Posts Tagged ‘Government’

I just don’t understand this need to prop up the media organizations with federal assistance.  Some fear that we will see the industry drop in numbers and that this will, in some way, limit our freedom of speech.  So, their answer?  Let’s get the government involved!  Yup, that will cure our ills and make speech even more free and opinions much more diverse.

The WSJ has an opinion piece on why we should protect these large dinosaurs.  I have some questions.  First,  aren’t we there already? AP, NewsCorp, ABC, …  Last time I checked, most news articles that are in print or on air are produced by a select few global news organizations.  So, any government involvement will not be to prevent the pool from getting smaller, it will be in protecting the small number we already have.  And, if you are going to be one of the select few chosen to survive with the assistance of federal monies, it is only logical that the federal government get to make up some of the rules on fairness and accuracy, no?  They want that in Healthcare, Auto Bailout, and in the Financial Reform Act, so why not here,also?  Oh, but the feds will need to lean on the expertise of the industry (those select few that have the ability to spend on lobbyists) to craft the new rules.  And the cycle goes until federal help turns into a federally-endorsed oligopoly on news outlets.  Step by step, inch by inch…

So, more questions;

Today, the federal government finalized the finance reform bill.  From all that I have spoken to that have read through it, it does little to actually correct the isses we experienced over the past 10 years.  Hooray!  One more large monster federal bill that has little benefit but lots of impact.

Two quotes in the attached article unnerved me.  The first was from Mr.  Dodd (senator of CT) where he said;

“No one will know until this is actually in place how it works.”

And the other was from Mr. Frank (representative of MA) where he is quoted;

“We’ve put in the hands of the president a very powerful set of tools for him to reassert American leadership in the world”

Why would any sane person want these quotes attributable to themselves?  Let’s see, the first one says that we just made 2,000 pages of laws and have no clue what the impact will be for the one industry that touches every single citizen.  Or, the 2,000 pages of laws that we all just passed are so general and vague that one can assume that they will be deployed in ways that are completely arbitrary, ways that we can never fully grasp.

The second quote jives with it perfectly.  Mr. Frank essentially celebrates the fact that our representatives, those that we rely on to check and balance the president, have given enormous power to one person.  And to make it all the more exhilarating, a president that has no economic background and has demonstrated a complete lack of respect for free markets.  Oh joy!

And one more thing, please read towards the bottom where they mention that 18,000 auto dealers (actually, the number is closer to 16,000 after the government forced some to close down)(also, at least 20% of them are selling government made cars) are exempt from the consumer protection portion of the law.  Keep in mind, the second largest expense for most citizens is an automobile with the majority of them financed.

Corrupt and stupid make for a very bad combination.  Worse, when it’s mixed with power.

And we should expect something different?

As of last night, it appears there is agreement on bailing out Greece.  Between Europe and IMF (which depends on the US for 25% of their funding), Greece will get about $150B worth of loans (paying a 5% interest rate)  in order for them to meet their current debt obligations (private investors demand an 8% interest rate given the risk) and internal needs.  In return for these loans, Greece has bitten the bullet and will dramatically cut salaries and pensions… temporarily.

I think it important to state a few facts about Greece.

• They rank second from the bottom on the Index of Economic Freedom (highly socialized economy).
• They import 3x more than they export (net users).
• Their government has overspent tax revenues by at least 15% each year for the past 5 years (spent more than produced).
• They have a debt level that is at least 125% of what they produce in a year in GDP .
• Public services account for 40% of their published GDP (so about half of their “GDP” is value productive).
• 42% of those between 55-64 are employed versus 52% in Europe and 62% in the US (few work).
• Tax rates on income are some of the highest in Europe (over 40%)
• Their fertility rate is below replacement rate (i.e. aging population that retires early).
• Their government spends over 12% of their GDP on pensions, double the US, second only to Italy at 15%.

So, with that little amount of information, what is the likelihood that Greece can pay off these loans?  Remember, in the agreement as formed last night, Greece only needs to get their spending down to 103% of their tax revenues by 2014.  In other words, they will still spend more than they make.

Now on to the dramatic cuts.  Riots were all the rage over the weekend as pensioners and union employees protested the expected cuts in entitlements and the anticipated rise in taxes.  The question that hit me was, who are they protesting against?  It’s a democracy from what I understand.  They are the ones benefiting from the large promises they made to themselves (early retirement, large pensions, free healthcare, etc) from which they are the sole providers of the funds for those promises.  Their government officials only act as the transfer agents; taking tax dollars from the few that work and place it into the hands of all in the form of entitlements.  Most likely, they are protesting that their guardians, their providers, are no longer able to borrow money to pay for promises that had no reasonable economic foundation supporting them.

