Fighting to Preserve Liberty in America
Progressives are a funny group when it comes to investing, and I mean real investing, not the phony code word for spending. If they’re the ones controlling the money and especially if the money is not theirs, then investing is fine. If it will compete with one of their sacred social programs and you will directly benefit from it, then bar the door it’s an out of control casino.
Actual Unemployment vs. Stimulus Sales Pitch
It was a very close race, one of the last decided in the country. Out of 180,000 plus votes the final margin of victory was just under 600 votes. In that election Tim Bishop successfully managed to hide from his record and instead he took advantage of a late Republican primary that was hotly contested and pounced with a campaign of personal attacks on his opponent that was just enough to carry the eight weeks until Election Day. His opponent, Randy Altschuler, wants a rematch and it appears the race will be decidedly different.
I received an e-mail from my congressman touting his efforts to fight outsourcing. In a global economy, it escapes my why this is a good thing and why we need more businessmen in Congress and fewer professional politicians and academics. So I penned the following response.
You don’t have to go too far to find a story about people suffering in these tough economic times, and your heart goes out to them. Some have lost houses, are living in cars, really tough stuff. But there is another story under the surface that reflects common attitudes developed growing up in the nanny state kicked into high gear by Franklin Delano Roosevelt.
In the midst of these tough economic times, instead of getting out of the way by cutting taxes and red tape, the Obama administration is focused on piling on more government programs. Worthless stimulus packages, health care reform, and efforts to push cap and trade have not moved the unemployment needle a whit. They extend unemployment benefits and keep whistling past the graveyard hoping they won’t get swallowed up.
Personal Responsibility
Since the Great Depression and the growth of the nanny state, more and more people have bought into the myth that the government can provide all, and our responsibility is to enjoy the ride. An article in today’s New York Times writes about people benefitting from a government program to keep them in their houses if they face becoming homeless. But there are some subtleties in the hard luck stories that give me pause.
There is the case of Antonio Moore who lost his job as a mortgage consultant that paid him $75,000 per year. He lost his 3-bedroom house with a Jacuzzi and his Lexus sedan. He is now faced with eviction from his apartment. The article doesn’t go into details, but in most cases you don’t lose your house and car if they are all paid for. Again, it doesn’t say if Mr. Moore bought his car new or used, but when I think of a car like a Lexus I usually don’t think that fitting in the budget of someone making $75,000 living in the San Francisco Bay area. Had Mr. Moore purchased a Toyota Corolla instead of the Lexus would he be in better shape? Again, I don’t know the details. I am just wondering.
Then there is the case of Dawn Martin.
Ms. Martin is mortified to be asking for help. She grew up wealthy, with vacations spent on Caribbean cruises. “I had everything I ever wanted,” she says.
She and her husband have a painting business that until 2008 was grossing $100,000 per year, but in this tough economy it dropped to $38,000. That’s hard. But then here is the between the lines story:
Her father has money to help if it really comes down to it, she acknowledges.
“I don’t see him letting his grandkids land on the street,” she says, “but he’d hold it over our heads for a long time. That would lower me to a level that I wouldn’t want to go.”
So she is here, at Samaritan House, filling out the paperwork for the homeless prevention program.
So because of her pride, she turns to your family and mine, through higher taxes to fund a government program, to help her through her rough spot before she will turn to her own family. But don’t worry. When our money is gone, she will turn to Dad. The painting business is picking up so Ms. Martin is confident they will be able to sustain themselves. She is able to take our money to tide her over and still maintain her pride.
But what did Ms. Martin learn about money when “growing up wealthy”? Is Dad responsible for not teaching her or was she a rebellious child who ignored him and perhaps that is why he would hold it over her head for a long time. Will she do something different this time around or hope for another government program?
Perhaps I was a little torqued before reading this story by another in the Wall Street Journal that wrote about the homes underlying the Goldman Sachs fraud case. This article talks about a Ms. Onyeukwu, a 43-year old nursing home assistant with pre-tax income of $9,000 per month. She is having trouble paying her $688,000 mortgage at $5,000 per month which is 56% of her pre-tax income. Her solution? Refinance it with a $786,250 mortgage. But hey, the interest rate is lower so her payments of $5,000 per month will stay the same. What is she thinking? I could be way off base here but I’ll bet she could get a nice apartment for significantly less than $5,000 per month. Sell the house, live within your means.
