Americanly Yours

The American People do not want the auto industry to be bailed out. According to a poll conducted by CNN, 61% of Americans surveyed are absolutely against any federal bailout of the American auto industry. Additionally, the majority of voters in every single region of the country are opposed to these bailouts, including 53% of people in the Midwest (these are the people most likely to be affected by any auto industry bankruptcies). 70 percent of Democrats, 62 percent of Independents, and 55 percent of Democrats are opposed to these bailouts. Simply put, this is an issue on which there is an overwhelming amount of agreement. The American people do not want to see their money wasted on bailing out failing automakers.

Chrysler is a privately owned company which is 80% owned by Cerberus Capital Management and 20% owned by Diamler AG. Both of these companies have billions of dollars in cash on hand, yet the parent companies of Chrysler have refused to inject more of their own money into their failing subsidiary. If, as the automakers are claiming that they only need money to temporarily get them through an organization process, why wont the owners of these companies temporarily inject the money into the companies? Probably because they know that it is a bad investment and that they are not likely to receive their money back. If the owners of Chrysler are unwilling to put their own money into Chrysler, why should the American people be FORCED AGAINST OUR WILL into spending OUR money on a bailout? Additionally, the Ford family has billions of dollars in personal assets. If they want to save their company, maybe they should use their money.

Speaking of Ford, of the Big 3 Automakers, Ford is the only one not in horrible shape. Since taking over two years ago, CEO Alan Mulally has begun to implement a vast turn around plan called “The Way Forward.” This plan has been relatively successful, and has already resulted in billions of dollars in cost savings, and will continue to help the company. As a result, Ford is the only American automaker not in immediate risk of collapsing. According to company reports, Ford expects to turn a profit in 2011, while GM and Chrysler haven’t bothered to give the American public any timetable for when they will be able to return to profitability. Both GM and Chrysler are said to be within weeks of collapse, and GM has already hired a team of bankruptcy lawyers. By bailing out GM and Chrysler, the government could be hurting Ford’s prospects of recovery.

Congress, President Bush, and President-Elect Obama should respect the wishes of the American People and allow these automakers to fail—or succeed on their own.

Americanly yours,

Phred Barnet

I just saw a report on CNBC that the TARP program (the government bailout of banks that resulted in government ownership of banks) has already lost the government 37% of its investment.  Remember, this was the program that was supposed to be profitable for the government and it was said that this program would return nice profits to the taxpayers.  Instead, the government has lost 37% of the money that it has invested so far.  I am not surprised.  The government (against the wishes of the public) invested money it didn’t have in companies that are failing—can anyone really be surprised that the loss is already so large?

On another note, I am very very very busy studying for finals and writing massive essays for grad school.  I will not be able to regularly update this site until December 15th.  Expect regular updates after that.

Americanly Yours,

Phred Barnet

I came across this piece of news yesterday.  The Intercollegiate Studies Institute put together a quiz and tested the American public and elected officials.  The quiz covers basic American history, economics, and civics.  The American public scored an appalling 49% on the 33 question quiz.  That seemed really bad, until I learned that the average score of an elected official was a 44% (5 points lower than the National average)!  The conclusion here is simple:  Americans are dumb, but our government is even dumber.

I got all 33 questions correct.  What about you?

http://www.americancivicliteracy.org/resources/quiz.aspx

If you havent taken the quiz yet, don’t read on.  If you have, then check out these examples of the stupidity of our elected officials (taken from the quiz’s website).  I think the first one is the most shocking!

In each of the following areas, for example, officeholders do more poorly than non-officeholders:

• Seventy-nine percent of those who have been elected to government office do not know the Bill of Rights expressly prohibits establishing an official religion for the U.S.
• Thirty percent do not know that “life, liberty, and the pursuit of happiness” are the inalienable rights referred to in the Declaration of Independence.
• Twenty-seven percent cannot name even one right or freedom guaranteed by the First Amendment.
• Forty-three percent do not know what the Electoral College does. One in five thinks it either “trains those aspiring for higher political office” or “was established to supervise the first televised presidential debates.”
• Fifty-four percent do not know the Constitution gives Congress the power to declare war. Thirty-nine percent think that power belongs to the president, and 10% think it belongs to the Joint Chiefs of Staff.
• Only 32% can properly define the free enterprise system, and only 41% can identify business profit as “revenue minus expenses.”