I was struck by a quote in this article,

“These are the harshest, most unfair measures ever enacted. That is why our reaction will be decisive and dynamic. You can’t always make the workers pay for the results of failed policies,” Stathis Anestis, spokesman for Greece’s largest umbrella union, GSEE, told The Associated Press.

I find this to be very circular:  People are protesting because they cannot fund the promises they made to themselves.  (I just don’t see how this loan solves anything or how this ends well for anyone).

This is worth reading…

Over the past 3 or so months, I have been hit by many healthcare reform proponents using a very consistent message that makes me think MoveOn.org penned a script to use when confronted with rational opposition.  They all use the highway system as an example of a central government success story and want to apply it to the healthcare reform debate.

I see two issues with this.  First, what similarities are there between building and maintaining highways and imposing a centralized approach to healthcare services?  It’s not size relative to the economy.  Highway infrastructure accounts for less than 1% of GDP while healthcare is upwards of 16%.  It’s not employment, only 600,000 work in the government highway system versus the 14 million plus that work in the healthcare industry.  Maybe it’s in the rate of innovation of the two sectors?  No.  Actually, there is no rational reason for using the highway system as an example.

Second, how could anyone look to the US highway system as a great example of success in centralized government manipulation?  I’m not even sure where to start.  How many of you have been driving home during rush hour to see the highway crew block off one or two lanes for a mile or so and have no one out there working?  How much over budget was the Big Dig of Massachusetts?  Well, they did finish it on time… NOT!  How many stories are there of payoffs and corruption within the highway construction industry?  Answer:  Too many.

What about the fact that most roads are locally managed and most commercial traffic flow over local roads, not highways.  Let’s not forget that government highways may be a monopoly within long distance transportation by automobile, it is not a monopoly of all transportation (private rails constitute the majority of goods transported, air freight is a large business that circumvents the highway system, barges also are a reasonably good transporter outside the highway system for the central part of the US).  I’m also very impressed with the myopic view these people have when they use the highway system as an example.  Do they not read about the crumbling infrastructure of our national bridges and tunnels?  Is that what they want our healthcare system to turn into?

What seems lost on some are the vast differences between these two systems.  Our highway infrastructure is long lasting (20-60 years between replacement cycles), static in the area of innovation (possibly due to government regulations), and not a monopoly of all transportation.  Our healthcare system and the proposed reform policies are completely different.  Innovation within the current healthcare system is enormous and funded by private enterprises on the order of 10 to 1 over government funds.  All medical services have a variable cost component that is significantly above zero unlike our highway system where an extra truck or two are hard to notice on the wear and tear of the infrastructure.   Oh, and let’s not forget that the proposed reform policies are attempting to turn the entire healthcare industry into a monopoly, not just a very small fraction of the medical care infrastructure.

I think it says a lot about their position when the best example of centralized government manipulation is the US highway system.  Remember this note the next time you hit a pothole.

What is happening to our congress?  It has come to a point where governing is no longer even an element of their day-to-day job.  The Healthcare bill in the senate is the most recent example and hopefully, the last.  Christmas, Christmas, Christmas!!!  We must pass this by Christmas!!!  Why?

This entire process is being driven by emotion rather than reason.  “What item do we need to include to get you to accept this other item?” is all they ask.  No matter the true cost, no matter who it impacts and how.  These people are making a mockery of our system.  All so that they can stroke their ego on how important they are and how they can make “big” decisions.

That is all crap.  They want the headline, no matter if it helps or hurts the bottom line.  Deadly Sins: 2 (Pride, Extravagance), American People: 0.

No doubt this will be taken as a scare tactic by those that favor government run healthcare, but examples of this behavior already exist within our country (think of our financial system and how a few people in Washington got to choose which ones survived and which failed, or the automobile companies and which managers were given new powers and which were pushed out by the auto czar).

The article is Klavan’s way of expressing the end that could come about from the government’s desire to control healthcare.  This quote sums up, for me, the attitude that appears pervasive in D.C.

“Free people can treat each other justly, but they can’t make life fair. To get rid of the unfairness among individuals, you have to exercise power over them. The more fairness you want, the more power you need. Thus, all dreams of fairness become dreams of tyranny in the end.”

