The causes of GM's lack of profitability are likely to be studied for many yrs, but if I had to pick just one, it would be:

*  the Two Fleet Rule: see http://online.wsj.com/article/SB122584326266699163.html for more on this. [I picked this one because it is both real and symbolic of numerous other instances of politically inspired meddling]

GM's revenues have been shrinking for some time. As revenues shrank, GM's expenses could not be scaled down - mostly due to fixed costs associated with union contracts, healthcare and pension liabilities which were negotiated during better times, sometimes under threat of strikes etc.

Unfortunately, this is what happens when companies are treated [by the Govt, labor and by Michael Moron] as a perpetual source of jobs and political influence while destroying the main component that makes jobs possible - profit.

Michael Moore, surrounded by 'hard-hit friends and family in Flint, Michigan', bemoans the loss of blue collar jobs. He strikes an appropriately proletarian chord - tres chic, Michael, now you can go back to Hollywood for a mockumentary sequel]. He suggests that the new GM [Government Motors] employ all those workers in building more unprofitable things! Borrow billions of Chinese yuan so that we can travel from NY to LA in 17 hours? What's wrong with taking a 5hr non-stop from JFK to LAX for ~$280 [round trip]?

Michael's friends - who support Big Govt and Big Labor - have finally got what they want. He mentions a sort of perverse 'joy' - striking a mournfully optimistic pose, which might screentest well as the happy ending for his next movie. In his case, it is a fat, sweaty mix of Schadenfreude and political vindication. Rejoice, says Michael, the workers finally control the means of production, and a watermelon-green utopia is just around the corner.

http://online.wsj.com/article/SB123431484726570949.html?mod=djemEditorialPage

The above link is to a well written essay in the WSJ, drawing a sharp contrast between Barack Obama [BO] and Ronald Reagan [RR]. The main thrust of this piece is that:

(1) RR inherited a worse economy from Jimmy Carter [JC] than BO did from GWB

(2) RR's policies - in the four main areas listed below - are credited with the largest economic expansion in recent memory

(3) BO's policies (to date) are ideologically in the opposite direction

* Spending - Reagan [less]; Obama [more]

* Regulation - Reagan [less]; Obama [more]

* Taxes - Reagan [less]; Obama [more]

 

* Monetary policy - Reagan [strict]; Obama [lax]

 

BO (and his supporters) claim that we are in 'uncharted territory' with respect to today's economic problems. The above WSJ article proves otherwise. But we are in uncharted territory when it comes to the ideological tilt to the Left. A significant percentage of our population is convinced that Capitalism is dead. Each generation (and we can thank our Public Schools for this) produces more Leftists, who have been indoctrinated into the belief system that Govt-provided Lifeboats are our only salvation.

 

BO (and his supporters') claims - that they have new ideas - would be comical, if they weren't so serious. Let's ignore the sinister possibility that the Dems are using this opportunity to scare us into spending on Liberal nirvana. But, if one presumes that BO and the Dems are well-intentioned, then their naivete is alarming. In the recent press conference, when BO brought up the 'Lost Decade' in Japan in support of the Stimulus package there should've been a howl of protest from those assembled. After all, Japan spent US$ 6.3 Trillion (those are dollars, folks, not yen) in the 1990s with anemic results.

 

With this Stimulus package and with TARP I and TARP II, we are deliberately choosing a model that is known to have failed (in the 1990s). At the same time, we are ignoring a model which is known to have worked in the 1980s, bringing unprecedented prosperity to our country. And, in the strange, parallel universe, of the NYTimes,  Liberal columnists are criticizing BO's administration for not doing enough.

 

Conclusion: we needed a RR to deal with the economic mess, but we elected a FDR (or, worse, a JC). The only difference, is that RR inherited his mess from JC (a big-Govt Democrat) - but BO inherits his mess from GWB (a big-Govt Republican with a bad spending habit).

Prediction: BO's policies will lead to considerable 'malaise', a JC-era term, which will last even after the 'natural' recovery in the economy.

There will be lasting damage that will make this a long, slow recovery. It will take a RR to come along in 4 -or- 8 yrs before there is any economic expansion. Unfortunately, elections have consequences. When we make choices based on Populism, the results may not be very popular!

Unfortunately, the people who precipitated our economic crisis are still running the show! These are the clowns who are respectfully called Congressmen and Senators.

