American Elephants

Obama’a Investment Record. by The Elephant's Child

And these voices are from some of the members of the media most in the tank for Obama. Experienced investors were even more dubious.

Smart Investments? And How Did That Turn Out? by The Elephant's Child

The Obama Campaign, noted for its brilliance, oddly seems to want to have a debate about which of the two candidates is more qualified to run the world’s largest economy.  Obama’s economic policies vs.Mitt Romney’s Bain Capital?  Um, you might want to rethink that.

Obama has made it clear that he really doesn’t understand the concept of profit. Liberals are often taught that profit is a bad thing that the rich sometimes do to line their disgusting pockets and pay for their yachts.

It is obvious that the administration is a little unclear about just how jobs are created. Today’s dismal jobs report makes that very obvious. Three and a half years later is really too late to keep blaming George W. Bush. At what point does the economy become Obama’s? When the recession is over? That happened in June of 2009, officially, from the agency that makes those decisions.

The Obama team does understand hiring, and have done a lot of it, creating new government departments and issuing new regulations; but they miss the detail about who pays for what. Government jobs are just another bill for the taxpayers to pay. From the president on down to the lowliest janitor, taxpayers pay their salaries and benefits.  Government has no money of its own, a fact that liberals forget until they need more revenue, at which point they expect taxpayers to pony up without complaint funds which, when received, will become ‘government money.’

Bain Capital buys failing companies that they hope to revive, with private money from themselves and from investors. They look at the books carefully before they invest, and determine what is needed— money, better management, eliminating a sector that is losing money, a new business plan — and consider what they can successfully provide. If the business still fails, Bain and their investors will lose money, and have a harder time raising investment money the next time. Not every business can be made to succeed, but under Mitt Romney more than 70 percent of their businesses did succeed, many dramatically so. It’s a very good record.

The Obama Administration has picked businesses to fulfill their ideological interest in green energy. They have listened to promoters’ talk of capacity and potential, and had the benefit of having supporters or campaign bundlers in charge or as investors so there were some familiar faces.

They did not ‘invest” their own money, but invested billions of taxpayer funds in speculative businesses that had no track record nor no evidence of expertise or professionalism. When one of those businesses goes bankrupt, it is just another total loss for the taxpayers. The administration’s goals are policy driven — intended to fulfill green ideology, not return on investment driven. We’re still looking for one clean energy success. Just one.

Mitt Romney showed up at Solyndra’s empty building to make the point that when the administration invested in Solyndra, it wasn’t the administration that lost money, it was the taxpayers. The Obama campaign is trying to claim that Romney’s policies in Massachusetts were an economic failure because during his tenure, Massachusetts unemployment rate was 4.7%. Um, 5% unemployment is usually considered full employment.

Obama has big problems arising from his inexperience. He has made universally bad bets. Attempting to invest in “green” energy in spite of the abundant evidence from Spain and other European countries is folly. You would need extensive investigation from trained professionals in the technology and business prospects. Making investments with politically connected business ventures has led to charges of corruption and cronyism. The largest bets went to friends and contributors to Mr. Obama. The biggest losses went to the taxpayers.

When Your Policies Are Proven Not to Work—Shouldn’t You Change Direction? by The Elephant's Child

The economic news is all bad. First quarter economic growth has been revised downward to 1.9% growth, which is downright anemic. Now the preliminary May jobs report shows the unemployment rate (U3) rising to 8.2 with only 69,000 new jobs. All momentum is gone.  This is the third subpar tally, with downward revisions for the two prior months.

The U6 unemployment rate which tracks the marginally employed or completely discouraged — increased to 14.8% from 14.5%. Labor earnings are almost, but not quite, keeping in line with the growth in inflation.

Obama doesn’t seem to understand that businesses create jobs. If businesses don’t make profits and expand, they don’t create jobs — yet here is Obama out on the campaign trail criticizing Mitt Romney for making profits.

Well, today, faced with such dismal news, Obama hopped on Air Force One, at your expense, to fly to Minneapolis for “official business” at an event at a Honeywell factory in a Minneapolis suburb (which excuses putting the trip on the taxpayer bill. That there just happen to be six fundraisers on the schedule is just a coincidence. At the first, the president will address a group of 100 guests ($5,000 a plate), followed by two small roundtables of deep-pocket supporters ($40,000 a plate) and ($50,000 a person).

Former Federal Reserve Chairman Alan Greenspan noted that businesses are holding back on investing for the future because, “In short, there is a fear of the future.”Tax Armageddon still awaits us on January 1. and a new survey shows that uncertainty in the tax code is causing businesses to sit on the sidelines. Most financial officers, according to the tax firm Alvarez & Marsal Taxand, rate eliminating uncertainty in the tax code as their top issue. “Confidence in knowing precisely what the tax code will require has become more important than how much it will cost them.” They are operating in holding patterns.

President Obama has been notably silent on the prospect of keeping the United States from heading over a fiscal cliff. Speaker John Boehner has announced that the House will vote in July to prevent tax rates from rising. The Senate should so the same. There is time for Washington to take action, but the fiscal cliff is not all that far away. Where is the Corporate tax reform? Ours is still the highest in the world. And, unsurprisingly, corporate profits rose at the slowest pace in more than three years.

