In my last post I mentioned that Gail Collins, a New York Times columnist, had advocated George Bush resign the Presidency so that Barack Obama could start his term early. Today, Thomas Friedman, the Times' foreign affairs correspondent seconded that desire. I just found out that Lou Dobbs, the CNN anchor, had made the same suggestion, that George Bush resign.
These are supposed to be thoughtful, intelligent, well-educated people. What possesses them to say such silly things?
One of the great things about the American political system is the peaceful transfer of power. On the appointed day, the outgoing guy packs up his momentos and rides off into the sunset. No riots in the street. No power sharing deals. No cabals of senior military officers throwing their support behind one candidate or another. No flight into exile, financed by a secret Swiss bank account. On Inauguration Day, the ex-President and his team leave quietly, and the new President and his team move into the White House.
What the pundits listed above have proposed is to interfere with that process. There is a crisis, so throw the rulebook out the window. No one's in charge, and we need a strong hand at the helm to steer us through this storm!
This just another version of the end justifies the means. If, by some miricle, they did manage to hound Bush out of office prematurely, do they not realize that would set a precedent? A precedent that can cut both ways. Suppose Bush was to announce that due to the crisis in the financial markets, he was going to have to stay in office until the crisis was resolved. That would create a constitutional crisis, but no more so than trying to install Obama before Bushes term in office is over.
Once you start playing games like that, you are starting to erode away one of the supports of our democracy.
Whether they like it or not, Obama is just going to have to wait his turn.
Monday, November 24, 2008
Saturday, November 22, 2008
Be Calm
From all indications, the US economy is in bad shape. Unemployment is rising, as more companies announce layoffs. The fall in stock prices has gotten to the level that many of us have stopped looking at our 401K balances. The credit markets are still largely frozen up, making it difficult for even profitable companies to get financing for their operations. It is clear that we are in a recession, and by all indications it will be a bad one.
In the face of all this bad news, the cries for a new stimulus package from Washington have become louder and more insistent. Paul Krugman, the Nobel winning economist and New York Times columnist, is calling for an immediate fiscal stimulus of $300 to $600 billion. Gail Collins, another New York Times columnist, is calling on President Bush to resign as the only way to save the country. "Orderly transfer of power be damned! Save us, Obama, save us!" Any impediment to handing out the fat envelopes of government cash, such as the Constitution, is considered as perilous in this time of crisis.
Two things are being missed in the panicked rush to increase the national debt in the name of keeping the economy going.
First, it's not that bad out there. The unemployment rate has risen, that's true. But 93% of us still have jobs. Banks have had to write off hundreds of billions of dollars worth of bad mortgages, and a number of banks have failed, that's true. But not a single depositor has lost his savings. Credit has gotten scarcer and more expensive, that's true. But my credit card still works and I expect it to keep working, as long as I keep paying off the bill. Standards may be a bit higher, but banks are still making loans to individuals with good credit ratings. Corporate profits are down, but aside from financial services and the domestic auto makers, companies in most sectors are not losing money.
Perform a little thought experiment: when you drive past Wal-Mart, is the parking lot still full of cars? If you go out to eat at a restaurant, is the place half empty, or do you have to wait for a table? My experience has been that the economy is still functioning. It may be harder to make a buck, but rumors of a new Great Depression are greatly exaggerated.
The other factor that has been missed by the pundits is that gas prices have dropped in half over the last couple of months. Gasoline that was at $4 a gallon over the summer now costs under $2 at the pump. For the average household, this frees up between $50 and $100 a week. Between now and the end of the year that could be worth up to $500, with another chunk of budgetary relief in January. And another in February, and so on. Over the next few months, lower gas prices will but as much money back into the economy as any proposed stimulus package.
Money that isn't literally burned is availible for keeping mortgages current, and paying down credit card debt, and shopping for Christmas presents. All activities that will reduce the level of financial panic. We just have to be patient.
In the face of all this bad news, the cries for a new stimulus package from Washington have become louder and more insistent. Paul Krugman, the Nobel winning economist and New York Times columnist, is calling for an immediate fiscal stimulus of $300 to $600 billion. Gail Collins, another New York Times columnist, is calling on President Bush to resign as the only way to save the country. "Orderly transfer of power be damned! Save us, Obama, save us!" Any impediment to handing out the fat envelopes of government cash, such as the Constitution, is considered as perilous in this time of crisis.
Two things are being missed in the panicked rush to increase the national debt in the name of keeping the economy going.
First, it's not that bad out there. The unemployment rate has risen, that's true. But 93% of us still have jobs. Banks have had to write off hundreds of billions of dollars worth of bad mortgages, and a number of banks have failed, that's true. But not a single depositor has lost his savings. Credit has gotten scarcer and more expensive, that's true. But my credit card still works and I expect it to keep working, as long as I keep paying off the bill. Standards may be a bit higher, but banks are still making loans to individuals with good credit ratings. Corporate profits are down, but aside from financial services and the domestic auto makers, companies in most sectors are not losing money.