These clowns are quick to criticize & fire the bit-players (whose crimes were that they acted on incentives set up by politicians) e.g. the 'greedy' bankers. Note: the bankers and Wall Street types are culpable too, but they could not create the rules and incentives that encouraged bad behavior without the connivance of lawmakers. Bankers merely engaged in the bad behavior that lawmakers in Congress encouraged; then, they asked for more encouragement, and greased the way with political campaign contributions, lobbyist fees and other perks. All of them -- Wall Street bankers AND the politicans -- benefited while the party lasted. So did many others who lived beyond their means. But taxpayers are now paying for all this.

The main culprits who caused the problems are still in Congress. Most of them (e.g. Barney Frank) are still around, and may be seen on TV, giving their sage advice on how to get taxpayers to pay for all this. Those that were defeated during the 2008 elections, have been replaced by their ideological twins.

The US Congress still has the same old clowns who:

* kept interest rates artificially low - GWB's administration did this, and BO's administration is following their lead

* increased Govt spending - both Republicans and Democrats are guilty of this, with the Democrats in a slight lead(!)

* encouraged unlimited borrowing - both sides want us to be fat, dumb and happy. But, once again the Democrats have a slight lead(!)

The only difference (in economic terms) between Democrats and Republicans is that the latter claim to be in favor of lower taxes, which, they say promotes growth, leading to higher tax revenues. Those higher tax revenues can be spent on vote-buying gimmicks such as Presciptions for Medicare Recipients. So, even the Republican's support for lower taxes is not based on shrinking the Government. It is merely their vehicle for paying for Government bloat. I guess we should be happy with the prospect that there is a desire for economic growth in this strategy!

 

The reality is that Republicans cannot win elections when the other side is promising all kinds of Govt giveaways (Universal Health Care, Affordable Housing, Free Education, ..) as long as the electorate is dumb enough to believe that all these goodies can be obtained for free! So, we are doomed to a Leftward slide towards Socialism.

 

Of course, Mr. Obama's was a rhetorical question .. aimed at critics of the proposed 'spending'. The answer that he seeks is "Of course, a stimulus involves spending, duh!" 

Our President might want to consult a dictionary. According to Webster, stim·u·lus : something that rouses or incites to activity.

Note to Mr. Obama: results matter. Having the intention to stimulate the economy isn't quite enough. Government spending takes money away from private enterprise -- either in the form of Taxes or Debt. This is the hidden "opportunity cost" of the Stimulus, as currently proposed. Govt spending will yield some benefit, which, no doubt, will be touted by a fawning media looking for a success story to credit Mr. Obama's presidency. However, it lacks the sustaining, multiplicative effect of individual and corporate investment. 

Let's all agree that our economy could use a stimulus. The question is what is the best way to achieve an increase in activity. Does an increase in Govt funding, draining the public sector of much needed capital, rouse or incite Americans to activity? Hardly. Did it work in the US during the the 1930s, or in Japan's Lost Decade of the 1990s? This Stimulus plan is very likely to cost us a decade or two of prosperity.

In the liberal echo chamber, people get points for criticizing President Obama for caving in to Republicans (sometimes euphemistically caused 'the courageous Republicans'). But this bill is just plain wrong, despite the compromises offered to obtain the votes of a handful of Republicans (in name only). And, it was written by Pelosi, Reid et al. Bankrupt of any ideas but those that promote welfare-statism (disguised as do-gooder-ism), Democrats rail against "tax cuts for the rich" if anyone suggests that their plan leads to disaster.

Although Republicans have lost their credibility to some extent, blaming the Republicans for this masks (conveniently) the actual problem with the spend-o-rama.

It will not work. This 'solution' will make our current economic problems worse. And, for that reason, THE PEOPLE DON'T LIKE IT!

We, the people (or at least 60% of us) realize that this is a boondoggle. President Obama's personal approval ratings notwithstanding, this bill is sinking in the public polls. Does this empower the Republicans (whose record on spending is far from good)? If it does, then is it the Republicans' fault?

Liberals do not understand how we - the American public - could elect a liberal demi-god as POTUS, but reject liberalism when it gapes at us from our widescreen TV sets and uncoils itself on our living room couches.

But why did a center-right electorate elect a Socialist? Perhaps it was the drumbeat of despair that the media inflicted upon us? The constant disparaging of right-leaning individuals, and glorification of left-leaning individuals in the media? In either case, the campaign was personality driven, not ideology driven -- and this is the problem.

Why? Because it is the 'poisoned fruits' of the ideology that we see now .. and 60% of us (including many who admire President Obama personally) are recoiling in horror.

This emperor's garments are spun from the transparent silk of socialism.

