The Tea Parties sprang to life after seeing cyincal politicians advance their own agenda that most Americans knew wouldn’t work, but damn the people, the politicians plowed ahead. It was about the time of the great stimulus program that we were told (and didn’t believe) the program would cap unemployment at 8% for the mere cost of nearly $1 trillion. If we didn’t act, the politicians somberly pronounced, we would face the dire situation of 9% unmployment.

New York Congressman Tim Bishop has introduced “The Big Oil Welfare Repeal Act,” which could be said is cynicism on steroids. Let’s start with the title. Does Mr. Bishop really believe that oil companies are receiving welfare? Welfare as most honest people know is where the government gives people money who are not working. It takes little questioning to figure out that is not happening in the case of the oil companies but, hey, lying works. Tim Bishop just ran his entire reelection campaign on personal attacks on his opponent rather than running on his record, so lies and distortion are his specialty. Let’s break it down.

What he wants to do is eliminate a tax break, not a subsidy, that the oil companies receive which equates to 6% of the income they get from domestic oil production. I am all for simplifying the tax code and eliminating all loopholes and at the same time reducing tax rates so on balance it is revenue neutral. But why stop with the five biggest oil companies? What about eliminating subsidies for ethanol? Wind? Solar? Crops? Electric cars? Mortgages? Uh, those wouldn’t be cool with the people Bishop needs to reelect him, but Big Oil, yeah everybody can hate Big Oil!

Bishop goes on to say that the extra revenue from the oil companies by eliminating the tax break will reduce the deficit by $13 billion over ten years or doing the math about $1.3 billion for one year which is 0.08% of the current one year deficit of $1.6 trillion. So, Mr. Bishop is cyinically trying to show he is concerned about the debt, and yet he voted against the Ryan budget proposal that would save $6 trillion; deficit reduction to Tim Bishop has to be symbolic not serious or real.

Lies, Lies and more Lies

Mr. Bishop, on his own website, says the following:

• I’m outraged that at $4 a gallon, Americans are still paying twice for gas: once at the pump and once on tax day,” said Congressman Bishop.  “Borrowing money to pay Exxon-Mobil to drill for oil they have every incentive to drill for already is Exhibit A for wasteful government spending.”
• Repealing the oil industry’s tax subsidies will not impact gas prices for American consumers.
• Bishop unveiled the bill at the Patchogue Village Department of Public Works facility on Waverly Avenue, which houses the gas pumps used by village, school, and fire district vehicles.  He was joined by Village Mayor Paul Pontieri, who described the effect high gas prices have on the Village’s budget.

These three bullets were from the same post on his website! He begins by saying he is outraged by the price of gasoline at $4 a gallon. He then says that his proposal will not affect gas prices. Then he uses the poor Patchogue Village mayor as a prop, to unveil his plan that Bishop  says won’t do a damn thing to solve the mayor’s problems. Do you wonder why Americans hate politicians?

Bishop is right about the gas prices. Exxon makes a profit of about $0.07 per gallon of gasoline. Bishop’s proposal will affect 6% of the profits they make on domestic production. It doesn’t take a mathematician to figure out at 6% of $0.07 is about half a cent per gallon. So why all the hoopla other than to create a false impression that this congressman is actually earning his $176,000 salary. That’s why Americans hate politicians.

Let’s move onto the next lie, paying the oil companies on tax day. With Memorial Day approaching we will be seeing a lot of sales from merchants. If you go to Lowe’s to buy that new grill and they advertise 10% off for Memorial Day, does the cashier reach into the drawer, take out some cash and give it to you? No. Ten percent off means you pay ten percent less. You do not come home with a grill and more money in your pocket than when you left the house. The same applies to taxes. Any tax break means you pay less in taxes, the government doesn’t pay you. The government doesn’t have any money except what it gets from you. That’s how it works. So tax cuts are where you get to keep more of your own property. It is not a payment from the government, it is not a cost to the government, IT’S NOT THE GOVERNMENT’S MONEY, it’s your money.

