Tuesday, March 31, 2009

Barack Obama Jumps The Shark

Barack Obama has jumped the shark. He fired the CEO of GM and replaced him with his own guy.

GM CEO resigns at Obama's behest

The Obama administration asked Rick Wagoner, the chairman and CEO of General Motors, to step down and he agreed, a White House official said.

On Monday, President Barack Obama is to unveil his plans for the auto industry, including a response to a request for additional funds by GM and Chrysler. The plan is based on recommendations from the Presidential Task Force on the Auto Industry, headed by the Treasury Department.

Do we really need the Presidential Task Force (none of which have any auto industry experience) & the Treasury Department to lead the auto industry? The Treasury Department hasn't even filled all of their vacancies. We don't really have a full and functioning Treasury Department. Shouldn't they concentrate on actually doing their job first before branching out into Detroit?

Has anyone even asked if this is constitutional? Is the Constitution even worth the paper it is printed on?

Obama has jumped right into the fray on this, and now he owns everything that comes next. As a political move it is pure idiocy. He can't save Detroit. It is going to go down the drain with or without him. But once you jump in, fire the CEO and start running the company like it or not you own it. Like Colin Powell at the Pottery Barn, the time to be careful is before you get it.

From the New York Time’s David Brooks:

Car Dealer in Chief

Well, the president certainly acted tough on Monday. In a show of force, he released plans from his Office of People Who Are Much Smarter Than You Are. These plans insert the government into the car business in all sorts of ways. They pick winners (new C.E.O. Fritz Henderson) and losers (Rick Wagoner). They basically send Chrysler off into the sunset. Joe Biden will be doing car commercials within weeks.

The Obama team also raised the bankruptcy specter more explicitly than ever before. Even more tellingly, the administration moved to “stand behind” the companies’ service warranties. That lays the groundwork for a bankruptcy procedure and should be a sharp shock to Detroit.

And yet by enmeshing the White House so deeply into G.M., Obama has increased the odds that March’s menacing threat will lead to June’s wobbly wiggle-out. The Obama administration and the Democratic Party are now completely implicated in the coming G.M. wreck. Over the next few months, the White House will be subject to a gigantic lobbying barrage. The Midwestern delegations, swing states all, will pull out all the stops to prevent plant foreclosures. Unions will be furious if the Obama-run company rips up the union contract. Is the White House ready for the headline “Obama to Middle America: Drop Dead”? It would take a party with a political death wish to see this through.

The scary thing is, I don't see where all of this ever stops. I don't see an exit strategy. With every move the government is getting deeper and deeper into a game they know little or nothing about. With every stumble, they will have the incentive to go even deeper into the belly of the beast. What is the endgame. We don't know. All that we do know for certain is that they don't know either.

Also from the NYTimes:

For U.S. and Carmakers, a Path Strewn With Pitfalls

As an assertion of government control over a huge swath of the industrial landscape, President Obama’s decision to reshape the automobile industry has few precedents.

In essentially taking command of General Motors and telling Chrysler to merge with a foreign competitor or cease to exist, Mr. Obama was saying that economic conditions were sufficiently dire to justify a new level of government involvement in the management of corporate America.

As the company’s lender of last, last resort, the government will have the final say on every significant decision until the company is turned back out into the free market. And [B]for Mr. Obama, that entails many political risks[/B].

If the generous health care plans that autoworkers have grown accustomed to are pared back, if wages fall to something closer to what workers at the Japanese and German transplants in the South are paid, it will be Mr. Obama — not G.M.’s management — who will be blamed.

Very few precedents indeed. We are pretty much in uncharted waters. Full speed ahead!

Wall Street Bets Obama Will Fire Bank CEOs Next Says CNBC Reporter
Network's NYSE floor staffer Bob Pisani: 'Several' bank executives are to be pushed out next.

After General Motors (NYSE:GM) Chairman and CEO Rick Wagoner was forced out by President Barack Obama, Wall Street is betting bank CEO firings will be the next shoe to drop.

