Economic Bloggers and the Renewal of Entrepreneurial Capitalism

Wait, Where's Our Stimulus?

Yesterday, we were reminded that the government is writing a check to General Motors for $400 million so GM can develop better car batteries.

This check wasn't a loan. It was a "grant." Another word for "grant," of course, is "gift."

The GM news came a few hours before the Senate finally agreed on how best to give car-buyers and car companies $4,500 per new car. These payments aren't loans, either. They're gifts.

Notice that all the helping hands that have gone out are aimed at either those that are "too big to fail" or to those who "can't help themselves".

The formula for destroying a civilization by destroying the middle class is so well known and understood that I can only wonder at what point our President and Congress are accused not just of being wrong about these policies, but in fact of intentionally trying to make matters worse.

While companies like GM (and the banks) may be "hurting" there are many small and medium sized businesses that have already bled to death but aren't big enough to make headlines.

Yes, Microsoft and Google will pay more taxes and deal with more regulators than your average electrician or plumber, but those regulations, taxes and fees will represent the difference between survival or failure for these small companies, while to the big guys (even those not being bailed out) they are simply an inconvenience.

American Thinker Blog: Feds issue guidelines to stay away from Vegas and Orlando for meetings

Following the embarrassment of video-taped scenes of federal bureaucrats boogying at the ultra-luxurious Arizona Biltmore Hotel to ‘relieve stress", it is understandable that agencies want to avoid the "appearance" of doing what they are doing: wasting taxpayer money on useless junkets.

We don't know when this guidance was supplied to federal agencies, but a sneaking suspicion is that it was after the Arizona Biltmore tape aired, and some genius in the White House reacted, not realizing that Harry Reid is up for re-election next year. Amateur hour stuff, it seems to me.

At some point the major media will take the trouble to report that before winning his party's nomination Obama hadn't won a major election outright. In previous contests his opponents had been forced to drop out for one reason or another. Hillary (and I'm no fan of hers either) had 15 years (count'em) of anti-Hillary material built up against her by both conservatives and liberals of one kind or another. McCain is considered a lefty among Republicans. "Acceptable" but nothing more. Meanwhile, Democrats who said things like "McCain is one Republican I could see voting for", voted for Obama anyway.

While Obama's term in office will most certainly hurt people who voted for him more than it hurts people who didn't, it will hurt all Americans in ways that will take a generation to recover from.

The empty suit in the White House isn't really all that hard to explain. It will be hard to forget.

U.S. National Debt Clock : Real Time

WOW!

Price Tag of Health Reform Bill Prompts Sparring and a Delay in Congress - washingtonpost.com

In a speech to the American Medical Association on Monday, Obama bragged that he had spelled out $950 billion worth of budget cuts and tax increases over the next 10 years -- an amount, he said, that takes "us almost all the way to covering the full cost of health-care reform."

But the independent CBO estimated that a draft bill by the Senate Finance Committee would cost $1.6 trillion, a figure that Sen. Olympia J. Snowe (R-Maine) described as "a jolt of reality."

That reality can be nasty stuff.

YouTube - Five Key Reasons to Reject Class-Warfare Tax Policy

THE BONDHOLDERS - Who they are, what they lost

Whitacre Vows to ‘Learn About Cars’ as Chairman of New GM Board - Bloomberg.com

June 10 (Bloomberg) -- Edward E. Whitacre Jr. built AT&T Inc. into the biggest U.S. provider of telephone service over a 43-year-career. By his own admission, he becomes chairman of General Motors Corp. knowing nothing about the auto industry.

Not to criticize his selection (I don't know enough one way or the other), but if you look at the history of AT&T you will see that it was for most of it's history a monopoly until roughly 1984 when it was busted up into several smaller regional monopolies providing local phone service. AT&T then proceeded to flounder around either merging with other companies or spinning off parts of itself in a desperate struggle to survive as a non-monopoly company.

The regional bells, continuing to rake in unearned profits wisely sought to diversify themselves, going into publishing, cable TV, cellular, and even the furniture business. It would be at least very difficult to catalogue where all the monopoly money ended up, except to say that some of it, if not most of it, ended up wasted on dead-end products and projects. In the process all the baby-bells as they cam to be called went on wild rebranding sprees yielding meaningless names such as Verizon, Qwest and SBC (which might have stood for Southwest Bell Corporation at one time but just stands for SBC (nothing ) now).