Okay, gas is expensive, so what do we do about that? Many on the right have said we should increase domestic production. So what does Tim Bishop do? His proposal is to remove a tax incentive on domestic production. That seems counterproductive. He also said he just voted against expediting domestic drilling permits. It would almost seem that Bishop wants to increase our dependency on foreign oil. He then goes on to say in a C-SPAN interview that domestic production is at an all time high, and that the oil companies have plenty of leases and they should just drill on the leases that they have.

The problem is that it takes about sixty leases to get one with a productive discovery of oil. What Mr. Bishop only mentions in passing is the value of the dollar as a contributing factor in the price of gasoline. I suggest that it is a more serious relationship than that and who has been destroying the value of the dollar by printing money and spending it like crazy? It was Tim Bishop who voted for the stimulus that accomplished nothing. Nancy Pelosi ran up the debt $5 trillion during her tenure as Speaker and Tim Bishop voted with her 97% of the time. Now he proposes meaningless legislation just to get some campaign sound bites, because attacking Big Oil is good politics. That’s why Americans hate politicians. They want their elected representatives to do things that work, not things that get the politicians another two years on the government’s payroll.

Here Mr. Bishop let’s his fig leaf slip and reveals his socialist leanings:

He noted that while continuing to enjoy the subsidy, the largest five oil producers have directed the lion’s share of their profits into dividends and stock buy-backs.

Think about the local green grocer. If he has a good year and he makes a profit, maybe he decides to put that profit into the bank. Would Tim Bishop object to that? Okay, who owns the oil companies? The stockholders. Mr. Bishop is basically saying that the people, maybe even a certain green grocer, who invested their hard earned money are not entitled to any of the profits from the oil companies they own in the form of dividends. They are not allowed to sell some of their stock back to the company in the form of a stock buyback so they can invest their money elsewhere. Perhaps some of those oil company owners are retirees who bought the oil company stocks for the dividends and because they believed the oil companies will be around for some time to come. Perhaps they don’t believe that Social Security is such a swell deal; few ponzi schemes are. Mr. Bishop takes exception to them getting a dividend increase now and then. In his twisted understanding of economics or lack thereof, the oil companies should be taxed more, its owners receive no profits, plow all profits back into exploration and development, and sell their product for less money, while he and his cohorts spend every last dollar that this country produces, to keep themselves in office, and have a claim on everything you own, except that which Mr. Bishop decides you can keep. But whatever you do, don’t call them socialists.

And that’s why Americans hate politicians.

That’s my opinion; I’d like to know yours. Please comment below.

Maybe it’s just me. Perhaps not having lived in the rarefied air of academia or politics, I have a more roll up the sleeves, get some dirt under the fingernails approach to what a job entails. Today it seems that politicians like to get in front of the cameras, fire off a sound bite and then go do something more interesting.

President Obama puts our troops in harm’s way and then jets off to Brazil to be photographed doing the samba, and saying he wants to be first in line to buy more foreign oil, this time from Brazil. Didn’t he just say that he wants to cut our imports of foreign oil by one third? Shouldn’t we be drilling here rather than lining up new suppliers?

We have a myriad of problems that include spending, the crisis in the Middle East, North Korea, unemployment, the budget, and yet the president has found time to play sixty-one rounds of golf, at last count. Who’s minding the store?

Newly elected Delaware Senator Chris Coons got on television to lament that he is holding a job fair at his Delaware office and if the government shuts down Friday night, he won’t have any staffers to run the job fair. This is very, very bad. Er, excuse me, senator but your job is to pass a budget not to be the local employment office. Cancel the job fair, as I am sure there are plenty of government and private agencies that handle that, and get back to work doing what you were elected to do.

In a similar vein, Congressman Tim Bishop is scheduled to kick off his 2012 reelection campaign this Sunday so that he can plan on continuing to pick up his $174,000 salary for failing to pass a budget. I am sure his quick retort will be that he is in the minority and therefore powerless to move those stubborn Republicans. But it was his failure a few short months ago when he and Nancy Pelosi were in the majority to pass a budget resolution for the first time since budget resolutions became standard practice. They also failed to pass the appropriation bills to fund the government until the end of the fiscal year in October.