Perform a little thought experiment: when you drive past Wal-Mart, is the parking lot still full of cars? If you go out to eat at a restaurant, is the place half empty, or do you have to wait for a table? My experience has been that the economy is still functioning. It may be harder to make a buck, but rumors of a new Great Depression are greatly exaggerated.
The other factor that has been missed by the pundits is that gas prices have dropped in half over the last couple of months. Gasoline that was at $4 a gallon over the summer now costs under $2 at the pump. For the average household, this frees up between $50 and $100 a week. Between now and the end of the year that could be worth up to $500, with another chunk of budgetary relief in January. And another in February, and so on. Over the next few months, lower gas prices will but as much money back into the economy as any proposed stimulus package.
Money that isn't literally burned is availible for keeping mortgages current, and paying down credit card debt, and shopping for Christmas presents. All activities that will reduce the level of financial panic. We just have to be patient.
Monday, November 17, 2008
Buzzing with Excitement
Since Congress passed the $700 billion bailout authorization called TARP (Troubled Asset Relief Program) in October, the predictable rush to the trough has occurred. What I didn't anticipate, however, was how fast other players than banks would get their hands out for a share of Federal largesse.
Originally sold as a plan to buy up illiquid mortgages and mortgage backed securities, TARP quickly morphed into direct equity injections into major banks. Seeing how easy it was, insurance company AIG bellied up to the bar for a second round, having already received an $80 billion Federal loan.
Not to be outdone, the cities of Philidelphia, Atlanta, and Phoenix sent a letter to Treasury Secretary Paulson, asserting their rightful claim to a Federal handout. San Jose, the home of Silicon Valley, is waiting to see how that is handled before submitting their request for $15 billion.
This was closely followed by the domestic automotive manufacturers. Not satisfied with the first $25 billion in loan guarantees they got as a separate line item in the TARP authorization, Ford, Chysler, GM are threatening economic armageddon if they do not get at least another $25 billion.
This morning a group of automotive supplier companies applied for their fair share of the bailout money. In a strange way, this latest request almost makes sense. The big 3 car companies are threatening to take their supplier base down with them if they have to declare bankruptcy. The auto suppliers are just trying to cut out the middleman, getting the money directly from the Treasury instead of getting it from the car companies.
I guess I shouldn't be surprised with how fast players far removed from the financial industry are rushing in to get a chunk of the $700 billion TARP bailout fund. When you've got that big a honeypot, you're going to pull in a lot of flies.
Originally sold as a plan to buy up illiquid mortgages and mortgage backed securities, TARP quickly morphed into direct equity injections into major banks. Seeing how easy it was, insurance company AIG bellied up to the bar for a second round, having already received an $80 billion Federal loan.
Not to be outdone, the cities of Philidelphia, Atlanta, and Phoenix sent a letter to Treasury Secretary Paulson, asserting their rightful claim to a Federal handout. San Jose, the home of Silicon Valley, is waiting to see how that is handled before submitting their request for $15 billion.
This was closely followed by the domestic automotive manufacturers. Not satisfied with the first $25 billion in loan guarantees they got as a separate line item in the TARP authorization, Ford, Chysler, GM are threatening economic armageddon if they do not get at least another $25 billion.
This morning a group of automotive supplier companies applied for their fair share of the bailout money. In a strange way, this latest request almost makes sense. The big 3 car companies are threatening to take their supplier base down with them if they have to declare bankruptcy. The auto suppliers are just trying to cut out the middleman, getting the money directly from the Treasury instead of getting it from the car companies.
I guess I shouldn't be surprised with how fast players far removed from the financial industry are rushing in to get a chunk of the $700 billion TARP bailout fund. When you've got that big a honeypot, you're going to pull in a lot of flies.
Sunday, November 9, 2008
Bailout Nation
Ford and General Motors are looking for $50 billion in loans from the Federal government to keep their operations going. I should say another $50 billion, because they already got $25 billion earmarked for them when the $700 billion financial bailout package passed.
Speaker of the House Nancy Pelosi and Senate Majority leader Harry Reid issued a joint statement last week in favor of handing more taxpayer cash to the domestic carmakers. Rahm Emmanuel, chief of staff designee for President-elect Barack Obama, weighed in on the side of the increased bailout this weekend. I guess that this means the fix is in.
Still, I’m not convinced that a good case has been made for bailing out the domestic car companies. Not that I do not believe that bankruptcy is a real possibility for the car companies. GM alone burned through $6 billion in cash during the last three months. If they continue at that rate, they will run out of cash sometime next year.