CNBC’s New York Stock Exchange floor reporter Bob Pisani told viewers of CNBC’s March 30 “Street Signs” the market’s actions, with the Dow Jones Industrial Average (DJIA) dropping as much as 300 points, are reflect, in part, that the government is going to force bank CEOs out as they did with Wagoner.

“Look, the main concern here today is Geithner’s comments that some banks are going to need a lot more capital,” Pisani said. “And for everybody who says why haven’t they fired anymore bank CEOs yet – why hasn’t the government done it, wait – they’re going to.”

“The Street basically believes there are going to be several of them fired at this point,” Pisani said. “We don’t know who. It may not necessarily be the biggest ones. You may see smaller ones. But the government has set up everything just like they did with the auto companies to basically start dismissing some CEOs of banks now and I think you’re going to see that happening and that whole issue is weighing on it.”

Some people on Wall Street are now expecting Barack Obama to start firing CEO's in other sectors of the economy, like banking or insurance. Where does this end? What are the rules? If the Constitution isn't a constraining document, are their any rules? What are the limits to executive power? What will this do to the market?

Mickey Kaus at Slate:

• Wagoner: Obama's Diem?
Rick Wagoner = Ngo Dinh Diem? Discuss. [B]After visibly defenestrating GM CEO Rick Wagoner, and moving to replace the board of directors, won't Obama now "own" the GM problem? If the company shuts down in the near future, costing tens of thousands of blue collar jobs, it will be under executives implicitly or explicitly chosen by Obama. It will be Obama's failure, not simply GM's failure, no?[/B] A public sector failure, not just a business failure. Doesn't that make it harder, not easier, for the administration to walk away and force the company into bankruptcy (if, for example, the company's plans for "viability" continue to fall short after the new 60-day deadline)? And doesn't that, in turn, make extracting the necessary concessions (by threatening bankruptcy) more difficult as well? ...

The main problem with government is that it is easy to expand and difficult to contract. We have seen several days in the early Obama administration which represent sweeping expansions of the Federal Government. I fear that more days lie ahead. I can't see how one could argue otherwise. How are we ever going to undo the damage? How long will it take? It is apparent to me that these people have no idea what they are doing. This is the Change that we can believe in. Sphere: Related Content

Sunday, March 29, 2009

Arnold Kling Letter In The Washington Post

Arnold Kling's letter to the editor:

The March 26 front-page story "Geithner to Propose Vast Expansion of U.S. Oversight of Financial System" said that Treasury Secretary Timothy F. Geithner's proposal would mean "breaking from an era in which the government stood back from financial markets and allowed participants to decide how much risk to take in the pursuit of profit."

In fact, banks have been subject to strict, risk-based capital requirements. It was these very capital requirements, which favored triple-A-rated securities, that produced the boom in the creation of structured products backed by subprime mortgages.

Risk-based capital requirements were a response to the savings and loan crisis of the 1980s, and regulators were confident that with those requirements in place, we would not see a repeat. As we watch Mr. Geithner's plan make its way through Congress, we should be wary that it, too, will seem like the correct response to the present crisis while laying the basis for the next one.


Those who do not know history...

And speaking of regulation, I wanted to note this Powerline post from a ways back:

Drama on the Hill

"In fact, the industries involved are heavily regulated, and I'm not aware of any instances where a lack of regulation, as opposed to a failure of regulation, is to blame for a significant aspect of the crisis. In general, what happened was that regulators and businessmen made the same mistake: they failed to foresee the decline in real estate values and, perhaps more important, failed to understand fully the consequences that would flow from such a decline. That is the context in which Polakoff's testimony was revealing:

HENSARLING: I believe I heard in an earlier answer to one of the questions, I believe I heard you say that OTS in 2004 should have stopped the book of business that I think you were alluding to to CDS and the AIG securities lending commitments. Did I understand you correctly?

