Cash for Clunkers, Good or Bad?

Market value. What is it an how does it work? It works by the laws of supply and demand as far as I know. You make too much or make it poorly and the demand for such an item is not high. Because it’s demand is low, the price has to drop to get rid of the inventory. Likewise, if you have something that is very high quality and/or rare, then the demand for that item is high and therefore the price goes up.

As a side note, this is even true of our labor. If we graduate high school and nothing more, the demand for our labor is minimal because nearly everyone has a diploma. Likewise, if we go to school for 15 years to get a Ph.D in neuro-science then not many people are going to have those skills and therefore we get paid more. Important subject on labor cost, but not the focus of this article.

What I want to talk about is the government program entitled Car Allowance Rebate System (CARS) and also commonly known as the Cash for Clunkers program. As I understand it, if your car is less than 25 years old and gets a low miles per gallon, you can trade it in for $3500 – $4500. Great right? The auto dealers get to sell cars and get cars off their lots. You get a new fuel efficient car that will save the world’s ecosystem. The auto manufacturers will be saved because you are letting them continue to make cars and thus keep all their people employed. And most importantly you will be able to pick up babes more effiently in your new car instead of your clunker.

Perfect! Or is it?

Where is this money coming from? What does the forced trade-in of a worthless pile of junk for $3500 – $4500 do to the market demand price? What about your continued debt? What about all these offers from dealerships/manufacturers where they say if you lose your job you can suspend payments or just give the car back. Then what?

On the surface it addmitedly seems like a great plan. But once I look into it, it doesn’t seem like such a swell idea. More than anything, I don’t care for the continued debt on the individual. Debt is slavery, if you haven’t already noticed this. I also don’t like the idea that tax dollars are being used to buy out garbage and screw up the fair market value of goods in the free-market system. And let’s face it and make this crystal clear, CARS isn’t about getting you a nice new car, it is about a covert bailout for the auto industry.

Our government knows that giving direct bailout money to corporations isn’t flying. Americans don’t want to hear that their tax dollars is being doled out to corporations to do as they please. So, to continue giving money to the corporations, the government has come up with a new way to funnel money to them. Of course, the Socialist trick is to make you think that the government is helping you out, not the corporations.

I want to make it clear that I have nothing against giant corporations – what I do hate is when government meddles, especially heavily, in their affairs and their livelihood. If companies are as mismanaged as the auto industry is… then let them fail. I am interested to see how this debacle ends when people get their new cars and then lose their jobs and then try to sell them off and they can’t because of stipulations in the bill and/or something else likewise stupid.

How Much of Your Money Is The Government Giving Away?

Calculate how much the government has promised to take from your family to bail out financially irresponsible companies. Click the graphic below to go to the site to see how much YOU are paying

If you are unhappy with this, then sign the petition!

Below is a video of Ron Paul schooling the shit out of Ben Bernanke on how the bailout is unconstitutional.

The Fed Creates a Crisis and Hampers the Recovery

by William Anderson (Original here)

When Ron Paul made eliminating the Federal Reserve System a centerpiece of his presidential primary campaign last year, media pundits and others scratched their heads in amazement.  After all, they reasoned, is not the Fed a collection of “conservative, buttoned-down” public officials who are given the mission of providing prosperity?

Indeed, whenever Ben Bernanke and his predecessor, Alan Greenspan, have traveled to Capitol Hill to testify before congressional committees, they are treated as royalty, economic geniuses whose every word is treasured, even if Congress and the press cannot comprehend all of them.  If there is any criticism for these men, it is that they have not inflated enough.

However, in watching one exchange last year between Rep. Paul and Bernanke, I was struck not only by the lack of comprehension of economic logic that Bernanke possessed, but also his utterly wrong view of the actions of the Herbert Hoover administration.  In response to Rep. Paul’s criticism of the numerous Fed-oriented bailouts, Bernanke quoted Andrew Mellon, Hoover’s secretary of the treasury, who had advocated that the government permit weak businesses to go under in order to “purge the rottenness from our system.”

Unfortunately, Bernanke got it wrong.  After quoting Mellon, he assumed that Hoover had followed Mellon’s advice, which clearly is not what happened.  Instead, as Murray Rothbard conclusively pointed out in his classic America’s Great Depression, Hoover ignored Mellon and continued his attempts to bail out failing businesses and implement huge public works projects in order to “increase employment.”