I believe it was Ayn Rand who likened Govt regulation to a 'penny in the fusebox'. While this may be a somewhat dated analogy in the modern context, it remains relevant.

Without the 'backing' of Fannie and Freddie, it is unlikely that the sub-prime, mortgage-backed-security contagion would have spread so far and wide. Investor fear (risk aversion, really) would've counteracted the desire for profit. This is the 'fuse' in Ayn Rand's fusebox analogy - the fear of losing money acts as a self-correcting mechanism.

But Fannie, Freddie and all their funny friends gave a measure of respectability to these investments, and the lure of easy money had a very strong appeal. With visions of a neverending shopping spree in their minds, investors kept on buying these dubious investments. The creation of Fannie, Freddie et al was the proverbial penny in the fusebox. Suddenly, an class of investments that belongs only among speculators, is given a stamp of respectability, or even a sense of false safety. No wonder that such instruments were picked up by pension funds world-wide.

Confession: Although I am an unabashed conservative, I sometimes enjoy reading Tom Friedman's articles in the NYTimes.

However, he is starting to resemble a stopped clock. And that may be the right metaphor for those who see everything from a "Oil bad, green good" perspective. In his August 9th article titled "Flush with Energy" Tom waxes eloquent about toilets in Greenland, bikes in Denmark and the stupidity of Americans. Please note that I have nothing against either conservation or the development of renewable energy sources. I am all for efficiency, productivity and tapping new sources of energy. The solutions to our energy woes will truly be a journey of a thousand steps, encompassing short-term and long-term solutions. If solutions do come, they will come mostly from the private sector. The speed of innovative development will depend largely on our Govt's ability to get out of the way.

Single Issue Greenies such as Tom seem to suggest that we begin our journey by pointedly shooting ourselves in the foot, by raising taxes on energy.

Reading Tom Friedman's article led to some interesting questions:

* 50% of Danes go to work or school on bicycles - is that out of choice or from necessity, born from $10/gal gas? What portion of their productive days is spent riding around on bicycles? How many Danes are compelled to move closer to their public sector jobs because of the high price of gas? What are the unintended consequences of such a migration? Has there been any impact on the prices of real estate? Oh, scratch that last one - no one can afford to own real estate 'over there'. They are all living in rent-controlled heaven!

* A somewhat random thought: is the Govt-inspired bike-riding in Denmark part of their Universal Health Care system? If so, I can think of an American Presidential Candidate who would surely be for higher gasoline taxes. Except, he will call it a Windfall Tax on Big Oil's profits.

* Denmark was 'lucky to discover some oil in the North Sea'. How exactly does one get lucky in the North Sea? Could there have been some off-shore drilling involved? Nah, couldn't be -- since Tom is decidedly against such activities!

* Did Danes suffer from their government shaping the market with energy taxes? Tom asks a minister of climate and energy, and the answer is a predictable "No". How many ministers would own up to the fact that their precious taxes sap the productivity from their economy.

* While Tom raves that "Energy technology exports rose 8 percent in 2007 compared with a 2 percent rise in 2007 for Danish exports as a whole" I would ask -- "Could it be that the high energy taxes sapped their productivity, causing the rest of their exports to languish?" While Tom raves about the growth of one sector of the Danish economy, I hear the sound of overtaxed Danes groaning under the weight of tax policies which burden every aspect of their productive lives, but create a green-tinted utopia for one-issue journalists to praise.

* I have nothing against Danes (or Americans) devising efficient ways to recycle waste heat from coal-fired power plants. But, if those methods are created by tax-extortions, they come at too high a cost. The ancillary technology benefits that may derive from such expenditure (yes, our Govt-funded space program gave us Tang, teflon and dehydrated food) do not compensate for the drag on the rest of the productive economy.

* To use one of Tom's attention grabbing tricks: Quick! Name an innovation that you associate with Denmark in areas such as electronics, biotechnology, software, material science, medicine, pharmaceuticals .. Did you say Windmills, Cheese and those funny wooden clog-shoes? Hmm .. so, they've gone from windmills to wind-turbines.

* Quick! Name the European country that has successfully used its Energy Tax revenue to come up with an alternative fuel that is better than gasoline .. Did you say "Denmark", Tom? Oops, sorry, that was a trick question. The reality is that when such an alternative is found or created, it will likely be in a free-enterprise country -- and there are fewer of those around. And, we are in serious danger of losing the last remaining bastion of said free-enterprise.