Americany Yours,

Phred Barnet

There has been lots of talk about an auto industry bailout. Apparently GM and Chrysler are both in imminent danger of collapse, while Ford has enough money to last through 2009, and claims that it will be profitable in 2010. Quite a few members of Congress have been floating several plans to bailout the “Big 3” US automakers, including a plan that would have the government take ownership stakes in the 3 companies (which is interesting because the combined market value of the 3 companies is less than the $25 billion that the government wants to inject into the companies) and appoint a “czar” to run them.

Sure, we could bailout these 3 large, iconic American companies. The rationale behind the bailout is that it could save a lot of American jobs. Yet, with the possible exception of Ford, I see little chance that any of the 3 companies will be able to completely turn around in the future. Instead, I see continued plant closings and lay-offs in the US along with continued losses. I think that bailing out GM, Chrysler, and Ford will just prolong the bleeding. The truth is that even if the bailout is a huge success and the companies survive, the Big 3 automakers will still close down all (or nearly all) of their American plants. The proponents of the bailout argue that the bailout is necessary to save American manufacturing jobs, but in the end, this will still result in the job losses that the proponents of the bailout are seeking to avoid. True, if the bailout works these cuts will come over the next 5-10 years, rather than all at once, but nevertheless they will still come. It seems to me that this type of bailout will end up subsidizing companies for cutting American jobs, rather than creating jobs.

For the record I oppose bailouts, but if there has to be a bailout, I have a better idea. Rather than subsidize 3 large automakers who have done nothing but cut American jobs and hemorrhage money for the past decade, we could subsidize 3 profitable automakers who in the past decade have greatly expanded their employment of American workers while earning large profits. I am talking of course about Toyota, Honda and Nissan.

You can argue that these companies are not “American” companies. This is true, these companies are headquartered in Japan, yet they do employ many American workers. Ford is headquartered in America, but I often wonder if there is anything besides that which makes it an American company. For example, I drive a Ford Fusion (which I love). My car was designed by Japanese engineers and built in Mexico with Chinese parts. I don’t really know what makes it an American car. If you buy a new Toyota Camry you will find that it was built in Kentucky. Japanese automakers also increasingly use American made auto parts in their cars. From 2000 to 2006, Japanese automakers’ purchases of American parts increased 53% to over $48 billion. And while the American Big 3 has been racing to close down its plants and produce its cars outside of the US, 63% of Japanese cars purchased in the United States in 2007 were manufactured in America.

Between 2004 and 2006, Toyota, Honda, and Nissan have created 4,715 jobs, increasing their employment of American workers by over 8% to over 63,000 workers, while Ford, Chrysler, and GM’s American workforce was cut by 23,264 jobs—cutting over 12% of their American workforce. [[Note, these figures were really hard to find, and the American Big 3 cut an additional 30,000 employees in 2007, bringing the total down to just over 129,000, however I could not find any statistics for the Japanese Big 3 for 2007.]] In that same time span, Ford, Chrysler, and GM have lost billions of dollars, while Toyota, Honda, and Nissan have made billions of dollars. Simply put, the Japanese Big 3 has produced much better results. The Big 3 Japanese companies clearly have better business models, and they have created thousands of jobs while Detroit’s Big 3 has cut thousands of jobs. Loaning the bailout money to the Japanese companies rather than to the American Big 3 will create necessary jobs which will most likely be filled by the highly skilled workers who will lose their jobs when the American Big 3 collapses.

Also, which Big 3 do you think ahs a better chance of paying back a $25 billion loan, bloody Detroit, or profitable Japan? And, if the government has to take an ownership stake in 3 automakers, I would rather it take ownership stakes in Toyota, Honda, and Nissan than GM, Ford, and Chrysler.

Besides producing technological innovations, Japan’s Big 3 is also the industry leader in producing environmentally friendly cars. The Toyota Prius and the Honda Civic Hybrid are great examples of popular hybrid vehicles which Detroit just cannot produce.

It is not just American automakers who are in “need” of a bailout. European automakers have asked their governments for a $40 billion Euro ($50 billion) bailout. Even China is now in the process of bailing out their automakers. The Japanese automakers are the only automakers in the world that are not in need of a bailout. Why fight against the inevitable? The whole world knows that Japanese car companies can make cars better and more profitable than any other group of automakers on the planet. Rather than extending the miserable lives of failing car companies, we should euthanize them and embrace the success of the Japanese Big 3. When companies can efficiently produce a great product and sell it at an inexpensive price, we all win, regardless of where the companies are headquartered.

Obviously, these companies are so well run that they don’t need a bailout. The auto industry in America is still strong; it just so happens that the strong producers of cars in America happen to be Japanese. So what? America is a Nation of immigrants. Maybe giving Honda, Toyota, and Nissan low interest loans to expand American factories could convince them to immigrate to America and move their headquarters to Detroit.