A cynic might look at it as a designed power play. “Look, we’re going to get clobbered in 2010, so let’s not vote on a budget or spending bills and it will be a twofer. One, we won’t be held accountable for voting for higher spending and that may save a couple of seats in November 2010; two, it will dump this mess in the Republicans lap and if we hold the Senate we can force a government shutdown and blame them like we did in 1995. Then we can coast back into power in 2012.” Of course, you would have to be a cynic to believe that, wouldn’t you? Wouldn’t you?

In the midst of the current budget crisis we hear an announcement by Harry Reid that their staffs will be working through the night, and the politicians will be back in front of the microphones tomorrow.

I worked a number of years in Information Technology, specifically in the credit card business. I can remember sitting at my desk on New Year’s Eve 1999. Perhaps the biggest New Year’s celebration of a lifetime and I was at my desk. Why? Remember the Year 2000 software bug? Well, we had to be ready to respond instantly if anying we worked endless hours to prevent slipped through. Nothing did and around 3AM or so, we started to head home. On the day after Thanksgiving, known as Black Friday, in the retail world it was “all hands on deck” to make sure that things worked and if there were any hiccups, we were on top of them immediately. Although I was a VP, I was there on the floor with the first line folks. The same went for any major software releases. If a critical decision had to be made we were there to make them. That’s the way it was done. We didn’t make pronouncements and go play golf. We were there onsite. But that is in the private sector, where things like profits and losses matter, accountability is real, and lifetime employment is unheard of. We could be fired any day, not just one day every two, four or six years.

We have a right to that accountability from our political leaders. Instead of raising funds for the next run for office, these politicians should have their salary cut off and be dipping into their savings to pay for the skyrocketing gasoline prices that are a result of not exploring for energy here, and instead destroying the dollar. Instead of doing their jobs, those on the left are ramping up their slime machines to give every reason under the sun why they can’t possibly cut any spending. There was some Congressman on the news talking about how wonderfully efficient Medicare is and how those evil Republicans want to put that in the hands of private insurers, horrors! It is common knowledge that between $60 – $100 billion is STOLEN from Medicare every year. How is that for efficiency? As I point out in my book Liberty’s Lifeline Steve Kroft of Sixty Minutes reported that stealing from Medicare pushed aside cocaine as the major criminal enterprise in South Florida.

2012 is coming and everyone one of these hand wringing, overpaid, do nothing, politicians should be bounced out on the street, if they don’t want to step up and transform Washington in to an efficient and accountable government.

That’s my opinion, I’d like to know yours. Please comment below.

There was the Empire State Building: the world’s tallest building at 102 stories taking just over 13 months to build, opening on May 1, 1931.

There was the Hoover Dam: 726 feet high, holding 6.6 million tons of concrete, holding back the mighty Colorado River, taking less than two years to build. It was started in 1931, completed in 1933 and turned over to the Federal Government in 1936, two years ahead of schedule.

There was the Golden Gate Bridge, a four year project completed in 1937, the longest span suspension bridge in the world at the time.

They all happened during the Great Depression the last time our economy was as bad or worse than today.  If one stops to view these projects through the prism of social impact, think about where American values were then, versus what we are being told about what is valuable, or should be valuable or what we are supposed to believe is valuable to us now.  These projects and others like them positively changed the landscape of America for generations to come, opening vast horizons of untapped American human and natural resources to growth and opportunity.  And some were even publicly funded.

The president Tuesday night pined for the good old days of jobs in factories, (sort of) forgetting the paralyzing grip that big labor unions had on the ability of American companies to adapt to a rapidly changing world economy.   The internet and automation he said were to blame for our manufacturing decline.  Really? I remember all the steel mills in Pittsburgh closing when I lived there in the 1970’s before computers were widely used in American industry, and before Al Gore even  invented the Internet.  A bridge built by PennDOT right over top of an American steel mill was done using Chinese steel.  Before the personal computer had even been invented, most of the steel mills in Pittsburgh were shuttered and rusting. The same virus spread across other industrial regions of the country creating what is widely now known as “The Rust Belt”. The president’s adaptation of history is misleading at best.