POLAKOFF: Yes, sir.

HENSARLING: So if you said you should have stopped it in 2004, that implies you could have stopped it in 2004. Is that correct?

POLAKOFF: Yes, sir.

HENSARLING: So there were not limits on your power. Perhaps, there were limits on your knowledge or insight, but there was not limits on your power to stop what you cite, as I believe AIG's liquidity -- I'm reading from your testimony -- was the result of AIG's business lines. So you did have the power to stop those business lines. Is that correct?

POLAKOFF: Yes, sir. ***

HENSARLING: Again, it appears, if this is correct, it was not a lack of supervisory authority that caused you not to take action with respect to these two lines. Is that correct?

POLAKOFF: Yes, sir.

HENSARLING: And I think I also heard you say in your testimony that you did not have [in]sufficient manpower and expertise. Is that correct?

POLAKOFF: Yes, sir.

HENSARLING: So, again, in retrospect, it wasn't the lack of authority. It wasn't the lack of resources. It wasn't the lack of expertise. You just flat made a mistake. Is that a correct assessment?

POLAKOFF: In 2004, we failed to assess how bad the mortgage economy, the real estate economy would become in 2008. Yes, sir.

It's never been clear why liberals have so much faith that regulators are smarter or better able to foresee the future than businessmen.

That last statement mirrors my own feelings. I have no idea why we would trust government bureaucrats instead of bueinessmen. Should we trust Barney Frank or Chris Dodd? What about Greenspan, he didn't see it coming? Why would a government pencil pusher have seen the big picture? What logic stands behind that faith?

Hundreds of government regulators worked on-site at AIG everyday well before the walls came crashing down. Why didn't they see it coming? Sphere: Related Content

The Forgotten Man - Amity Shlaes

I have read Milton Friedman on the Great Depression and the contraction of the money supply. I had never really thought about what that meant though.

Chapter 4
The Hour of the Vallar

One late summer day in 1931 in Salt Lake City, the money ran out. Not just the money in the banks, and not just the money in town coffers--the money that citizens had to spend. Locals reached into their pockes and, finding nothing, began to trade work and objects.

She then goes on to explain how barter systems sprang up in responce to the lack of currency. I have never thought about the everyday real world implications of having no stock currency. With the way they print greenbacks in Washington, I am sure it will never happen again. I think the danger today is the opposite. We will have plenty of currency, but it will mean nothing. That is the terrible other side of the spectrum. Still, the history is interesting.

Not only did people begin bartering, they started printed their own currency, like the Vallar in the title of the chapter...

"The money droubht that America was suffering from had a technical name: deflation. Deflation meant that the currency was becoming more valuable every day, rarer and scarcer."

Money was becoming worth more and the business climate was risky. It added an incentive to hoarde money. They also had high taxes on upper incomes, which worked in a perverse way to decrease the money supply. If I take a venture in a risky environment, the risk is all mine. If I lose I could lose it all. If I win and I make money I have to give much of my profit to the government. If I just hold on to my money though, it is increasing in value. It gives the incentive to do nothing. The policy of the government was to make the rich take the sidelines, and at the same times FDR was going after the same "idle rich" that he had created.

"The effect of all this was that banks tended to make loans to businesses in periods of expansion. In periods of contraction, the banks made fewer loans. yet those same bad periods were the very times when the banks most needed and infusion of cash from the Fed."

It appears that the government has at least done this this time around, at least in terms of the infusion of cash.

"Perplexed, yet courageous, American towns and neighborhoods rallied one more time. he made a last effort to solve the money problem on a local level. Salt Lake City had now gone further than barter. The townspeople had banded together and created a group. The Natural Developmetn Association (NDA), that made its own money. They had given their unit the reverberating name of the vallar."