The irony is that Hoover’s policies did “liquidate” the farmers, the bankers, and many others, despite the efforts of the government to keep it from happening.  Unfortunately, the liquidation was much worse than it would have been had Hoover done what his predecessors had done: not intervene into the economy during a downturn.  (President Warren G. Harding, although ridiculed by historians for his relative laissez-faire viewpoints, nonetheless understood the limitations of federal power in economic affairs and refused to intervene when the economy faced a serious downturn in 1921.)

Economic Freedom or Socialist Intervention?

The freedom to fail is an essential part of freedom. Government- provided financial security necessitates relinquishing the very essence of freedom. Last week, the big 3 American automakers came back to Capitol Hill with their hands out to the government. Congress spent this past week debating how much money to give them and what strings should be attached. Though the bailout plan for the auto industry has suffered what I would call a temporary setback in the Senate, other avenues for public funding are being explored through the Federal Reserve and the Treasury Department. I am afraid the American auto industry will soon learn that having billions rain down from Washington will not be the blessing one might expect.

The government, after it subsidizes an industry, tends to become a very demanding benefactor. Politicians may not have any real idea about how to build a car, run a bank, educate a child, heal the sick or build a road, but they are quite adept at using carrots and sticks to manipulate and threaten those who do. Most of the federal control over education, roads, healthcare, and now banking and soon auto manufacturing, is done through money, mandates and conditions. The bailout proposal we were considering would force automobile manufacturers to submit their business plans for the approval of a new federal “car czar.” This bureaucrat would have the authority to approve the automakers’ restructuring plan, monitor implementation of the plan, and even stop certain transactions he determines are inconsistent with the companies’ long-term viability.

One could argue that if billions of taxpayer dollars are going to flow into a failing industry, then representatives of those taxpayers have “bought” a say in how that industry is run – which is precisely why bailouts are such a bad idea for both the industry and the taxpayers. The federal government has neither the competence nor the Constitutional authority to tell private companies, such as automakers, how to run their businesses. I would have thought that failed experiments with central planning and government control of business that caused so much harm in the last century would have taught my colleagues the folly of making businesses obey politicians and bureaucrats instead of heeding the wishes of consumers, employees, and stockholders. But the auto industry is in danger of learning for themselves one of the oldest lessons in politics: he who pays the fiddler calls the tune.

It is not the job of government to sustain business. The government should get out of the way, and instead examine excessive regulations, tax policy and red tape that have been hostile to manufacturing in this country. We should get back on a sustainable economic course in this country, or we are doomed to collapse, as the Soviets did, under the crushing burden of big government and a strangled economy that can no longer pay for it.

(Reblogged. Original here)

UAW is a Problem Folks

I went back to the midwest this Christmas break to be with my family. I grew up in Dayton, Ohio, where a GM plant was 15 minutes away. A place where I saw trains carrying cars and/or car parts every time I crossed the train tracks. You would think that with the recent “hardship” of my home town that they would have something to say about the bailout right.

Of course the subject was broached on the first day I was there. I don’t remember the exact subject at hand, but I think the news was showing the somber sad GM workers taking their tools home because their shop was closing it’s doors. Somewhere during this I chirped in and said, “Good. Chapter 11 is exactly what they need so they can get the Union off their back.” I was immediately rebuked with, “No, that isn’t it!” I didn’t get into it at that point but here is a good article here from Michelle Malkin about how the UAW spent money unwisely and lost money for the benefit of the head-hancho UAW people. Anyways, article below…

No! Don’t Do It!!

It’s like watching a horror movie. No! Don’t do it!! Don’t open the door! You cover your eyes because you don’t want to look. You can’t believe they’re going to do it. But you know they are. Even though it makes no sense, and it’s obvious to everybody watching that it’s the absolute worst thing they could possibly do. They’re going to do it anyway. Why? In a horror movie it’s because it’s in the script. And ultimately, it doesn’t really matter, because it’s all make believe.

But this isn’t a horror movie. It’s real. And it affects every one of us, but we’re powerless to stop it. All we can do is write our Congressmen and say No! Don’t do it!! Don’t give them the bailout money! And that does about as much good as shouting at the movie screen Don’t open the door! Because you know they’re going to do it anyway.

First they said they needed $700 billion to bail out troubled financial institutions. Letters to Congressmen ran 20-1 against the bailout and, last September, Congress voted against the bailout bill. But they kept sweetening the pot with a little pork here and a little pork there until everybody in Congress had enough pork in the bill to lure them into voting for the bailout, in massive disregard of the indignant outcries of the people who elected them.

