There is no such thing as a free lunch.

Come on W, Take a Stand!

It seems that President-elect Barack Obama is asking President Bush to provide further aid to the U.S. automakers.  It seems like the NY Times prefers this route too, because they have painted a bleak short-term picture of what were to happen if any one of the automakers fails. To do this they cited the “Center for Automotive Research”, which has strong connections to organized labor and the auto industry:

The major automakers — G.M., Ford and Chrysler — are each using up their cash at unsustainable rates. The Center for Automotive Research, which is based in Michigan and supported by the industry, released on Election Day an economic analysis of the impact of one or all of them failing. If the Big Three were to collapse, it said, that would cost at least three million jobs, counting autoworkers, suppliers and other businesses dependent on the companies, down to the hot-dog vendors and bartenders next door to their plants.

The center also concluded that the cost to local, state and federal governments would reach to as much as $156.4 billion over three years in lost taxes and higher outlays for things like unemployment and health care assistance. Separately, some economists say the demise of even one of the automakers could tip the current recession toward a depression.

But what about long-term? I hope President Bush will take a stand, and will not increase the aid to the automakers. It is actually the best thing to do to for the long-term future of the US auto industry. One of the Big Three needs to fail for the UAW to get the picture.

November 11, 2008   1 Comment

The Real Problem With Detroit

I’m a little bit incensed that the government is going to loan the U.S. auto industry $25 billion, and possibly more. I have always thought that these are poorly run companies that design lousy cars, or cars that were too big and fuel-inefficient, and as such they deserve to fail. But I also thought that because of the high labor cost brought about by the United Auto Workers (UAW) union, it was difficult for the U.S. auto companies to be as flexible as they needed to be.

I was recently speaking with a friend who argued that the big problem was management, that the executives at these companies were just plain dumb. It was hard to disagree with that, but after doing a little reading, I can’t really place that much blame on the executives. Ford, GM, and Chrysler have been shuffling through executives in recent years – could they really all be dumb?

It’s really a much more complicated issue than that, and it has to do with the UAW and the Corporate Average Fuel Economy (CAFE) standards. Let’s address the UAW. There are basically two auto industries operating in the U.S. There’s one in Detroit which includes GM, Ford, and Chrysler, where the workers are all UAW. Then there’s one in the southern U.S. which includes Honda, Toyota, and Hyundai. Their workers do not belong to a union and work predominantly for less money (although that is not always the case) and no pension benefits.

Now, the CAFE standard basically mandates that your entire fleet of domestic vehicles has a minimum fuel efficiency, or else you pay a fine based on how much you’re over that minimum. As a result of CAFE, the UAW, and low fuel prices, the U.S. automakers were basically forced to make more SUVs and trucks, because those vehicles have much higher margins, and are much more profitable – at least when they’re selling. But, to meet CAFE, the U.S. automakers also had to offer a line of much lower profit-margin fuel-efficient vehicles. In order to keep costs low, for years the companies skimped on styling, materials, and engineering, to the extent that they lose money on each and every fuel-efficient small and mid-size car they sell.

Instead of letting the free-market dictate the winners and losers in the auto industry, the U.S. government intervened, first through CAFE and now through a generous though not unprecedented lending program. The UAW has huge sway in Washington over our political leaders, and they have Barack Obama as an ally. President-elect Obama also supports the Employee Free Choice Act, which will make it easier for auto industry workers in the southern U.S. to unionize. He also wants to raise tariffs on cars imported from South Korea by renegotiating our trade pact with them. I fear the result of all this will be more expensive, lower-quality cars for the masses. But this isn’t going to hurt the rich, just the lower and middle-class.

November 6, 2008   No Comments

Obama’s 95 Percent Myth

I’m watching the third and final Presidential Debate between Barack Obama and John McCain. I’ve heard for the umpteenth time from Senator Obama that he will cut taxes for 95% of the American population. This cannot be true. Almost 40% of Americans have zero tax liability. I repeat, 40% of Americans do not end up paying any taxes and in many cases receive tax refunds. Senator Obama does plan to raise taxes on people making more than $250,000 a year, and balance that with refundable tax credits (not deductions, credits) for people on the low end of the pay scale. What’s important about a refundable tax credit is that once that money is used to offset taxes, the remainder ends up in the person’s pocket. Senator Obama is not simply going to increase taxes on the rich and decrease taxes on the poor – he’s going to increase taxes on the rich, and give that money to the poor. That’s income redistribution, and I vigorously oppose it.

October 15, 2008   No Comments

Obama and Ayers

Here’s what I think about Bill Ayers and his relationship with Barack Obama. I know that Ayers was one of the founding members of the Weatherman organization, which bombed some U.S. government buildings. I don’t think Ayers himself committed murder, but if those bombs killed people I don’t think he would have cared much. And I don’t know how this guy is not in jail right now. I also know that after charges were dropped and he turned himself in, he returned to school and later founded an educational organization in Chicago.