Ventura, Califorina, Minneapolis, and Yellow Springs Ohio, were all also making some form of scrip. In Arizona, the state's governor enforced a three-day bank holiday--banks were closed. The legislature, by a special act, ordianed a state scrip, to be issued in denominations of up to $20. Three Million in scrip was to be lithographed by a private firm. As it happened, this scrip was not used. But that did not stop other private firms from generating their own. The Nogales Herald, which had the advantage of possessing its own printing press, issued its own bills. In areas near the border, Mexican pesos begant to trade at a premium; the peso, at least for a short moment, had become anther form of American money.

Obscure nonprofits and citizens' groups, towns and businesses, were all creating money: The Business Men's Club of Oak Hill, West Virgina issued coins. The Lane Bryant Store issued money in Indianapolis...City and state governments also got into the money business. The state of Washington issued money, as did the Port Authority in New York and the Village of Chatham, New York...

I never realized that this happened. There was no money. I couldn't employ you because their was no money to pay you. You couldn't employ me because there was no money to pay me. Everything shuts down without money. It is interesting to see how they reacted to the shortage with an American brand of ingenuity. Not that it did much good, but the scale was impressive.

The barter systems kept growing, by the spring there would be some 150 barter and/or scrip systems in operation in thirty states. Tens of thousands of people--perhaps hundreds of thousands--used barter money. Barter enthusiasts claimed the number of those engaging in some form of barter had hit a million.

It really is an amazing history that I never knew anything about. The history of money is really something. Thank you Amity Shlaes. I found the book very interesting, and the most depressing thing about the depression is how long it lasted. I hope that tough history will never be repeated again, though I feel that tough history has finally arrived again. Sphere: Related Content

Saturday, March 28, 2009

Jeffrey Miron : Legalize drugs to stop violence

Legalize drugs to stop violence

Prohibition creates violence because it drives the drug market underground. This means buyers and sellers cannot resolve their disputes with lawsuits, arbitration or advertising, so they resort to violence instead.

Violence was common in the alcohol industry when it was banned during Prohibition, but not before or after.

Violence is the norm in illicit gambling markets but not in legal ones. Violence is routine when prostitution is banned but not when it's permitted. Violence results from policies that create black markets, not from the characteristics of the good or activity in question.

The only way to reduce violence, therefore, is to legalize drugs. Fortuitously, legalization is the right policy for a slew of other reasons.

Prohibition of drugs corrupts politicians and law enforcement by putting police, prosecutors, judges and politicians in the position to threaten the profits of an illicit trade. This is why bribery, threats and kidnapping are common for prohibited industries but rare otherwise. Mexico's recent history illustrates this dramatically.

Prohibition erodes protections against unreasonable search and seizure because neither party to a drug transaction has an incentive to report the activity to the police. Thus, enforcement requires intrusive tactics such as warrantless searches or undercover buys. The victimless nature of this so-called crime also encourages police to engage in racial profiling.

If would quote the whole thing if I could. I would vote for Jeffrey Miron for President. He was also against the bailout.

The Drug war is insane and needs to go the way of prohibition. It isn't about what is right or moral, it is about the tradeoffs and the consequences of failed policy. The drug war simply doesn't work and it causes more harm than it helps. It also destorys urban black communities. Sphere: Related Content

An econ primer

Economics As It Could Be Taught

In several principles-of-economics textbooks, the first chapter is devoted to the basic elements of economics such as scarcity, tradeoffs, opportunity costs, incentives, marginal thinking, etc. Most instructors spend very little time with this chapter.

I spend weeks on these concepts. These principles are at the heart of economics, which is, essentially, the study of human behavior. Economics explains how people make decisions—important ones such as where to go to college and unimportant ones such as which shampoo to buy.

Economics teaches us that if given a certain set of conditions and incentives, rational humans behave quite predictably. We need to look no further than the macroeconomic crisis that our nation is currently experiencing. As well-meaning government officials promoted homeownership over the years, the incentives they put into place led, gradually but almost inevitably, to a housing boom and then a bust. Those incentives included lower mortgage standards, the Federal Reserve’s low interest rate policy in 2002-2004, and changes in accounting rules that allowed financial institutions to expand their capital when asset prices rose but reduced their capital when asset prices fell.