The White House has fallen once again back on its old theme (foregone briefly yesterday) it’s all George W. Bush’s fault. Nearly four years and the man cannot take responsibility for anything slightly negative, and makes up everything slightly positive out of whole cloth.

I wish I believed that the president was deeply concerned about the economy because of the misery it is causing the American people, but I don’t.  It’s all about the election.


Here’s How to Put Waiters and Waitresses Out of Work. by The Elephant's Child

In an election year, one of the big problems is that everyone wants to do nice things for their voters. They want to appeal to the heart.  But your government does not love you, much as they try to make you think they do. They love getting re-elected.  Case in point: Senator Tom Harkin (D-IA) has introduced the Rebuild America Act. (Good names make it harder to vote against). Among other things, the Iowa Democrat wants to raise the minimum wage by 220% for employees who receive tip income, such as waiters and waitresses. Huh?

Seems like only yesterday, Congress was railing about waiters and waitresses not paying taxes on their tip income. Fact: the federal minimum wage for employees who earn tip income is $2.13 an hour. The Labor Department permits this lower minimum wage so long as the employee earns at least the full federal minimum wage of $7.25 when tips are included. If tips fall short of that amount, employers kick in the rest. According to Census Bureau data, the average hourly wage for a restaurant employee earning tip income is $11.82. Top earners can collect $24 an hour or more. It pays to be a nice waiter or waitress.

The difference between the two minimum wages is called the “tip credit.” It is a political acknowledgment of the single-digit profit margins in tipped industries, and of the income supplement that gratuities provide.

Economic studies show no relationship between a boost in restaurant employee base wages and their take-home compensation.  A study that examined 20 years of Census Bureau data found that each time the mandatory state wage for tipped employees rose by 10%, hours worked fell by 5%.

Economists William Even and David Macpherson analyzed Sen. Harkin’s bill, and they estimate that the combined loss of hours would translate to the loss of 447,000 jobs. There are always consequences. Table-service restaurants have experimented with computer terminals tat allow customers to order and pay at the table. When a server is only carrying food to the table, restaurant jobs won’t be as lucrative.

Progressive politics is simple. Just make the employer pay more. The law of unintended consequences always applies.  But if Sen. Harkin’s bill doesn’t pass, restaurant employees in Iowa will know (maybe) that he tried, which is the point.

The Paradox of the Electric Car: A Puzzle. by The Elephant's Child
June 1, 2012, 6:35 am
Filed under: Domestic Policy, Energy | Tags: , ,

Fisker Automotive announced today that the company’s revenue for the first quarter of 2012 has exceeded $100 million, and funding for the company has exceeded $1 billion. Pretty good for a company that has only one product, pretty, but questionable.  In the last six months they have sold 1,ooo cars since starting deliveries last December.

That would add up to about five-and-a half cars sold a day. That’s really good for a car that retails for over $100,000. Fisker said they would make 15,000 Karmas in 2012. The recalled battery packs either are replaced or will be soon.

Fisker also announced earlier this year, the Atlantic, a less expensive model that is also extremely sexy looking. Very good looking cars, very expensive price. President Obama has invested $200 million in the company which they have already received.  they also received federal funds to help purchase a closed General Motors plant in Delaware, Vice President Biden’s home state, where they said they would one day employ 2,000 auto workers to assemble the clean burning gas-electric car called the Atlantic. However they may never make cars in the U.S.

The Karma is a hybrid sports sedan that it assembles in Finland, and the company says it has started to sell in Europe and could soon be on sale in the Middle East. Rich oil sheiks should really like this one. Fisker appears, however, to be preparing for the day when they will no longer get government monies —”then obviously we are in a place where other options are open to us and have to be considered from a business perspective.”  Well, yes, I can’t imagine a Romney administration continuing to plunk down taxpayer money for sexy playthings for the 1%.

The electric car is a puzzle that has not been solved. The GM Volt and the Nissan Leaf have fared poorly in the marketplace. For the electric car to be more than a plaything for very rich environmentalists, it has to succeed in the mass market.

The cars themselves are technology marvels; the availability of charging infrastructure can be extended as long as government is willing to foot the bill.  Good looks and supposed environmental purity may be appealing to first time buyers. BUT. Electric car batteries are extremely expensive — they can account fo one third of the cost of the car — and they depreciate fast. New buyers may not pay much attention to the resale value, but for the mainstream market it’s important.

Lots of attention has gone to the roll-out of charging stations, but little attention has gone to investment in the smart-grid technology that would assure that the grid would support mass charging. If 5% of cars in LA County were to plug in at the same time, that could place a 750 megawatt load on California’s already strained grid — equal to two midsize power plants. There is no evidence that electric cars will have the slightest effect on CO2 in the atmosphere, and using our own abundant oil resources should bring the price of gasoline down significantly.

Engineers have said that they have investigated every element in the periodic table of elements, and that battery technology will require some breakthrough that is as yet completely unknown.  Electric cars look very different and have all sorts of bells and whistles, but they don’t go significantly farther on a charge than the 1898 Roberts electric car which went a solid 40 miles on a single charge.

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