But bankruptcy isn’t the end of the road. They can use Chapter 11 of the bankruptcy code to continue to operate while they reorganize. This is what all of the major airlines except Southwest and American have done, and they all managed to stay in the air while going through the process. If the airlines can do it, why can’t the auto makers?
A Chapter 11 filing would give them a chance to get out from under their UAW contracts. These are the contracts that require the car companies to pay laid off workers 95% of their base wage (and 100% of their benefits), even though those workers and actually doing any work.
My concern is that, even with the government loans they are seeking, GM and Ford are only staving off the inevitable. Without structural changes to how they do business, like dropping the UAW contracts, what’s to keep them from coming back to the taxpayers in another year or two, asking for good money to be thrown after bad?
Speaker of the House Nancy Pelosi and Senate Majority leader Harry Reid issued a joint statement last week in favor of handing more taxpayer cash to the domestic carmakers. Rahm Emmanuel, chief of staff designee for President-elect Barack Obama, weighed in on the side of the increased bailout this weekend. I guess that this means the fix is in.
Still, I’m not convinced that a good case has been made for bailing out the domestic car companies. Not that I do not believe that bankruptcy is a real possibility for the car companies. GM alone burned through $6 billion in cash during the last three months. If they continue at that rate, they will run out of cash sometime next year.
But bankruptcy isn’t the end of the road. They can use Chapter 11 of the bankruptcy code to continue to operate while they reorganize. This is what all of the major airlines except Southwest and American have done, and they all managed to stay in the air while going through the process. If the airlines can do it, why can’t the auto makers?
A Chapter 11 filing would give them a chance to get out from under their UAW contracts. These are the contracts that require the car companies to pay laid off workers 95% of their base wage (and 100% of their benefits), even though those workers and actually doing any work.
My concern is that, even with the government loans they are seeking, GM and Ford are only staving off the inevitable. Without structural changes to how they do business, like dropping the UAW contracts, what’s to keep them from coming back to the taxpayers in another year or two, asking for good money to be thrown after bad?
Thursday, November 6, 2008
Where is the Center?
As Team Obama shifts from the campaign to the transition team, the analysis coming out of the media has also shifted. Some have suggested that the Obama administration will shift to the right once in office, attempting to find centrist positions to the tough issues. Looking at Obama's policy positions, I'm not holding out a lot of hope.
Governing from the center is raising taxes to pay for infrastructure spending. Governing from the left is raising taxes on some people to give transfer payments (excuse me, tax credits) to others.
Governing from the center is making an argument for expediting new nuclear power plants, to replace carbon dioxide emitting coal fired power plants. Governing from the left is placing a massive tax on energy (excuse me, a cap and trade system), while telling people that wind mills will replace the industries that you bankrupt.
Governing from the center is announcing that you will put your administration's political capital into redefining Federal law to recognize gay marriage. Governing from the left is declaring you will appoint judges who will rule based on their compassion for the downtrodden.
Governing from the center is coming out in favor of unionization, staffing the NLRB with pro-union partisans, and ramping up Justice Department investigations of companies accused of illegal antiunion activities. Governing from the left is tossing out 70 years of law backing secret ballot elections, and replacing it with card check legislation allowing for covert intimidation and coercion to determine the nature of the workplace.
Governing from the center is to propose raising the minimum wage to $9.25/ hour. Governing from the left is to propose raising the minimum wage to $9.25/hour, extend the FMLA in terms of employers affected, reasons for claiming leave, and amount of leave, and require employers to give employees 5 days of paid leave.
Governing from the center is to require health insurance plans to provide unlimited mental health benefits. Governing from the left is to require health insurance plans to provide unlimited mental health benefits, and then go on to require employers to health insurance to all employees as a mandatory benefit.
The Obama administration has the potential to make conservatives nostalgic for traditional tax and spend liberalism. Between unfunded mandates on business and tax and give policies, I'm gearing up for four years in loyal opposition.
Governing from the center is raising taxes to pay for infrastructure spending. Governing from the left is raising taxes on some people to give transfer payments (excuse me, tax credits) to others.
Governing from the center is making an argument for expediting new nuclear power plants, to replace carbon dioxide emitting coal fired power plants. Governing from the left is placing a massive tax on energy (excuse me, a cap and trade system), while telling people that wind mills will replace the industries that you bankrupt.
Governing from the center is announcing that you will put your administration's political capital into redefining Federal law to recognize gay marriage. Governing from the left is declaring you will appoint judges who will rule based on their compassion for the downtrodden.
Governing from the center is coming out in favor of unionization, staffing the NLRB with pro-union partisans, and ramping up Justice Department investigations of companies accused of illegal antiunion activities. Governing from the left is tossing out 70 years of law backing secret ballot elections, and replacing it with card check legislation allowing for covert intimidation and coercion to determine the nature of the workplace.