Just as my students learn to understand the causes of today’s problems, they learn why conventional wisdom is often wrong. For example, most people think that rent control—government limits on rent increases—make the poor better off by keeping housing affordable. But my students understand the unintended side effects. In cities like New York, rich insiders are often the ones who get the breaks. Because landlords can’t get a market rent, few people want to build more apartments, so existing houses often cost more. When rents are low, landlords don’t want to make necessary repairs and in extreme cases they abandon the apartments.
Sphere: Related Content

Wednesday, March 18, 2009

Teleprompter President thanks himself

Obama In St Patrick's Day Teleprompt Blunder

Mr Cowen stopped, turned to the president and said: "That's your speech."

A laughing Mr Obama returned to the podium to take over but it seems the script had finally been switched and the US president ended up thanking himself for inviting everyone to the party.

Mr Obama is an accomplished orator but is becoming known in America as the "teleprompt president" over his reliance on the machine when he gives a speech.

Looks like he is going to give George Bush a run for his money. Somebody stop him before he teleprompts again! Sphere: Related Content

Monday, March 16, 2009

Cincinnati Tea Party

We are not alone. The time has come to take back this country and reject more Bush/Obama spending. Congress needs to go. Look at how much money they have spent in the three years since Pelosi and Reid took office. They will break the country unless we break them. Sphere: Related Content

Saturday, March 7, 2009

Sweden's Government Health Care

Sweden's Government Health Care

Malmo, with its 280,000 residents, is Sweden's third-largest city. To see a physician, a patient must go to one of two local clinics before they can see a specialist. The clinics have security guards to keep patients from getting unruly as they wait hours to see a doctor. The guards also prevent new patients from entering the clinic when the waiting room is considered full. Uppsala, a city with 200,000 people, has only one specialist in mammography. Sweden's National Cancer Foundation reports that in a few years most Swedish women will not have access to mammography.

Our health care system gives people unequal treatment. Some people spend a lot of money for top of the line treatment. Some people don't spend a dime and get what they can at a free clinic. I would hate to think the solution is to give everyone shitty healthcare at a free clinic. Equality in something usually means that everyone has very little.

Dr. Olle Stendahl, a professor of medicine at Linkoping University, pointed out a side effect of government-run medicine: its impact on innovation. He said, "In our budget-government health care there is no room for curious, young physicians and other professionals to challenge established views. New knowledge is not attractive but typically considered a problem (that brings) increased costs and disturbances in today's slimmed-down health care."

These are just a few of the problems of Sweden's single-payer government-run health care system. I wonder how many Americans would like a system that would, as in the case of Mr. D. of Gothenburg, prohibit private purchase of your own medicine if the government refused paying. We have problems in our health care system but most of them are a result of too much government. Over 50 percent of health care expenditures in our country are made by government. Government health care advocates might say that they will avoid the horrors of other government-run systems. Don't believe them.

Walter Williams is one of my heros. Sphere: Related Content

DC Spends $28,813.22 Per Public School Student

Vouchers vs. the District with ‘More Money than God’
Posted by Andrew J. Coulson

That is an quite a bit of money for a horrible public school system. Maybe the answer isn't throwing more money at the problem.

I read a book of Coulson's, Market Education. It was an interesting book and I am a big fan. Sphere: Related Content

Thursday, March 5, 2009


Why I Miss Bill Clinton

It's hard to overstate the expansion Obama proposes. Leave aside the supposedly temporary spending binge that constitutes his stimulus package. Under his budget blueprint, total spending would soar by roughly 75 percent above what it was last year.