Typical of big government liberals, President Obama became almost misty eyed at the prospect of tapping a huge as yet undefined pool of private money drained from its productive citizens into the government sewers and spent on favored social development projects in the name of either public works or the beautiful catch all, “infrastructure”, urging us to tap into our innovative spirit.  He lauds our past innovative accomplishments, most of which were achieved many years ago, cars, airplanes, computers and the internet. Since 1963, twice as many U.S. Patents were issued to foreign applicants as American applicants.  He calls us the nation of Edison and the Wright Brothers. Mr. President, you’re a century late.  While Italy may be the nation of Marco Polo, Ralph Lauren has created more jobs using his name than you have by invoking the name of Thomas Edison.  It’s not that computers and airplanes are not contributing to economic activity. The problem is, Microsoft and IBM probably couldn’t get out of the box in today’s stifling tax and regulatory environment. Norman Augustine, former chairman and CEO of Lockheed Martin, very recently said we have lost our competitive edge and the situation is even more “perilous” than it was five years ago. His words, not mine.  Can anyone address this problem honestly while ignoring oppressive government and government protected organized labor? What has NOT been invented because of this self inflicted strangulation?

It is time to stop channeling dead people who invented things in the last century when there was no income tax, no government red tape or environmental garrote around the neck of new businesses, and just get the hell out of the way and unleash the true American spirit of innovation, the one that existed when the government was not there to help us.  The American people are tired of government help that doesn’t, and government investment that isn’t.  The new vocabulary of investment and infrastructure should not include wind energy, moonshine gasoline (biofuel) and other ephemeral social engineering projects. Start drilling for oil today. We are not getting off oil any time soon. Break the backs of the Middle East hostility against us because they no longer respect us. Hit them where it hurts and let’s get competitive in the world of real ideas.  If we want a Sputnik moment, let’s endeavor to be 100% rid of foreign oil by the end of this decade, and let’s do it competitively.  That means domestic oil production. Imagine the independence we would feel when gas is under a $1.00 a gallon and none of our money goes overseas. 

Stop pretending that teachers unions are not harming education, and labor unions are not draining our national will to excel.  Get back to the basics: protect our borders and our citizens at home and abroad, steward our currency and money supply, and shepherd our economy by unleashing the potential American dream for all its citizens, instead of favored unions and corporations who achieve such status by toeing your politically correct line.  We don’t need a Sputnik moment, we need a Reagan moment. Then leave us alone. We’ll take it from there thank you very much.

 Please add your comments below

Do you like to breath?  I do.  Do you like trees and enjoy their beauty?  I do.  So what’s the problem?  The problem is that Obama’s EPA is considering a ruling that would declare Carbon Dioxide a “dangerous pollutant“.  So what do you do with a dangerous pollutant?  Well, you stop it, ban it, eliminate it so that it no longer harms us or the environment.  No?

Carbon Dioxide as a Pollutant

The problem is that every time you exhale, part of what you are exhaling is carbon dioxide.  So with every breath you are dangerously polluting the earth.  You must be stopped.  Your breathing must be banned.  You must be eliminated.

What about all those dangerous trees and plants?

“When the sun is shining, plants perform photosynthesis to convert carbon dioxide into carbohydrates, releasing oxygen in the process.”

Trees and plants absorb carbon dioxide and convert it into oxygen.  So if we eliminate this dangerous pollutant, wouldn’t it stand to reason that plants would die?  If plants die, they don’t produce oxygen and people and other oxygen breathing life would die. What a great idea! Let’s ban a dangerous pollutant and in doing so, kill all life on earth as we know it.  Why didn’t I think of that?

Global Warming, I mean, Global Climate Change

Since we have been seeing record cold temperatures across the country and it seems to snow everywhere Al Gore goes to speak (is GOD playing with him?), we hear less and less about global warming.  Now it’s called global climate change, which in my observation happens every day, season, year for as long as I can remember and I expect that it will continue to do so.

The problem is that those who advocate the declaration of carbon dioxide as a pollutant are the same people that say it is settled science that the increase in temperatures, or as it is now called climate change, are man made.  The truth is that there is significant evidence to the contrary that increases in carbon dioxide are not the cause of temperature increases, but the result of temperature increases caused by solar activity (see previous post).