Government as Savior or Government as Pusher?
This is a tale of two government programs and personal responsibility. We had or still have a massive government program that uses threats, goals, and sleight of hand to help millions achieve the American dream of home ownership. This is not through thrift, like our parents did it, but by the government threatening banks with charges of racism (there’s the race card again) if the banks didn’t lower their lending standards. As the housing market took off, the feeding frenzy intensified and everyone was trying to buy houses or finance them with less and less money down. The Community Reinvestment Act, HUD, Fannie Mae, Freddie Mac were all players in this debacle, but don’t expect our elected officials to wade into that swamp to see what happened. No, they will pile the blame on the banks and Wall Street, while they take Wall Street’s massive donations and do nothing but pass meaningless “reform legislation”. Now we need new government programs to keep these people hanging on. How similar is this to the drug pusher who gives you your first hit for free to get you hooked and dependent on them forever.
What About Personal Responsibility?
Unlike the people in the articles, I believe I have responsibility first and foremost for my actions. If I need help beyond myself I turn to my family and then the charity of my church. I believe many conservatives share my views, which is why on average conservatives give 30% more to charities than liberals. It is why I gave the moniker “Buck a Day Biden” to Vice President Joe Biden because in his financial disclosure forms he reported give only about $300 a year to charity. Here is a man who has been drawing six figure salaries from the taxpayers for years, is a millionaire, but will not reach very deep into his own pocket to help his fellow man, but has no problem reaching into your pocket and mine to create some government program to give your tax dollars to someone else.
There is a man named Dave Ramsey, who was a millionaire in his mid-twenties but later lost it all and declared bankruptcy. He now teaches others how to live without debt and take responsibility for their financial lives. It is a lesson all of us should learn and if we do, I’ll have to find something else to write about that sets me off. But in the mean time we have a lot of work to do. First we have to stop the federal government’s runaway train. Next, we have to shrink government. Then we have to go back to being responsible for ourselves and wean ourselves off the government.
The battle lines are being drawn and the factions are jockeying for position.
The louder the hue and cry against bankruptcy and the need to empty my wallet, the more confident I feel that bankruptcy is the right thing to do. Without fundamental management change, union change, and structural change, no amount of taxpayer funding and bailout upon bailout, will enable the Big Three to crawl off their death bed and once again be giants of American Industry. Bankruptcy is bitter medicine, but without wrenching change that bankruptcy protection can provide, with a trustee making hard decisions and getting concessions from all sides, this patient on life support will die.
I came across this excellent joke on Evolving Excellence that was making the rounds a few years ago, but seems sadly relevant today. As I said it is a few years old, so don’t look too closely at the financials:
A Modern Parable.
A Japanese company ( Toyota ) and an American company (Ford Motors) decided to have a canoe race on the Missouri River Both teams practiced long and hard to reach their peak performance before the race.
On the big day, the Japanese won by a mile.
The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.
Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 7 people steering and 2 people rowing.
Feeling a deeper study was in order; American management hired a consulting company and paid them a large amount of money for a second opinion.
They advised, of course, that too many people were steering the boat, while not enough people were rowing.
Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team’s management structure was totally reorganized to 4 steering supervisors, 2 area steering superintendents and 1 assistant superintendent steering manager.
They also implemented a new performance system that would give the 2 people rowing the boat greater incentive to work harder. It was called the ‘Rowing Team Quality First Program,’ with meetings, dinners and free pens for the rowers. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses. The pension program was trimmed to ‘equal the competition’ and some of the resultant savings were channeled into morale boosting programs and teamwork posters.
The next year the Japanese won by two miles.
Humiliated, the American management laid-off one rower, halted development of a new canoe, sold all the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses.
The next year, try as he might, the lone designated rower was unable to even finish the race (having no paddles,) so he was laid off for unacceptable performance, all canoe equipment was sold and the next year’s racing team was out-sourced to India.