I know that Barack Obama was the Chairman of the Board of that organization. I also know that Obama and Ayers served together on the board of one another organization. I think Obama knew Ayers sort of the way that co-workers know eachother, but I wouldn’t go so far as to call them friends. I don’t think they spent any time together outside of these organizations, but they did work together. To what extent? Ayers and Obama probably sat together at a few dozen meetings over the course of a decade or so, and probably exchanged some work-related emails (or memos) related to the organizations. One such email might have looked like this:

Hey Bill,

I’m just putting together that quarterly presentation for the trustees, and was wondering if you were done with your report. Please try to get that to me by tomorrow at the latest.



I think Obama was happy to have these board positions, and probably didn’t want to make any waves by alienating another board member. I think Ayers liked Obama, saw that he had potential in politics and probably helped him to get his political career started, likely by hosting some sort of gathering at Ayers’s own house. I think Obama was probably a little wary of Ayers’s past, but since Ayers was such a fixture in local Democratic politics and non-profit circles in Chicago and could help Obama’s career, he didn’t reject that help.

I think the Republicans are justified in questioning Obama’s association with Ayers. When I read about some of the things that Ayers and the Weathermen did, I wonder why Obama didn’t just refuse to work with this guy. Or quit. It’s a legitimate concern because it raises question about Obama’s character. If I found out that someone in my group at work previously bombed some government buildings, even 40 years ago, would I continue to work with that person? Probably not. I don’t know if I would quit my job, but I would probably refuse to work with that person and I think most people of good character would do the same.

But I cringe when I hear some pundits on the right clearly overstate the closeness of Ayers and Obama’s relationship. They just don’t have enough proof to draw the conclusion that they are great friends, to name an example. I think there is so much to go on already, that any exaggeration of the relationship is unnecessary and only backfires because it plays into the other side’s hands.

I also cringe when I read articles like this one from Gail Collins. Collins, apparently an aspiring comedian, is so smug in her characterization of the issue that it makes my blood boil. I think people in the free world are a little sensitive right now when it comes to terrorism, and they might be concerned about the character of a Presidential candidate who previously chose to work with a former domestic terrorist. Her opinion piece demeans anyone who has such concerns.

I’ll probably vote for Obama anyway. I think he’s way too liberal, but he’s certainly the more cerebral candidate and I think he does have a decent sense of fiscal responsibility. My taxes are going to go up a bit, but he’ll bring our troops home and I think he’s the best equipped to handle a crisis. And I like him. But his relationship with Ayers does give me pause, and I think it is perfectly all right for Republicans to keep bringing it up.

October 9, 2008   No Comments

Could Obama Pick a Republican?

Barack Obama and Chuck Hagel

Source: Barack Obama on Flickr

It’s rumored that Barack Obama will announce his running mate within the week. According to the Intrade Prediction Market, the leading contender is Joe Biden, the senior Senator from Delaware. A contract for Joe Biden as the Democratic Vice Presidential nominee is currently trading at 30.90 (for those not familiar with prediction markets, that number is essentially the probability in percentage terms, set by the market, that Joe Biden will be the nominee). But I don’t actually like Biden for the job. According to the National Journal 2007 Vote Ratings, he is the third-most liberal Senator in the country. Barack Obama tops the list as the most liberal Senator. I think by choosing Biden as his running mate, Obama will reinforce his liberal voting record, which will make it hard for him to run as a centrist and capture a substantial portion of independent voters.

If Obama really wants to change the politics in Washington, he should seriously consider picking a Republican as his running mate. I believe that the most compelling case can be made for Chuck Hagel, the senior Senator from Nebraska (an Intrade contract for Hagel is currently trading at 5.10). Hagel is apparently a good friend of Obama, and he has been mentioned as a likely cabinet member in an Obama administration. Hagel worked on Ronald Reagan’s campaign for California governor, and served in the Reagan administration as the Deputy Administrator of Veteran Affairs. He is a Vietnam War Veteran, Purple Heart receipient, and a very successful businessman. He has served on the Senate Committee on Foreign Relations, and the Committee on Banking, Housing, and Urban Affairs. He has been highly critical of the Bush administration and its handling of the Iraq war, and he supports a timetable for U.S. troop withdrawal. He is also known for working with Democrats in the Senate, as he did with Ted Kennedy on the Immigration Reform Act of 2007. Of course, Hagel is a conservative and has large differences with Obama when it comes to social litmus test issues such as abortion, affirmative action, and the death penalty. Maybe it’s a long shot, but if Barack Obama wants to solve some of our country’s real problems over the next four years or more, he needs to look past those issues. Choosing a Republican as his running mate, especially Chuck Hagel, will signify to Americans that he is not your typical liberal Democratic candidate, and that he is truly serious about reaching across the aisle to get things done.

August 18, 2008   3 Comments