lot about the potential bailout of the automakers in Detroit–an awful lot that is increasingly negative. People are tired of bailing out investment banks and credit card companies, and that is something that I can understand. I despise government intervention. Too much central planning, not enough personal liberty and freedom…

Bailing out Detroit, it seems, is a different matter then bailing out an investment bank. A lot of jobs depend on the success of the domestic auto industry, from manufacturers of parts(which are largely produced by many different companies, and is by far one of the biggest aspects of this), distributors of parts specifically related to the Big 3 in Detroit, and the car manufacturers themselves. Losing these companies means losing millions of jobs without the prospect of much replacing them. Losing investment banks means losses on the market and perhaps less liquidity, as well as job losses in the same industries I’m referring to, but less fear for me of losing the entire sector.

Can anyone honestly argue that losing domestic auto manufacturers would be good for the country? Perhaps in the long run, it might pan out, but in the short run, not so much. Even then, would it really be good in the long run?

How can we lend to them without fearing that they’ll use it unwisely? Attach these conditions (among others):

1. Find a way to bring the company into near profitability (as near as you can get at least) without the bailout funds first. For example: reduce the labor force, cut lines, shore up this, that and the other, etc.
2. Guarantee a negotiation of substantially lower pay and benefits for employees. Not non-livable levels, but rational levels, based on job type and experience. Work towards elimination of the union in the workplace in order to bring wages and benefits to a rational workable level in the future.
3. Car manufacturers must get to the root of another problem beyond employee compensation: vehicle quality, which seems to diminish year after year. Quality control is paramount; increase quality without increasing cost.
4. Find a way to increase fuel efficiency; get vehicle fleets to an average of [arbitrarily] 65mpg in the next 10 years. Any way you do it, go for something big, you’ll sell more vehicles domestically. And don’t do it by going small. Small cars are no good. Let’s keep making SUV’s and large trucks, but let’s find a way to make them burn less fuel.
5. Let’s find an alternative to fossil fuels to power our vehicles. Innovate, do something that is good for your business in the long haul and find a way to survive that doesn’t include oil or necessarily even a plug-in, electricity driven vehicle.
6. And most importantly reiterated, keep costs down by getting rid of unions. The union has ruined domestic autos because of demands that are unreasonable and irrational. Janitors should not earn $80,000 a year.
7. Pay the loan back in a specified reasonable amount of time.
8. Do not use the loan to compensate executives in an excessive manner whatsoever. Compensate them when your business is successful and you’ve paid back the loan. In the meantime, give them a realistic and rational wage. Stop with the bonuses, until said conditions are met.

Another important thing we must do, if we are to bailout automakers: take advantage of nuclear energy and get away from coal power plants; and we must get back to harvesting our own resources, environmentalists be damned.

Who knows, the plan is very antithetically libertarian of me, but man, my job depends on Detroit, and so I wonder if one little loan would be such a bad thing. Honestly, though, if Detroit can survive without the bailout it needs to do what I mentioned in my requirements to return to profitability in the long-run, so what’s the point…?

Need more Jeffersonians, less Hamilton(?)…ians.

Update:12/12/2008 To be honest with you, it looks as if the Obama administration is going to lean to the center for a while, certainly as long as the economy is weak. If he and his team have learned anything from the past, it’s that increasing taxes and spending in an economic downturn, even to create work programs, could inevitably lead to further destabilization and the extension of the problem. At any rate, his first term will be tough, but I’m curious to see how he handles it. Good luck Mr. President, all anybody can hope for is that our government doesn’t try to manage this recessionary period too much.

Update:5/20/2009 Wrong. Wrong. Wrong. This guy is a socialist through and through. He’s sure good at pretending to be a centrist though.

This was not an entirely unexpected result. Mr. Obama was a highly touted media darling of a candidate, and extremely popular with the people—considered the vox populi by many.

I’m not as frightened by his election as some conservatives, and he may well not do any of the things most people fear, but it is what he represents that I find to be so dangerous about him. It is the Marxian principles that he touts so energetically; the socialist tendencies his administration, coupled with Democratic control of both houses of Congress, would bring to the table; and the seemingly willful way in which the media has ignored his associations, misspoken words, policy gaffes, and inexperience in an effort to see that he is elected, that bother me so much.

For me, the American ideal can be summarized as rugged individualism, laissez-faire economics, and little Federal involvement in my life. I believe strongly in paying few taxes to the Federal government, and more locally (i.e. the state or municipality one resides in). What should I pay taxes to the Federal government for? Simply put, defense and operating costs. That’s it.

Obama would raise taxes for the rich; while this might not affect me directly, it does not make this redistribution of wealth right. I’ve read, and I’ve heard, leaving my claims without a source for now, that an increase in taxes will often erode your tax base, leaving you with less money in the coffers than if you had left the rate where it was at. Obama ignores this fact.

Obama would increase the rate at which capital gains are taxed. This leaves less incentive for individuals to invest, and puts our already teetering economy in an even worse position. For the economy to grow, and for individuals to prosper from this growth, we need healthy investment. The economy is built on investment from the top, not the bottom’s spending power.

The Democratic party is entertaining a very nasty idea; some in the party have proposed a removal of tax incentives for 401(k) plans; 401(k) plans are one of the single most important retirement investment tools available to individuals and have been a major investment opportunity for the average person. You remove that and the market will drop to levels not seen in twenty years because of the mass exodus induced by this plan. What will they replace the 401(k) with? Social Security 2: it will be a required deduction of 5% from your check to be deposited into a government retirement account. Your money will be invested in government bonds with a meager return rate of 3%. Oh and they’ll even contribute $600 a year to your account. Plus, and here’s where the mass exodus from the market comes from, any 401(k) rolled into this government investment account will not be taxed.

Additionally, Democrats are itching to reduce that defense budget. By as much as 25%. While we’re still in Iraq and Afghanistan. Dumb move.

Look, Obama won’t be the end of the country, but the damage the Democratic party can do to my future makes me quite nervous. I’m not looking forward to the next two years, but we’ll see what happens.