Governing from the center is to propose raising the minimum wage to $9.25/ hour. Governing from the left is to propose raising the minimum wage to $9.25/hour, extend the FMLA in terms of employers affected, reasons for claiming leave, and amount of leave, and require employers to give employees 5 days of paid leave.
Governing from the center is to require health insurance plans to provide unlimited mental health benefits. Governing from the left is to require health insurance plans to provide unlimited mental health benefits, and then go on to require employers to health insurance to all employees as a mandatory benefit.
The Obama administration has the potential to make conservatives nostalgic for traditional tax and spend liberalism. Between unfunded mandates on business and tax and give policies, I'm gearing up for four years in loyal opposition.
Wednesday, November 5, 2008
How to Create Jobs, Not!
Part of an interview Barack Obama gave in San Francisco last January came to light over the weekend. In the interview with the San Francisco Chronicle, President-elect Obama made the following comments regarding coal-fired power plants:
“If somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.”
This comment was made in the context of explaining a cap and trade system for reducing greenhouse gas emissions. Since coal burning power plants emit more carbon per kilowatt than any other type of electrical generation, the penalties on those plants will be higher. The idea behind a cap and trade system is that, over time, the penalties for emitting carbon increase, until they become ruinous, and the carbon emitting power plants are shut down.
The goal of a cap and trade system is to drive carbon emitters out of business, while rewarding businesses that produce the same products in a carbon neutral way. In the context of power generation, coal-fired power plants are bad, solar and wind farms are good.
I bring this up by way of introducing the topic I really want to write about: the myth of the “green job.” The way this myth is presented is that by developing nonpolluting energy sources, all kinds of jobs with high pay and great benefits will be created. Since entirely new industries will be created in the field of clean energy, lots and lots of new “green jobs” will be added to the economy.
Yesirree, plenty of demand for windmill mechanics out there on the horizon. Sky’s the limit. Speaking of the sky, we’ll also need a bunch of solar mirror focusers. Step right up and get your job application here.
Now the problem I have with this line of argument is that job creation is being sold as one of the benefits of changing our energy infrastructure over to a less carbon intensive model. Try telling that to the guy who works in the coal-fired power plant that’s going to be taxed out of existence to pay for all those shiny new windmills. That poor schmoe is going to lose his job. So will the coal miners supplying him with fuel.
As I see it, employment in the energy industry is at best a zero sum game. For every job you create building or servicing windmills, or installing solar panels, you lose a job building mining equipment or transporting coal. There are going to be winners in new energy technologies, but there will be just as many losers in the old, reliable, proven technologies.
If we have to make this transition, if the survival of civilization requires it, than so be it. But don’t try and pitch it as a good way to create jobs.
We should pay more respect to the people who are going to lose their livelihoods after the companies they work for are bankrupted.
“If somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.”
This comment was made in the context of explaining a cap and trade system for reducing greenhouse gas emissions. Since coal burning power plants emit more carbon per kilowatt than any other type of electrical generation, the penalties on those plants will be higher. The idea behind a cap and trade system is that, over time, the penalties for emitting carbon increase, until they become ruinous, and the carbon emitting power plants are shut down.
The goal of a cap and trade system is to drive carbon emitters out of business, while rewarding businesses that produce the same products in a carbon neutral way. In the context of power generation, coal-fired power plants are bad, solar and wind farms are good.
I bring this up by way of introducing the topic I really want to write about: the myth of the “green job.” The way this myth is presented is that by developing nonpolluting energy sources, all kinds of jobs with high pay and great benefits will be created. Since entirely new industries will be created in the field of clean energy, lots and lots of new “green jobs” will be added to the economy.
Yesirree, plenty of demand for windmill mechanics out there on the horizon. Sky’s the limit. Speaking of the sky, we’ll also need a bunch of solar mirror focusers. Step right up and get your job application here.
Now the problem I have with this line of argument is that job creation is being sold as one of the benefits of changing our energy infrastructure over to a less carbon intensive model. Try telling that to the guy who works in the coal-fired power plant that’s going to be taxed out of existence to pay for all those shiny new windmills. That poor schmoe is going to lose his job. So will the coal miners supplying him with fuel.
As I see it, employment in the energy industry is at best a zero sum game. For every job you create building or servicing windmills, or installing solar panels, you lose a job building mining equipment or transporting coal. There are going to be winners in new energy technologies, but there will be just as many losers in the old, reliable, proven technologies.
If we have to make this transition, if the survival of civilization requires it, than so be it. But don’t try and pitch it as a good way to create jobs.
We should pay more respect to the people who are going to lose their livelihoods after the companies they work for are bankrupted.
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