Then Bernanke and Paulson turned around and said, You know what? We’re not going to use this bailout money the way we originally said we would, because that would have been a really stupid thing to do. (Really? When did you figure that out, Mr. Genius? That’s what all the people writing to their Congressmen were screaming all along.) But, even after acknowledging the plan was hopeless, instead of rescinding the bailout, they decided to spend it on something else. After all, they already had the money; you could hardly expect them to just give it back! — Not that they actually do have the money. But that’s never stopped them from spending it before. Why should it stop them now? — So they voted to spend all this money they don’t actually have, and then decided not to spend it for the purpose for which they swore they needed it. So now they’re going to spend it on something else. They haven’t yet told us what, exactly. Why not? Because they don’t know. They don’t have a plan. But spend it they will.

They’ve put out the word that there’s $700 billion of free money on the table, and they’re going to give it all away. To whom are they going to give it? The criterion to qualify seems to be incompetence. But not just any incompetence, only massive incompetence will do. To qualify for some of this free money, a corporation or institution has to prove they’ve mismanaged their finances on such an unprecedented scale that they’re billions of dollars in the hole and have absolutely no way out, short of a federal bailout.

The three automakers deserve to go out of business. GM and Toyota each sold 9.37 million vehicles last year. Toyota made $17.1 billion. GM lost $38.7 billion. What more needs to be said? But, instead of letting economic Darwinism take it’s course, the government wants to compel the taxpayers to throw our hard-earned money at them so they can flush our money down the drain after their own. This is madness. Just say No! Don’t do it!! Don’t open the door!

And, of course, now everybody else is lining up for bailouts as well. Even city and state governments are getting in line. The economy is bad. An awful lot of businesses are losing money or going bankrupt, and local governments are losing tax revenue because their tax base is losing their jobs. So why not just stick a hose directly into the pockets of all the taxpayers in the country, and siphon out more and more money until the well runs dry, to keep businesses afloat that are unable to make a profit on their own merits? Surely, every business deserves to make money, whether or not they provide good value to their customers and investors. Free market be damned! Move over Rover, let Government take over. It seems the government is determined to prove they can waste even more money faster than the failures they’re bailing out.

Which brings us back to the horror movie. Everybody in the audience can see that disaster lurks behind that door. But the protagonist is about to open it. We’re all sitting on the edge of our seats, gripping the handrests, holding our breaths, and whispering through gritted teeth – No! He hesitates with his hand on the knob. Don’t do it!! (But we know he will.) He twists the knob. Don’t open the door! And then he does ———————–

Reblogged. (Original here)

Top Ten Reasons Against an Auto Bailout

The auto industry sees other industries getting government bailouts, and wonders why not? Others hear the pleas of the Big Three carmakers and wonder, why?

Democratic leaders in Congress crafted a plan to fork over $25 billion to Detroit, above and beyond the $25 billion in loans the government already committed to help the Big Three make more fuel-efficient cars.

But a majority in Congress, along with the Bush administration, balked at the idea. Critics of the bailout plan argue that the real problem for General Motors, Ford, and Chrysler is that their cost structures are bloated, their management doesn’t work, and they can’t make cars of high enough quality to attract American buyers.

Throwing money at the same people who couldn’t get it right wouldn’t solve any of that.

Following are 10 top reasons why a bailout is not a good idea:

1. A bailout would provide money only for short-term survival. It wouldn’t alter carmakers’ flawed business models. GM is running through cash at the rate of $2 billion a month. So $10 billion from the government would give it only five months’ breathing room. Can they turn over their business practices in that period? Please. The temptation would be simply to come back to taxpayers for more.

2. A government handout would allow the Big Three to avoid necessary cost cutting. Because of a strong union, the average GM employee received $70 an hour in combined pay and benefits last year. And it’s not just line workers who are making too much. GM chief executive Richard Wagoner garnered about $24 million a year in 2006 and 2007, while leading his company toward oblivion.

3. Bankruptcy isn’t all bad. It doesn’t mean liquidation. It means taking the painful steps the companies have been unwilling to contemplate to date. The real losers in such a deal are carmakers, equity shareholders and creditors. Bankruptcy would give the automakers the chance to throw out existing employee contracts with their onerous health and pension systems. The unions would be forced to temper their demands if they want the car companies to survive. In the case of GM, it could also dump some of its uncompetitive product lines such as Pontiac and Saturn. Discontinuing five of GM’s eight domestic brands would save the company $5 billion annually.