We should reward innovation and punish sluggishness. Thanks to Honda’s innovations, a Honda factory in East Liberty, Ohio can switch from manufacturing Honda Civics to making Honda CR-V’s in only 5 minutes. However, a Ford SUV factory in Michigan is switching its production from SUV’s to small cars, but because of a lack of innovation at Ford, the factory is shutting down for 13 months to retool, which is costing the company $75 million.

Bailing out Detroit will subsidize bad behavior, similar to giving a juvenile delinquent child a raise in allowance in the hopes that it will somehow change his behavior (if you think that will work, ask my parents). The government should reward good behavior, not bad behavior. Rather than raising the allowance of the bad kid, why not reward the good child? Wouldn’t this be a valuable lesson, not only to the “children” involved, but also to all the other children out there (airlines). “Bailing out” the Japanese Big 3 will lead to the creation of American jobs, increased research, and increased profits for these companies. Bailing out Detroit will only extend the pain and slow bleeding.

Americanly Yours,

Phred Barnet

In the election that just ended, Barack Obama was called a socialist by his opponents.  To anyone who understands the true definition of socialism, Obama could not be considered a socialist (maybe a collectivist, but definitely not a socialist).  Socialism by definition is a system in which the government owns and controls the factors of production in the name of the common good.

Well, in the past 24 hours, Obama has announced his plan to help the Big 3 American automakers. His plan includes a $50 billion loan to the automakers. But, the plan doesn’t end there. In a similar manner to the bank bailout plan recently passed against the wishes of the American people, this plan also requires the federal government to take ownership stakes in Ford, Chrysler, and General Motors. Additionally, Obama wants to appoint an “Oversight Czar” to “oversee the companies” thereby giving the federal government both ownership and control of three massive American corporations. Of course all of this is being done in the name of the “common good.”

The $50 billion price tag is most likely a large underestimate of the amount of money it will take to save these automakers. The government doesn’t exactly have the best history of predicting the total costs necessary in an intervention. Some recent examples: the $152 billion stimulus package passed earlier this year which was supposed to save us from a recession, the $250 billion bailout plan which quickly ballooned into a $700 billion bailout package, and of course the $85 bailout for AIG in September which has already cost $143.7 and could cost much more. When $50 billion turns out not be enough for the automakers, the government will surely throw more money at the problem to “protect” its investment as it did with AIG. And, the automakers will need more money too. In 2010, several state-owned Chinese car companies intend to start marketing very inexpensive Chinese cars in America.

This will not stop with the automakers either. If there is one industry in this country worse off than the automakers, it is the airline industry. The airlines have been hemorrhaging money for years and now that the economy is bad, companies are laying off workers and cutting corporate travel, while regular Americans are also cutting back on flying. The airline industry will be the next to go and its lobbyists will swarm on Congress and demand the same favors that were given to the financial industry and the automakers. Then, the government will also own our airlines in addition to our banks and our automakers.

To me, that is a definite. The only maybe is how far this will go. When no new airplanes are being built due to the collapse of the airline industry, what will become of Boeing? Their bottom line will be hurt, and considering that they are a major defense contractor, would the government deem them to be too important to fail? If the automakers and airlines are suffering then of course the steel industry suffers. Will the government then take control of our steel giants like US Steel and Nucor in order to “protect” them from domestic problems and foreign competition?

Now, I am not opposed to helping the automakers. If a loan is absolutely needed, and if the government believes that there is a reasonable chance that it can get its money back, then the government definitely should help the automakers, but under no circumstances should it buy the automakers and take control of them.

This isn’t all about business either. The Democratic Congress is considering passing laws to reinstate the “Fairness Doctrine” to the radio. The Fairness Rule was established in the late 1940’s to guarantee that time would be given to both sides of an issue on the radio. The courts gradually struck down more and more of this doctrine until 1986 when it was completely abolished. Democrats, lead by New Mexico Senator Jeff Bingaman want to reinstate the rule which would effectively force conservative radio stations to place just as many hours of liberal talk radio on their stations as conservative talk radio (to me this is like requiring Christian radio stations to broadcast Jewish or Muslim programming). Of course, there are no Democratic Senators currently pushing legislation that would require CNN, MSNBC, NBC, and CBS time to conservatives or to require FOX News to give time to liberals.

We as a People voted for change last week. Change can be good, yet this is not the change that we need. We must not abandon the free market and free thinking ideals which brought us from a small, weak country of 13 states into a great Nation. If we are to continue to be a great Nation and a leader among other nations, we must not walk down this road.

Americanly Yours,

Phred Barnet