Sadly, the End.
Here’s something else to think about: Ford has spent the last thirty years moving all its factories out of the US , claiming they can’t make money paying American wages. TOYOTA has spent the last thirty years building more than a dozen plants inside the US. The last quarter’s results:
TOYOTA makes 4 billion in profits while Ford racked up 9 billion in losses.
Ford folks are still scratching their heads, and collecting bonuses…
IF THIS WEREN’T SO TRUE IT MIGHT BE FUNNY
It will be interesting to see when the auto executives go back to Washington, will they fly in three separate corporate jets? will they “jetpool”? will they fly first class? will they fly coach? or will they drive one of their excellent products to ask for a bailout? How much trunk space do you need to carry $25 billion? Remember that’s 25,000 million.
About every three years when the labor contracts between the unions and the auto companies come up for renewal, a target company, Ford, GM or Chrysler is typically chosen. The purpose is to threaten a strike on that company while allowing UAW members to keep working at the other two (and still pay union dues), rather than striking against all three.
Here’s my proposal. Since GM seems to be in the worst shape, they should go Chapter 11 right away. Let Ford and Chrysler stand back and watch the result. If it works and GM successfully restructures, you can bet Ford and Chrysler will be scrambling to go Chapter 11 to get their houses in order. If it is a bust, then one of three things can happen. One, they can learn what GM did wrong in the process and perhaps craft a better and maybe even “prepackaged” Chapter 11 filing. Two, they can go back to Washington and try again, but at least they would have a stronger case for why bankruptcy is a bad idea. Three, they can wake up and get all the parties together including management, unions, retirees, suppliers, banks, bondholders, local governments, Congress and make the changes voluntarily that would otherwise be made under a bankruptcy.
What do you think?
I got the phone call around 7:30AM. It was my wife and her voice was shaking, choking back tears. She said she was in an accident and that the truck was totaled. Totaled? I thought to myself, my God, what kind of accident could have totaled a 2 ½ ton, hulking Ford Excursion SUV? Before I could ask the next question, the one I didn’t want to ask, she said, “The girls and I are alright, just some cuts and bruises.” I was able to start breathing again. She began to apologize for the SUV and I gently cut her off. “I don’t care about the truck, as long as you and the girls are okay.” The girls were my two daughters.
I got the location of the accident, briefly told the lead guy in my shop the situation, light on the details which I didn’t have anyway, and jumped in my truck to find them. As I approached the accident scene, I saw an ambulance, with siren blaring and lights flashing, going the opposite way. I called my wife’s cell phone and when I got her I asked, “Did you just pass me in the ambulance?” She said, “Yes, we’re headed to the hospital to be checked out.” So I made a U-Turn to go meet them in the emergency room.
What had happened was that my wife was crossing an intersection when another car blew through the red light. According to one witness it looked like he was going 60 mph, according to another it looked like he was going 100 mph. They said the nearly 19′ long, 2 ½ ton vehicle with a massive V-10 engine that my wife was driving was lifted up in the air, turned 180 degrees and landed on its side. My wife had to kick out the windshield to crawl out and guide our daughters out behind her to safety. Thankfully it didn’t catch fire.
Why the other driver was driving the way he was we never found out. He was pronounced dead at the scene. He was driving a Kia, a small Korean import, and before impact, I’m sure he was getting great gas mileage. He went from leaving a small carbon footprint to leaving no footprints at all.
My wife was exonerated from any responsibility for the accident. She and my daughters were completely innocent. Had Ford been required only to build highly fuel efficient econoboxes, half my family would have been killed that morning. In fact, the driver who was behind my wife said that if she had not been there, he was sure he would be dead, as it would have been him that was hit by the speeding car in her place.
They are alive because I have the liberty, so far, to buy any vehicle that I choose and can afford. The choices are many and I have made many choices through my life. That is primarily because the government has not yet taken away that liberty and demanded what types of vehicles can be built and by whom.