Let Cooler Heads Prevail

I have no problem in working toward reducing the amount of anything that is a byproduct into the atmosphere.  Recycling is good.  Cutting back on energy waste is good.  Renewable energy helps us get off foreign oil from despotic dictators which is good.  But we have to avoid going around the bend and taking extreme positions that the very act of breathing results in a dangerous pollutant.  Once you give that power to the government, more of you liberty vanishes and there is no telling how far they will go with it.

Speaker Nancy Pelosi has released a draft of the proposed stimulus package that is now standing at around $825 billion.  It didn’t take too long to grow $50 over what Obama was asking for (read draft here).  Needless to say, that in order to get bi-partisanship off on the right foot, she had to make sure to give Bush a parting shot by indirectly blaming him for the current crisis (“Since 2001…” gee, who began their presidency in 2001?).  I also found this statement curious:

The economy is in such trouble that, even with passage of this package, unemployment rates are expected to rise to between eight and nine percent this year. Without this package, we are warned that unemployment could explode to near twelve percent. With passage of this package, we will face a large deficit for years to come. Without it, those deficits will be devastating and we face the risk of economic chaos. Tough choices have been made in this legislation and fiscal discipline will demand more tough choices in years to come.

The first interesting point concerns unemployment.  In Obama’s economic team’s analysis they said that with a stimulus plan unemployment would rise to 8% and without it, rise to 9%.  Pelosi is now saying it could explode to 12%.  Can we get on the same page, here?  Which is it?  The next point is that with the stimulus we will face large deficits for years to come, but without the stimulus the “deficits will be devastating and we face the risk of economic chaos.”  So we’re damned if we do, and damned if we don’t because Congress can’t keep themselves from spending more damn money than they take in.

But don’t worry folks, this time (really) there will be unprecedented accountability.  Do you feel better? I do.  After all, don’t we have Barney Frank to thank for making sure Fannie Mae was fically sound?  No?  Let’s recap.

In 2000, then-Rep. Richard Baker proposed a bill to reform Fannie and Freddie’s oversight. Mr. Frank dismissed the idea, saying concerns about the two were “overblown” and that there was “no federal liability there whatsoever.”

Two years later, Mr. Frank was at it again. “I do not regard Fannie Mae and Freddie Mac as problems,” he said in response to another reform push. And then: “I regard them as great assets.” Great or not, we’ll give Mr. Frank this: Their assets are now Uncle Sam’s assets, even if those come along with $5.4 trillion in debt and other liabilities.

Again in June 2003, the favorite of the Beltway press corps assured the public that “there is no federal guarantee” of Fan and Fred obligations.

A month later, Freddie Mac’s multibillion-dollar accounting scandal broke into the open. But Mr. Frank was sanguine. “I do not think we are facing any kind of a crisis,” he said at the time.

Three months later he repeated the claim that Fannie and Freddie posed no “threat to the Treasury.” Even suggesting that heresy, he added, could become “a self-fulfilling prophecy.”

In April 2004, Fannie announced a multibillion-dollar financial “misstatement” of its own. Mr. Frank was back for the defense. Fannie and Freddie posed no risk to taxpayers, he said, adding that “I think Wall Street will get over it” if the two collapsed. Yes, they’re certainly “over it” on the Street now that Uncle Sam is guaranteeing their Fannie paper, and even Fannie’s subordinated debt.

By early 2007, Mr. Frank was in charge of the House Financial Services Committee, arguing that he had long favored some kind of reform. “What blocked it [reform] last year,” Mr. Frank said then, “was the insistence of some economic conservative fundamentalists in the Bush Administration who, to be honest, don’t think there should be a Fannie Mae or a Freddie Mac.” What really blocked it was Mr. Frank’s insistence that any reform be watered down and not include any reduction in their MBS holdings.

In January of last year, Mr. Frank also noted one reason he liked Fannie and Freddie so much: They were subject to his political direction. Contrasting Fan and Fred with private-sector mortgage financers, he noted, “I can ask Fannie Mae and Freddie Mac to show forbearance” in a housing crisis. That is to say, because Fannie and Freddie are political creatures, Mr. Frank believed they would do his bidding.