I don’t get it. I thought Mr. Obama and his administration were for the ‘common man’ and the protection of individual rights. If so, why, in the last two weeks, has he come out in favor for authoritative rulers? A week ago, he was against “meddling” in the affairs of Iran’s elections, worried about upsetting the tyrants that have been spreading fear and misery all over the Middle East. And now, he comes out in favor of the recently ex-president of Honduras, saying that he, Mr. Obama, will not recognize the new government of Honduras.

Yes, on the face of it, it does look like the president was removed by the army in a coup. But, in reality, the president was ignoring the constitution and attempting to strengthen his control over the people of Honduras. From what I understand, this wannabe dictator, Mr. Zelaya, wanted to throw out the constitution because it didn’t fit with his plans. The Supreme Court of Honduras ruled that he was violating the constitution and ordered the army to detain him and then swore in the head of the congress as interim president. Sounds like the army was actually defending the people’s constitution and Mr. Zelaya was attempting to produce yet another Latin American dictatorship.

I’m becoming increasingly concerned Mr. Obama doesn’t know right from wrong. For a better read on the current events in Honduras, I would recommend Mary Anastasia O’Grady’s article.

Is anyone else getting uncomfortable with every new  employee of the current administration being labeled a czar?  When did it become acceptable to refer to a government employee as a king, monarch, or ruler?  Please note that those being labeled czars are not elected politicians, but appointed officials.  We have the auto czar, the banking czar, the healthcare czar, the global warming czar, and now the regulatory czar.  Maybe we have more and I’ve been oblivious to it (more than fair odds that it true). 

What astonishing changes a few years are capable of producing! I am told that even respectable characters speak of a monarchical form of government without horror. From thinking proceeds speaking, thence to acting is often but a single step. But how irrevocable and tremendous! What a triumph for the advocates of despotism to find that we are incapable of governing ourselves, and that systems founded on the basis of equal liberty are merely ideal & fallacious! – George Washington

To state clearly, I have no reason to be against any of these individuals holding some position within the government as I know very little about them.  But to willingly give them titles as mini dictators makes my stomach turn. 

What I find even more disgusting is the media’s acceptance of this term.  They appear to proudly endorse this type of talk by placing it in headlines on the front pages rather than condemning it in editorials.  Maybe this is too romantic a thought, but I was hoping journalists would question and test the actions of government, not endorse their power to dictate.

There are many people discussing if government threatened hedge funds to take less during the Chrysler bankruptcy.  Implied in these discussions/opinions is that hedge funds are dirty, greedy, evil people looking to profit from others’ misfortunes.  Most definitely some are evil, much like individuals in general.  But what does that have to do with the government’s actions?

That whole discussion misses the point and is completely irrelevant to the fact that the government got involved with the automakers bankruptcy filing and enacted policy, ignoring the Rule of Law.  The fact is the government forced secure creditors (Chrysler made very specific promises to them giving them first rights to all assets in case of bankruptcy) to take less than due to them and gave considerably more to the UAW who were unsecured creditors (Chrysler made promises to them but the union workers were well aware that they were behind the secure creditors in case of bankruptcy).  Who held the secure debt is immaterial to this case as the Rule of Law is not being followed.  And it’s our own government not following it!

If you want to see the unintended consequences of these governmental dictates, please refer to page C2 of today’s Wall Street Journal or to recent comments from Bill Gross of Pimco (the largest steward of debt instruments in the US).  When the government changes the rules after the fact, no private capital will want to align with them to help solve the liquidity problems.  Or, if they do, they will require outsized returns to take on the outsized risks.  This only increases the costs of capital movement, therefore lowers the actual movement of capital which only drives the economic decline farther down.

This is exactly what happened in the 1930′s as the government continued to enact legislation that changed the rules after the fact.  This caused private capital to move/stay on the sidelines.  CEO’s decided to wait to buy new equipment and/or hire.  Capital providers demanded a higher return given the government’s involvement.  Investment, which drives job growth, stalls.  Quality of living drops.

Question:  Why does it matter if a hedge fund owns any of the Chrysler debt?  Does anyone feel it fair to treat them as less-than-equal investors?  If so, how do you want to parse out the good hedge funds (those managing the money for charities and widows) from the bad ones?  Who is to say that one man’s money is more ‘ethical’ than someone elses?  And what does any of that have to do with the government disobeying the Law?

Here is a nice letter responding to the Mr. Obama’s threats to the Chrysler bondholders that refuse to let the UAW steal their assets.  This is just one more example of the government whimsically favoring some individuals more than others.