My first car was a Toyota Celica, which I purchased just after graduating from college. It was well made, well equipped, and although a little expensive at $4,700 brand new, I thought it was worth it. That car served me well for 105,000 miles. When it was time for a replacement I bought a Plymouth Sapporo and I really liked it. Unfortunately, someone liked it as much and it was stolen when it had just 9,000 miles on it. It was a Chrysler Corporation car, but under the hood it was Japanese. Still living in the Bronx, I decided to buy something functional but not too attractive. I remember my friend’s rationale for buying a Subaru while living in the city. None of the parts fit in a gypsy cab. My next vehicle was a Toyota Corolla.
When my wife and I married in 1986 she brought to the marriage her Ford Mustang. My Corolla was starting to get tired and my wife was pregnant, so it was time to get a new vehicle. I bought a Ford Probe, with front wheel drive and turbocharged. It was hard to decide if it was American or Japanese. It was sold by Ford, built in the United States by Mazda which is a Japanese company, but Ford owned 25% of Mazda at the time. It made for interesting conversation, but not worth losing any sleep over.
After our second child, the Probe and the Mustang were getting a little cramped. So we said goodbye to the Mustang and hello to a Volvo 740 Turbo Wagon. This was my wife’s dream car, owing somewhat to her Swedish heritage.
Things were going well for us and it was time to replace the Probe. I leased a BMW M Roadster and had more fun behind the wheel of a car than I can remember before or since. We both thoroughly enjoyed tooling down the road with the top down, turning heads as we went. Life was good.
My wife and I had two more children and as they grew, the jump seat in the back of the Volvo was less than optimal. In the winter the heat never seemed to reach back there and in the summer the kids in the back felt like a couple of tomato plants in a hothouse. So it was time for our next vehicle, which for the first time I bought completely on the Internet. It was a Ford Expedition. I had seating for eight and room for some cargo as well, and heat and air conditioning all the way to the back. The kids could each sit comfortably without bumping into each other and to reach out and smack someone next to them took some effort. That vehicle served us well for a couple of years and then as they grew, our needs grew and when it was time for the next move, we got the Excursion, bigger, they didn’t come.
Meanwhile things became a little more challenging for us. When the BMW’s lease was up, back it went. I took over the Volvo for a while until I started a new construction related business and then I took over my father-in-law’s Chevy pick-up truck which he left for my son when he passed away. After a year when the business got more established I put the Chevy aside for my son and the company bought a Ford F-350 Super Duty, dual wheel pickup truck with a diesel engine, which I still drive.
Then came the accident. As soon as we got the insurance money for our totaled vehicle we immediately went out and bought another Excursion, with safety the foremost reason. Ford wasn’t making them anymore so we bought a used one. I wanted my family protected.
When my son moved out freeing up a seat on the “bus” and my wife started selling real estate and gas prices started to climb, we reevaluated the Excursion. The Volvo was gone, and at twelve mpg and my wife driving a lot more, it didn’t make sense. With five of us at home, at worst we could all fit into the pickup truck with its crew cab. So she bought a Volkswagon EOS. The savings on gas would make up for any differences in payments on it. She now had her own convertible and was very happy.
About six months later, my older daughter got her license and wanted a car. She didn’t have much money for purchasing it or for gas so she needed something economical. Her choice, a Volkswagon Jetta.
What’s the point of this stroll down vehicular memory lane? To demonstrate that with liberty we have a great many choices. We also have different needs at different times in our lives. Through a free market I was able to select from a number of vehicles from different manufacturers, from different countries, to find what fit our needs. Those companies decided what to build to suit the market. The cars that I eventually chose, though not done conscientiously at the time, were from each of those manufacturer’s strengths, not their weaknesses. I did not choose an economical car, when I needed one, from one of the Big Three. We did however, choose some of their sporty models (Mustang, Probe) and their trucks (Excursion, Expedition, F-350, Silverado).
The market should tell them what cars to build and build at a profit. Government should not require them to build six or eight cars that they have to sell at a loss for each vehicle they can sell at a profit, to meet some government mandate such as CAFE standards. As the market causes fuel prices to rise, the market will react with increased demand for more fuel efficient cars. We should be able to choose when that works best for us. If we have a distance to commute, we will more inclined to factor fuel efficiency into the equation. However, if we want to travel in luxury two miles to our favorite restaurant, who cares if the car that gets us there only gets 8 mpg? Many families have more than one car for that very reason. Who is some government bureaucrat to tell us what we can choose among?