Of whom else could that be said? Do you expect to be spending 75 percent more 10 years from now? Does your employer?

and this

This increase may not sound like much, but it is. Before the current recession began, reports budget analyst Brian Riedl of the conservative Heritage Foundation, government spending amounted to about $24,000 per household. Under Obama's plan, it would exceed $32,000 per household (in inflation-adjusted dollars). Someone will have to pay for every cent of that spending, and it won't be just the rich.

Obama's Charitable Taking
When tax increases are "savings," reach for your wallet.

But it turns out that tax increases account for half of those "savings." From Obama's perspective, it seems, letting people keep their own money qualifies as a "wasteful and ineffective program." That makes sense if you believe all resources are the government's to distribute as it sees fit, which is the premise underlying the multitrillion-dollar spending binge that Obama calls "A New Era of Responsibility."

Under the Bush administration, Obama said, "a surplus became an excuse to transfer wealth to the wealthy." Whatever you think about the wisdom of Bush's tax cuts, they amounted to taking less from people, not giving more to them. Obama makes it sound as if there is no meaningful difference between robbing Peter to pay Paul (which is what he has in mind when he talks about "rebalancing the tax code") and leaving Peter alone (or, more accurately, robbing him less thoroughly)—except that the latter option is, in Obama's view, morally inferior.

And this...

In response to nonprofit organizations worried that limiting the deduction for charitable contributions will reduce donations, The Washington Times reports, Orszag "said Mr. Obama took care of that by giving charities government money to make up part of the difference." Orszag noted that "in the recovery act, there's $100 million to support nonprofits and charities." In essence, then, Obama plans to take money people otherwise would have given to the charities of their choice and give it to the charities of his choice.

Editorial: Cap-and-trade plan will sink Michigan

The nation's gross domestic product contracted at an annualized rate of 3.8 percent in last year's fourth quarter -- the worst economic record in nearly three decades. Is this really a good time to be talking about a carbon tax? How will such talk impact investment decisions?

Obama promises to use some of the revenues for tax relief for certain workers and some of the rest for subsidies for alternative energy. But that won't make up for the damage this huge new tax will do to the economy, especially in Michigan.

A similar program in Europe hasn't worked. European automakers complained about carbon dioxide limits the European Union proposed in 2007 as damaging to the economy.

The Obama cap-and-trade program will place even more of the economy under the control of the federal government. The only upside is that the negative impact it will have on economic growth and job creation will take care of the carbon emissions problem, for sure.

An Assault on Authentic Compassion

A study released Friday by the Center on Philanthropy at Indiana University shows that if the provision had been in place in 2006, charities would have lost almost $4 billion in donations in the intervening period. With the incomes of the so-called wealthy dropping, at the same time that their taxes are going up, it’s hard to see how limiting the deduction will not have a significant impact on charitable giving. The dollars taken away from private donations and directed into government coffers are not going to be magically replaced.


The Obama administration’s unprecedented intrusion into the private sector betrays its underlying philosophy. In his speech before a joint session of Congress last week, the president declared that he doesn’t believe in bigger government. Oh yes he does, in ways we have never quite seen before.

With this proposal, President Obama is saying as directly as it can be said that the federal government is better able than private citizens and the charities they support to decide how these donation dollars are best distributed. Conservatives, by contrast, believe in the principle of subsidiarity — which in this instance means that charity is best performed at the most local and immediate level possible, and by “mediating” institutions rather than large, distant, and bureaucratic ones. This is not an abstract doctrine; it is based on the accumulated wisdom of the ages.

A Moderate Manifesto

Those of us who consider ourselves moderates — moderate-conservative, in my case — are forced to confront the reality that Barack Obama is not who we thought he was. His words are responsible; his character is inspiring. But his actions betray a transformational liberalism that should put every centrist on notice. As Clive Crook, an Obama admirer, wrote in The Financial Times, the Obama budget “contains no trace of compromise. It makes no gesture, however small, however costless to its larger agenda, of a bipartisan approach to the great questions it addresses. It is a liberal’s dream of a new New Deal.”
Sphere: Related Content