Courtesy of Freelance Photography

I just had to point out this article.  It talks about violent rallies that occurred yesterday in various countries (those mentioned were all in Europe).  This is so perverse that it needs to be called out.  Those rallying were all anti-capitalist groups; the Greek trade union GSEE, the French union CFE-CGC, the French Socialist Party.  They were rioting, demanding the government do something to get them jobs.  Please remember that all of these countries practice socialism, not capitalism. 

They all have government meddling in their daily lives.  The rioting yesterday shows the depth of their belief in socialism as they were out demanding that the government GIVE them jobs or FIND a solution to what ails them. 

It’s funny to think back 2 weeks to the United States Tea Party rallies where hundreds of thousands came out to show their frustration WITH government involvement.  Let that soak in for a few minutes.  ( One hippopotamus, two hippopotamus, three hippopotamus…).  People in socialistic countries demonstrate to force their governments to find solutions to problems.  People in the United States (an almost capitalistic country, at least in the past) came out to demonstrate for the government to lessen its impact on the Individual. 

I find that poetic.  To state the obvious, the United States has many, many problems that need to be solved.  But what was evident from the Tea Parties were Individuals wanting to control the process to find solutions.  In socialist countries, they rely on groups to demonstrate for a new tit to suck.

I have just returned from a weekend in our nation’s capitol, and can report that there is no recession in the district. Walking through much of the area around GW and Georgetown, I must have seen 25 cranes and over 30 houses undergoing renovation. A quick look at the state-by-state per capita GNP statistics shows a Washington DC that ranks first among all 50 states, over twice the next highest (Connecticut) and challenging oil producing nations if treated as its own nation. Remind me again what we produce in DC.

I plan to access that same statistical information to compare per capita GNP growth rates over the last 25 years. I suspect that I will find that our fastest growing product will be legislation and regulation.

I read an editorial in the Post bemoaning the difficulty of finding the 600,000 workers who will be needed to fill government jobs over the next few years. Not one of those workers will have to worry about producing revenue, selling a product, or making a payroll.

There is a nice opinion article in the Wall Street Journal concerning a potential solution to the ever growing federal government. Here is the link.

Photo by Steve Wampler

It has been interesting to watch the gnashing of teeth related to Wall Street bailouts and bonuses.  I clearly understand the outrage associated with allowing those who benefit from Washington largess being allowed to take home $millions.  For the record, I am not a big fan of the “too big to fail” argument.  As one who must compete with Wall Street types to pay my kid’s college tuition, too big to fail was preceded by “big enough to have massive competitive advantage in the marketplace.”  So, do not count me as one who feels a need to defend Wall Street.  (They still have funds necessary to pay for their respective PR agencies.)  I merely react to the argument that those who get Washington hand-outs should have limited incomes.

In our economy, we have plenty of examples of industries in receipt of government subsidies (bailouts / handouts / welfare / etc.) where employees are made very comfortable through the generosity of taxpayers.

The last time I looked, Major League Baseball was benefiting from a government granted monopoly.  By law, only 30 organizations (owners) have the privilege of paying A-Rod $25 million or more a year to play baseball.  According to ESPN, in 2008, the average franchise value for a major league baseball team is $471 million.  In the absence of the government blessings (read “bailout”), would a baseball team fetch much?  While not the $5 Billion threshold provided in the Wall Street legislation, each of these franchises is receiving a healthly little gift from Uncle Sam.  Even though, you would be hard pressed to find “employees” of these organizations taking home less than $250k, and I do not see outrage directed at players (not counting strikeouts and blown saves).

Lets go right to the meat of the matter.  Consider also broadcast TV.  Those major networks are given bandwidth each year by the FCC.  While difficult to value, surely access to the airwaves is worth a pretty penny.  A good proxy might be the wireless bandwidth auctions that require telecom providers to pay $billions for the right to use little pieces of frequency.  Should Jerry Seinfeld be asked to repay the $1 million per episode he was paid in compensation?  Brian Williams reportedly makes $4 million per year selling airtime that we taxpayers could otherwise sell, but give to NBC.  Where is the outrage?

Conclusion:  Yes, I am one of the millions who feel that Wall Street misbehaved.  Sure, I think that paying a bonus to the guy who made the mistakes is wrong.  But, we have to admit that Wall Street is not the first industry to benefit from the trough, and that most of the employees in these organizations had no decision-making responsibility and caused no problems.