This Thanksgiving I can sit down with my family, and be thankful that I had that choice, and I can hug each one of them and pray it stays that way.
The conga line for companies with their hands out forms on the left. The next ones bellying up to the slop trough are GM and Chrysler. They need $25 billion to help them through a tough patch or they may go out of business. It is a loan? Is it buying a stake in the company? Is it that thing of which we dare not speak– socialism?
The question is are we, by the continued intervention of the government, managing our way out of a recession and into a full blown depression? For all the warm memories of FDR, the depresion lasted more than twelve years thanks to, “We’re from the government and we’re here to help.” Perhaps it’s time to take our medicine, pull the covers up under our chin, sweat it out, and get back on our feet.
Business, like many things, runs in cycles. There are up cycles and there are down cycles. We can’t eliminate them, they are a necessary part of the process. But just as there is no cure for the common cold, sometimes it is best to let it take its course as soon as possible and be done.
I don’t believe so. It was unfortunately necessary to end the panic. When lenders have no confidence that if they lend they will be paid back, and if they have non-performing assets and they can’t sell them because they don’t know how to price them, the whole system locks up. The system needs a lender of last resort and the only one big enough to step into that role is the government. However, that should be for the least amount of time possible.
The auto industry has had 35 years to figure this out. With the Arab Oil Embargo of 1973, Japanese auto companies made major inroads into the automobile markets. Imagine buying a car that got 20 miles per gallon, rather than 8, was better built, and cost less. Well, that’s what the Japanese companies were offering, but what did Detroit learn? Union contracts too expensive, let’s invest in robots and get rid of the expensive people! GM bought boatloads of robots and later ended up scrapping them. Why? Because the workers weren’t the problem.
Who transformed the Japanese auto industry? An American by the name of W. Edwards Deming. After World War II, Japan’s industry was in shambles. Deming went to help them get their industry back on its feet and taught them about statistics and quality control. They learned their lessons well. They focus on incremental changes every day. If someone sees a problem on the assembly line and takes action to stop the line, he doesn’t get chewed out, he gets applauded.
The Big 3 have had all this time to figure out what they were doing wrong and fix it, but what did they do? During the good times, they just rolled along. If signing a big labor contract kept the peace and kept the factories running, they would buy off the unions. But when the trouble starts, there’s no room to maneuver.
The Japanese saw the need to cut back further on fuel consumption, but they knew there was a limit as far as how much mileage you could squeeze out of a gasoline engine, so they came out with hybrids. Initially they were a novelty, but when gas was headed for $4 per gallon, they we economical. Where was Detroit on this? Lagging behind, of course. Don’t develop a hybrid car until your customers demand it, but by the time they do, they would rather buy the tried and true hybrids being built by Toyota and Honda. Ford promised to produce 250,000 hybrid cars but rescinded that pledge nine months later. Why?
“According to a Ford spokesperson, an internal panel of experts analyzed customer interest in hybrid cars and did not feel that there was enough demand to warrant the expense of building 250,000 hybrids.”
What was the price of a gallon of gas when they made that decision? $2.20, the lowest it had been in ten months. The other half of that article quoted above said, “Toyota remains top hybrid producer.” GM is now placing a very big bet on the Chevy Volt, which will be an electric car scheduled to launch in 2010. Although there is little fanfare, Toyota, Nissan and Mitsubishi are all planning electric cars in the next two years.
So why should the taxpayer be on the hook for the mistakes of the Big 3 auto maker’s management for these past 35 years? Perhaps they should just go into Chapter 11, reorganize and come out as more competitive companies. Why prop them up so that they can stumble along for another 5-10 years until the next downturn and come back to the trough? The stockholders have been electing the boards of directors for these companies for 35 years and buying their stock. The boards have been hiring the management team and providing them with their compensation. The management team has made the product decisions, negotiated the labor agreements, and all the other missteps. Why should American taxpayers have to step up to the plate and bail them out. They got themselves into this mess, let them get themselves out.
But that’s just my opinion.