* So, Denmark leads and America lags in wind turbines? OK, we concede that segment to them, until there is a real market for such technology. At that time, American innovation, backed by real-world, market-driven capital will clean their clocks. That is, unless foolish, one-issue greenies like Tom Friedman and Al Gore have their way with our economy. If that happens, we too will have windmills .. and a lower standard of living.

* Unemployment in Denmark is 1.6% -- that sounds wonderful! But, what percentage of working-age Danes are feeding off the Govt-trough, in their non-productive roles as tax collectors, bureaucrats, politicians, welfare-statists and other vermin?

I will only vote for a Presidential Candidate who will
    * re-open debate on drilling in ANWR and other environmentally verboten areas

I'm fully aware that a President can't enact such laws without the support of Congress. Therefore, I extend this litmus test to all candidates who are running for elected office within my <limited> sphere of influence in Nov '08. Since I believe that economic issues trump social issues, I will use my proverbial nose-clip fashion accessory when it comes to those matters this fall.

The very fact that the debate on drillin' in ANWR is re-opened will cause the forward contract price of crude to fall. This will have a much larger short-term impact on gas-prices than (a) begging the Saudis to increase production (b) reducing taxes on gasoline (although I'm in favor of this as well, see below). If drillin' in ANWR is voted down, the American public will see prices rise again and apply pressure on elected officials who oppose it. This will actually have a long-term effect on gasoline prices.

Actually, I have a suggestion on the topic of gasoline taxes: permanently repeal the subsidies to oil companies and permanently eliminate federal taxes on gasoline. Hey, is this what the (D) party means by pay-go?

Q) Does it bother anyone else to watch our Senators and Congressmen lecturing oil industry executives about their moral duty to seek alternative fuels?

That is analogous to Coke being ordered (maybe even subsidized) to seek an alternative to Coca Cola. Of course, if Coke chose to do so voluntarily, for competitive reasons - and on their own nickel - that would be just fine. But isn't it absurd to make such a demand?

In a recent debate on the topic of Universal Health Care, Barack Obama asked Hillary Clinton a question:

"You can mandate it but there will still be people who can't afford it. And if they can't afford it, what are you going to fine them? Are you going to garnish their wages?"

Hillary ducked the question at the debate, preferring to filibuster the issue by mouthing platitudes (to partisan applause), including gems such as "Universal Health Care is a core Democratic value" until the clock ran out! Later, on the ABC program "This Week", when pressed on the question of mandates she conceded that "we will have an enforcement mechanism" including ""you know, going after people's wages."

Barack's side is playing up the 'difference' between his soft, benign mandate (applicable only to children), and evoking images of Hillary's thugs garnishing the wages of the healthy middle-class folks who choose not to buy health insurance.

Voters should realize that all Government programs - even those with warm, fuzzy-sounding goals - require a Govt enforcer. Somewhere behind all the largesse is a squad of Jackbooted Thugs, who will take away your money, or, if you protest, your freedom. But who, exactly, is the target of these gun-toting Thugs?

For an understanding of this, I recommend the book "The Forgotten Man" by Amity Shlaes.

This book is a must-read, not just for conservatives, but for all ..

You may be asking "who is the Forgotten Man"?

Imagine that a person 'A' observes that a person (or group) 'X' is suffering. A goes to B and together A & B conjure up a noble, societal scheme to help X.

If you are a conservative, you will understand that there is a person 'C', the Forgotten Man, who is paying for the 'noble' intentions of A and B. Unfortunately, C was never consulted, but has to silently sacrifice his interests on the altar of A and B's grandiose schemes.

To a Leftist, the rhetoric is all about X. Whether A and B are well-intentioned, or only in it for their self-aggrandizement. C does not exist - or, if he does, he exists only to be turned into the villain of the piece.

In the introduction to this book, Amity Shlaes tells of how FDR used the phrase "The Forgotten Man" in one of his first famous radio speeches - but neglected to use it in the proper context as was intended by William Sumner, the original author of the analogy.

In FDR's speech, the forgotten man label was switched from "C" to  'X', the supposed victim of societal inequity! And FDR was elected, then re-elected, then re-elected ..

Incidentally, Amity Shlaes doesn't spare the Hoover administration (that preceded FDR) either!

In case you have any doubts, the Jackbooted Thugs are directed at "C", the forgotten man. And, unless you are one of the "X" who lives by siphoning from the Govt trough, that means YOU!

Barack or Hillary may ascend to the Presidency, helped by those who think (mistakenly) that Government can (or should) correct economic inequities - whether real or perceived. Once their plans to help "X" are put into effect, the freedom of the majority is diminished.