I certainly don't know what Whitacre's real resume would look like, but he was at least NOT with AT&T during most of this time, but when AT&T re-merged with SBC in 2005 (AT&T as the company being acquired) he was head of SBC, not AT&T.

Someone else can figure out to what extent he was responsible for the success of what was still a mini-monopoly, I'm more interested in the principle than the individual.

The principle being, as someone put it recently, that most of these companies are not too big to fail, they are in fact too big to exist. I personally think that busting the AT&T monopoly was a good thing, particularly as it wasn't just a big company it was almost an extension of the government in its monopoly powers.

Now, in saving GM (and some banking and investment businesses), we are moving in the opposite direction, that of combining more and more businesses into government run monopolies (including offloading of Chrystler to the Italians so that we at Government Motors only have one remaining private company, Ford, to deal with). Of course we are told that all of this is only temporary. Problem with that is that temporary can turn into a very long time.

The two most likely outcomes are that GM will succeed, at the expense of the only other large American car company, ending real choice, or that through gross mismanagement, it will fail, leaving taxpayers with a big bill to pay and also leaving Americans with only one company to chose from.

Very little that is good can come from this, but our die has been cast, and I will not let those around me forget who (which voters that is) are the responsible parties. Before anyone protests, no, the Obama administration didn't cause it all, they have just provided the "punch line" that shifts our course from heading toward simple socialism to something much much more sinister.

For the real punch in the gut, we should all remember that none of these recent course changes can be corrected during most of our lifetimes, assuming we start correcting them in 2010, which is still doubtful considering new high school graduates know almost nothing about this country's history or how its government was designed to work. Congratulations to all of you who "won".

US Jobless Rates May Be Closer to 16%: Analyst - CNBC.com

Take the better-than-expected U.S. jobs report with a grain of salt, cautions Tim Mulholland, MD at China-America Capital Company. He tells CNBC's Martin Soong that there have been some prominent reports that suggest jobless rates are probably closer to 16%.

McGurn: The Media Fall for Phony 'Jobs' Claims - WSJ.com

"Of course, the inability to measure Mr. Obama's jobs formula is part of its attraction. Never mind that no one -- not the Labor Department, not the Treasury, not the Bureau of Labor Statistics -- actually measures 'jobs saved.' As the New York Times delicately reports, Mr. Obama's jobs claims are 'based on macroeconomic estimates, not an actual counting of jobs.' Nice work if you can get away with it."

Obama Tells American Businesses to Drop Dead

U.S. firms have nonetheless prospered because our tax code allows a business to set up a subsidiary in a low-tax country. When that subsidiary earns profits, they are taxed at the rate of that country, and don’t face U.S. tax until the money is mailed home.

The economically illiterate partisan Democratic view is that this practice is unpatriotic and bleeds jobs from the U.S. The economic reality is that American companies use this approach to acquire market share overseas. The alternative is losing the business to foreign competitors.

...

So the question is, why does Obama advocate a policy that so flies in the face of everything that economists have learned? How could Obama possibly say, as he did last month, that he wants “to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens?” Further, how could Treasury Secretary Tim Geithner call a practice that top scholarship has shown increases wages and employment in the U.S. “indefensible?”

Bond-market rout lifts mortgage cost

"NEW YORK (AP) - The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.

But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation."

SURPRISE!
You have to wonder also what the chilling effect is on GM bondholders getting the shaft is having on financial markets belief in the sanctity of contract law. Essentially the government is saying that "for the good of the country we can come in late in the game and change the rules on which everyone was playing...retroactively", and in the case of GM, not for sound economic reasons, but to please a voting constituency (special interest group).

George F. Will - Have We Got a Deal for You at GM - washingtonpost.com

"Washington mandates that Detroit must build cars for which there is much less demand than Washington demands that there be. Then Washington tries to manufacture demand with a $7,500 tax credit for purchasers of the electric Chevrolet Volt, supposedly GM's salvation. So, GM is to be saved by a product people will not buy without a cash incentive larger than the income tax paid by 83.4 percent of America's families."

Ballmer Says Tax Would Move Microsoft Jobs Offshore (Update3) - Bloomberg.com

"Chief Executive Officer Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.

