American Elephants


Excuse Me, But The Auto Bailout Was a Failure. by The Elephant's Child

Vice President Joe Biden’s favorite line on the campaign trail is:”Osama bin Laden is dead and General Motors is alive.” Good soundbite, bad analysis. Bin Laden is dead, but al Qaeda is alive, active, and recruiting. Some economists have warned that GM may soon be facing bankruptcy again.

Economist Dan Mitchell emphasizes that “any company can be kept afloat indefinitely with taxpayer subsidies.” GM is spending scads of money on the Chevy Volt because of pressure from Washington, not because of consumer demand. And the CEO is advocating higher gas taxes in order to make the poor unwanted Volt more attractive to consumers.

Obama seems to believe that bankruptcy is a bad thing. But our bankruptcy courts and bankruptcy laws are designed to save companies by helping them to reorganize. One of the biggest reasons for GM’s failure in the first place was the burden of their overgenerous union contracts and overgenerous pensions.

The video doesn’t really get into the costs to bondholders who legally are supposed to have first call on company funds in a bankruptcy. Nor does it deal with the auto dealers — private businesses whose only connection to GM is that they buy their stock of cars from GM, who were just shut down by the government, and who each had up to 100 employees. Talk about a heavy boot descending on a business. Boom, you’re out of business, your businesses are worthless, your people are unemployed. Welcome to Obamaworld, where everything is always politics.

ADDENDUM: The auto bailout may have been a failure in the eyes of taxpayers. For Obama, it was a big win. Time for gangster government to call in the markers. The United Auto Workers donated $1 million  to President Obama’s super PAC and another million to super PACs that support Congressional Democrats in September, with totals for October yet to be announced. Whatever union members happen to think, that’s where their dues are going.



How Do We Fix The Economy? Let’s Outlaw Profit! by The Elephant's Child

The world’s manufacturers have fallen back into recession.  A key gauge of factory output shrank in August to its lowest point since July 2009 — to 49.6.  A reading below 50 is considered recessionary and the index has been below that key level three months in a row. The reason is the U.S. manufacturing sector.

Manufacturing  is mostly done by small to midsize companies, but due to a raft of new regulations under Dodd-Frank financial reforms, those businesses are struggling to get financing. But if they do get funds — under ObamaCare any company with more than 50 employees will pay steep penalties to insure its workers. So many will put off new investments and curb hiring plans to avoid higher costs. And they don’t know what other regulations may be coming down the pike. In Obama’s first term, manufacturers were hit with an average of 72 new regulations a year, an increase of 60% from the Bush era.

In this sluggish economy, factory output remains 4.7% below where it was when we entered the recession.

The United States took the top spot in the WEF’s Global Competitiveness Report as recently as 2007 and 200, but dropped to 2nd place in 2009, and now we have dropped to 7th place.  The business community is critical toward public and private institutions, and it’s trust in politicians is not strong (54th). Business leaders remain concerned about the government’s ability to maintain arm’s-length relationships with the private sector (59th) and consider that the government spends its resources relatively wastefully (76th). A lack of macroeconomic stability is the country’s greatest area of weakness (111th, down from 90th last year). We do beat Portugal though. The U.S. is 76th in the burden of government regulation behind Kenya and Thailand.

Here’s one reason why we find ourselves in this position. Peter Schiff posed as an anti-business crusader, and found a significant number of DNC delegates and attendees who support explicitly outlawing profit.  These are not the occupy people camping outside, but Democrats at their own convention.

Schiff is CEO of Euro Pacific Capital Inc, a broker-dealer in Westport, CT, and Euro Pacific Precious Metals LLC, a gold and silver dealer based in New York.

If people don’t have the most basic understanding of how the world works, no wonder…



Where Does the Economic Nonsense Come From? by The Elephant's Child

Treasury Secretary Timothy Geithner appeared before the Senate Finance Committee yesterday.  He said some surprising things, surprising that they would come from a U.S. Treasury Secretary.  But then the Germans have been complaining that Mr. Geithner keeps coming over there and lecturing them about finances — which they find incredible in view of the state of the American Economy.

Geithner told the Senators that “modest increases in revenue through tax reform” are a must.

James Pethokoukis points out that Obama’s $1.7 trillion tax hike is not a “modest increase” and suggests growing the economy.

Geithner seemed unaware that fiscal sustainability (there’s that word again) is possible unless you get more taxes from those nasty rich people.

James Pethokoukis suggests cutting spending.

You really need to read the whole thing to grasp the mindset of this administration. James Pethokoukis is very good at  pointing out patent nonsense, and explaining why it is nonsense.

If we are to believe Obama’s own words, his view of his position is that the administration is completely a top-down affair. He gives the marching orders, The vision for change comes from him. So maybe Geithner knows better, but then again, maybe he doesn’t. It is a puzzlement.



Oh My, We Need Some Remedial Economics 101 Here. by The Elephant's Child

I was still giggling over Nancy Pelosi’s comment on Progressive Health Care: “We will have a cap on costs,  and we will have no cap on benefits, ” when I learned that in Michigan, suffering from some of the highest unemployment  in the country, State Democratic Party Chairman Mark Brewer wants to test support for potential ballot initiatives that will:

“give voters the chance to circumvent recalcitrant politicians in Lansing, he said, demonstrating that Democrats are “on the side of the people.”

The brilliant ideas they are proposing consider:

  • Hiking the minimum wage to $10 an hour for all workers.
  • Cutting utility rates 20% across the board.
  • Imposing a blanket moratorium on home foreclosures for 12 months.
  • Requiring all employers to provide health care to their employees.
  • Hiking, by $100 a week, and extending, for 6 months, unemployment benefits.

Raising the minimum wage will increase the unemployment rate.  Cutting utility rates will cripple Michigan power companies.  Mandating health insurance should shut down any small businesses who were considering staying in Michigan, and no small employer would consider relocating to Michigan. Remaining would be the Democrats and the unemployed, but who would pay for their additional unemployment benefits remains a mystery.

Then Michigan governor Jennifer Granholm has mandated that 20 percent of the state’s power come from renewable resources — and now she wants utilities to cut consumer rates by 20 percent. Yes, she wants utilities to provide more costly power, and cap the prices that customers pay for it.

Last year, Barack Obama named Ms. Granholm to his 17-member economic advisory board.  According to Edward John Craig, she seems to still be active in that role.  At least the climate bill, the budget, the stimulus and the health care reform agenda would seem to indicate that she is.

I knew that Democrats don’t much like the free market, nor do they understand it.  They are deeply suspicious of the profit motive, and antagonistic to business.

That is why we have a stimulus bill that is going to wait a year or two to attempt to stimulate.  That is why, in spite of warnings that fiscal stimulus seldom works, they were sure that more money would make it work.  That is why they are quite sure that dumping large amounts of federal funds into wind turbines and solar panels to produce “clean” electricity will somehow reduce our dependence on foreign oil; and by making the cost of energy far more expensive will somehow create more jobs.  And as Nancy Pelosi claims, by capping costs and making all health care benefits available to millions more people, we will save money.

It seems that we have all stumbled down the rabbit hole, and are lost in a make-believe world.




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