So, I for one am really glad that we will now have A Recovery Act Accountability and Transparency Board, to keep an eye on things.  Whew, I was concerned there for a minute.

What’s Included in the Package

• Clean Efficient, American Energy
• Transform Our Economy with Science and Technology
• Modernize Roads, Bridges, Transit and Waterways
• Education for the 21st Century
• Lower Health Care Costs
• Help Worker’s Hurt by the Economy
• Save Public Sector Jobs and Protect Vital Services
• Tax Relief

Clean Efficient, American Energy

“To put people back to work today, and reduce our dependence on foreign oil tomorrow.”  Wow, sounds like, Drill Here, Drill Now, doesn’t it?  Not a chance.  Oil drilling is no where to be seen.  After over 1 million signatures on a petition to tell Congress to stop blocking our ability to drill for our own oil, Congress agreed, until the election that is, and then nothing more.  Also, nothing about nuclear energy either.

What is included:

• Reliable electric energy grid — $11 billion
• Renewable energy loan guarantees — $8 billion
• Renovations and repairs to federal buildings, including energy efficiency — $6.7 billion. Why are our federal buildings in such need of repair?  Why hasn’t Congress been maintaining them?
• Local government energy efficiency block grants — $6.9 billion.  This is taking money out of the left pocket and putting it in the right pocket.  The federal government’s money comes from individuals and businesses in all fifty states.  Why do we send our money on a round trip ticket to Washington, only to have our local politicians grovel to get it back?
• Energy Efficiency Housing Retrofits for HUD sponsored housing — $2.5 billion
• Energy Efficiency Research and Development — $2 billion
• Advanced Battery Loans and Grants — $2 billion.  I’ve got a better idea.  Do you want to see innovation in battery and energy efficiency?  Eliminate the Capital Gains tax.  It will boost the stock market and bring in a lot more investment in new technologies
• Energy Efficiency Grants and Loans for Institutions — $1.5 billion
• Home Weatherization — $6.2 billion.  That’s $20 for every man, woman, and child in America.  Does every house in America need weatherization or is this a but much?
• Smart Appliances (rebates for new appliances) — $300 million
• GSA Federal Fleet (replace older vehicles with alternative fuel vehicles) — $600 million. Are they saying that today the Federal Government buys inefficient vehicles?
• Electric Transportation (new grant money to encourage electric vehicle technology) — $200 million.  Did any of these politicians go to the Detroit Auto Show?  It was chock full of electric vehicles.  Didn’t we just give GM and Chrysler $14 billion?  Are we saying they need another $200 million for encouragement?
• Cleaning Fossil Fuel — $2.4 billion
• Department of Defense Research — $350 million
• Alternative Buses and Trucks for state and local governments — $400 million
• Industrial Energy Efficiency for demonstration projects — $500 million.  There are dozens of things we can do to improve Industrial energy efficiency.  We need demonstrations?
• Diesel Emission Reduction — $300 million

That’s just the energy piece of the package.  With regard to the renewable and efficiency spending on government buildings, there should be a reduction in energy costs going forward.  Are the operating budgets for those buildings going to be reduced in future budgets to reflect the savings or is that money just going to be diverted to other uses?

It seems to me that we could get a lot more stimulus with some immediate tax breaks and if the problem with the economy is a lack of credit, perhaps loan guarantees is a better way to go.  Having the government pick winners and losers, or set dollar amounts on each of the slop troughs, just opens the door to lobbying, corruption, and mismanagement.  Who gets the money?  How is it determined? Who gets to decide?

Tax cuts are there for everyone.  As I have said many times, to me, many of our problems have been caused by the government.  The government is not the answer.

I was having lunch with a colleague the other day and the conversation turned to the economy. He spoke of some recent analysis of the number of jobs that would be lost if the Big Three failed.  He recounted not just the employees of the auto companies themselves, but the employees of their suppliers, advertising firms that produce car ads, and on and on.  His final tally was well over 1 million jobs lost.  He concluded by saying it would make the current financial crisis a walk in the park.

Getting enough exercise?