“It makes U.S. jobs more expensive,” Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”"

Rise of the Machines - Cringely on technology

I’m beginning to think there aren’t as many devils as one might suspect in this passion play. There are a few devils, sure, but also a lot of innocent dopes who may have made the situation much worse while not even making very much money from our pain.

A lot of it comes down to a probable misapplication of technology, something that hasn’t been discussed much in the coverage of this financial crisis. We talk for seconds at a time about the confounding complexity of derivative securities then quickly go on to something more understandable.

Is technology our friend in this mess or our enemy?

Particularly:

If a bunch of wealthy traders get together at Starbucks and agree to short-sell a company or a financial instrument, driving down that price ideally to the point where it never recovers, well that’s against the law. But with trading automation and the Internet as a platform it is possible to accomplish this same end WITHOUT it being explicitly illegal. It is even possible that the perps don’t know the level of damage they are inflicting, though I doubt that’s true. The trick is to avoid communication. If there is no communication between traders there is no chain of causation, no conspiracy, just an unhappy accident.

FT.com / US / Politics & Foreign policy - Obama promises bipartisan action on deficits. zzzzzz

"Although Lawrence Summers, head of the National Economic Council, fell asleep on the podium, most attendees, including Republicans, appear to have appreciated the exercise. There was even some light-heartedness."

A good nap was had by all.

From Wikipedia:

Born in New Haven, Connecticut, on November 30, 1954, Summers is the son of two economists, Robert Summers and Anita Summers, who are both professors at the University of Pennsylvania, as well as the nephew of two Nobel laureates in economics: Paul Samuelson (sibling of Robert Summers, who, following an older brother's example, changed the family name from Samuelson to Summers) and Kenneth Arrow (Anita Summers's brother). He spent most of his childhood in Penn Valley, Pennsylvania, a suburb of Philadelphia, where he attended Harriton High School.

Maybe proclivity for economics (as well as narcolepsy) should be treated as an inheritable disease.

Also:

Summers resigned as Harvard's president in the wake of controversy over a talk in which he speculated that women may have lesser aptitude for work in the highest levels of math and science. Summers has been criticized by some liberals for the centrist economic policies he advocated as Treasury Secretary and in later writings.

Only if you know the right people can all sins be forgiven. For people with "R" after their name this (and shuffling your feet in the bathroom) are career ending.

George F. Will - Hosed by the Stimulus - washingtonpost.com

"Never," Rep. Tom Cole (R-Okla.) said when voting against the stimulus, "have so few spent so much so quickly to do so little." Three of his contentions are correct. The $787 billion price tag is probably at least two-thirds too low: Add the cost of borrowing to finance it, and allow for the certainty that many "temporary" programs will become permanent, and the price soars far above $2 trillion.

But Cole's last contention is wrong. The stimulus, which the Congressional Budget Office says will, over the next 10 years, reduce GDP by crowding out private investment, already is doing a lot by fostering cynicism in the service of opportunism.

The Great Awakening: Boomers, Your Crisis Has Arrived (Part 1 of 3) -- Seeking Alpha

I don’t have a preconceived notion of our country’s destiny, but I’m getting a bad feeling about the track we are on. The last thing in the world I want to see is my three boys being forced into a war caused by a bunch of clueless 60 year old political hack morons in Washington DC fulfilling their destiny to cause the once in a century national crisis. Based on the foolish actions of most politicians in Washington over the last thirty years, I fear for the future of our country. I don’t think the politicians in Washington comprehend the state of affairs. I sense the mood of the country turning. Fear, anger and disillusionment are the prevalent themes. Change is coming, but it is not the change that Barack Obama campaigned for. It will be forced upon us by circumstances beyond any one person’s control. While we are hurtling towards our summit with destiny, Congress continues its path of pork barrel spending, short term solutions, party politics, and condemning our children and grandchildren to a lower standard of living. The “leaders” of this country are using the tried and true method of using fear to ram through their $900 billion tax on future generations. President Bush used the same fear tactics to launch his invasion of Iraq. I see a similar success story with the coming stimulus package. Maybe the coming crisis will ultimately lead to Great Leaders rising to the occasion.

If there are any.

My Way News - World stocks sag on concerns about Obama plans

"World stock markets fell Thursday amid pessimism about the Obama administration's plans to fix the U.S. banking system and restore the overall health of the world's largest economy. European stocks were also undermined by a raft of disappointing earnings."