Does that mean that we are all going to start walking?  Not that that would be a bad idea, we could all stand to lose some pounds, but for someone who has a 23 mile one-way commute with no option for mass transit, it’s just not going to happen.  So what do we do?  Well, one of several scenarios is going to happen.

Scenario 1:  The Big Three Close Their Doors

If this scenario came about, what would we do?  We would go buy Toyotas, Nissans, Hondas, Volkswagens, etc.  Those companies would have to scale up to fill the void caused by the Big Three closing their doors.  That demand would need people.  So a significant number, but by no means all, of the laid off workers from Detroit would move to North Carolina, Alabama, and other points south, and join these auto companies at their U.S. plants.

Likewise the suppliers would form new alliances to supply these car companies, as would all the other ancillary companies that currently support Detroit.  Would jobs be lost?  Yes.  Would it be anywhere near the number of jobs my friend projected?  No.

Scenario 2: The Big Three Reinvent Themselves

The liberty of the car companies to reinvent themselves is constrained by government regulations.  Surprise!  If the Big Three have any hope of reinventing themselves, they have to have the freedom to do so.  Start by eliminating the CAFE standards.  CAFE, which stands for Corporate Average Fuel Economy, is the mileage standards dictated by the government that the auto companies must comply with or face heavy fines, draining more money from the Big Three’s coffers.  So for every car that the Big Three build that may get 20 mpg, they may have to build and sell perhaps 3 that get 30 mpg, in order to meet the standard.  But what if they can make money on the 20 mpg car, but they lose money on every 30 mpg model?  What if the reason they can’t make money is because of their labor costs per vehicle, their pension costs per vehicle, their health care costs per vehicle, when added up are too high compared to their foreign competitors.  They are basically forced by the government to make an unprofitable product.

Why not abandon the CAFE standards?  Let Detroit build the cars and trucks that they can make at a profit.  Let the foreign manufactures make cars that they can make at a profit, including high mileage cars.  Let the American people have the freedom to choose which they want.  As the price of gasoline climbs as it did, and will again, people will want to buy high mileage cars, hybrids, electric cars, but they will also want to buy SUVs, luxury cars and light trucks.  Why does a particular manufacturer have to produce all kinds?  When has government ever made the right call on what products to produce? (Hint:  think of all the five-year plans and Great Leap Forwards from the Communist world).

Scenario 3: The Government Bails Out the Big Three

The government prints up a bundle of cash, $25 billion or more, gives it to the auto companies and hands the IOU to you and me.  The new Democratic Congress and Administration will toe the line for their backers in the environmental movement and demand higher CAFE standards for the auto companies in the interest of addressing: our dependence on foreign oil; green house gases; and helping consumers.  This will put increased pressure on the Big Three to make more unprofitable products and we will find ourselves back in the same place a few years hence.  More liberties will be vaporized as the government appoints a czar to oversee the auto companies to be sure they are building the right products, that management is not getting paid too much money, and well let’s face it, they would basically be nationalizing the auto companies.  Management talent would dry up, and socialism would make greater inroads into the U.S. economy.

The Best Scenario

The Big Three file for bankruptcy, if that is what they need to do.  The stockholders would probably be wiped out, the management team would be replaced, and this will let them re-negotiate their labor agreements.  Congress and the new Administration realize that people will want to purchase cars with higher mileage as the price of gas climbs regardless of any government requirement.  There is no justifiable reason that any particular auto company has to build a particular car because the government says so.  Achieving this state of enlightenment, Congress repeals the CAFE standards.  With the liberty to manage the company to make a profit rather than meet the constraints of a bevy of interest groups, a more energized management team takes the reins, and returns the Big Three to competitiveness.

Drawing a line in the Sand

If we don’t take a stand here and now, every company that wants a cash cushion will be working the halls of Congress to get their hands on your money.  There is not enough to go around.  In addition, many of the problems we are facing were created by government initiatives.  The mortgage mess was not the result of not enough regulation but by government programs that compelled lenders to give loans to people who could not afford them.  Detroit’s problems are a result of CAFE standards and onerous union contracts.  Since government created many of these problems why do we think that government knows how to fix them?  What we need to do is tell them to back off and let the free market work.