4. Taxpayer money won’t change the fact that many foreign cars are made better than their U.S. counterparts. Kelley Blue Book announced its top 10 brands for resale value this week, and not one of the Big Three was on the list. Chryslers, for example, keep only 24.2 percent of their sticker price on average after five years. By contrast, Hondas retain 44.5 percent of their value.

5. Bailout funds would help automakers continue their outsourcing of auto jobs to foreign countries, where costs are lower. All of the Big Three have increased the percentage of manufacturing and assembly done overseas in the past year, especially in China and Mexico. In May, Ford agreed to build $3 billion auto plant in suburban Mexico City and upgrade two other Mexican plants, the largest foreign investment in Mexican history.

6. Big Three bankruptcies wouldn’t mean the end of auto industry in the United States. Foreign companies, which already have plants here, could pick up the slack and open new factories. Some 78,000 Americans already work for foreign carmakers, a number likely to rise in the wake of any U.S. automaker demise. The depressed South could benefit particularly from increased production of foreign auto companies.

7. Other industries have survived bankruptcy just fine. Most of the major airlines have spent time in bankruptcy, including United, Continental, Delta, Northwest, and US Airways. Their predicament looked particularly dire after 9/11. But the major carriers made it through. And to the extent that they suffered, low-fare competitors such as Southwest and JetBlue picked up the slack, often offering superior service in addition to cheaper prices.

8. Bailing out the auto industry would only encourage other sectors to beg for government handouts. Remember that the $750 Billion Troubled Assets Relief Program was designed only to assist banks, but now insurance companies and even credit card giant American Express are trying to get in on the action. Homebuilders, who arguably are as strapped as the automakers, could lobby for some of the action.

9. Stockholders deserve no mercy. Some argue that they should be compensated for the fact that GM and Ford’s share prices have hit their lowest levels in decades. But in a free market, stock prices go down as well as up. The automakers’ problems have been clear for years, so investors had plenty of time to get out. As for Chrysler, it’s owned by private equity firm Cerberus, no innocent victim itself.

10. Bailouts have been tried in the auto industry, and they don’t work. In the 1970s, Britain’s Leyland hit the skids, hurt by slipping quality in its vehicles and imports from Germany and Japan. Sound familiar? Leyland, which made MGs, Jaguars and mass-market cars, accounted for 36 percent of the UK market. So the government sunk in $16.5 billion to keep it afloat. The result? Unless you’re a car buff, you’ve probably never heard of Leyland, because it no longer exists.

© 2008 Newsmax. All rights reserved. (Original here)

Congress says: “Quit drooling on us!”

This bailout business has got to stop. It is getting entirely out of control and someone needs to stop it. In this poll here it is said that “70 percent of Republicans, 62 percent of independents, and 55 percent of Democrats said they oppose the [automaker] bailout.” Do you hear that? For nearly every political idealogy, the people think that this automaker bailout is wrong.

This is no longer an even an issue where we can point fingers and say, “Well, the Republicans want this, those greedy capitalist pigs.” Or, “The Democrats want this those yellow-bellied libtards.” No, we the people as a group are saying, we don’t want this. Yet, our Congressional representatives are telling us, “No, no… you people don’t know what is best for you, we do.” What are we to these people, a bunch of drooling 3 year olds?

Where is the outcry? We are no longer a people that are represented by people we elect. No, we are a people who pay taxes to pay for people who couldn’t give two hoots about what we say – even when we write them, call them, and have our media outlets report our disgust.

If there ever was a time where we should be alarmed, it should be now. Our government has run amok and it is telling us to our face that it no longer even cares what we think – because we are not smart enough to understand it. Of course, remember, because we are just stupid drooling 3 year olds to them.

One word for this kind of act – disgusting.

Bailout Cartoon Truth

Why Doesn’t the Media Report the Facts on Where the Blame Belongs on Financial Crisis?

Since the current financial crisis is taking place under a Republican administration it is easy for people to automatically blame Republicans. The media have happily pushed this misconception too. Facts the media ignore are things such as the very groundwork for today’s problems being rooted in legislation created by Jimmy Carter , or that in 2003 President Bush proposed “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis that was blocked by Democrats on party lines. However, the media don’t report these very important and significant facts and so it is no wonder that the GOP takes the brunt of the blame in this recent CNN poll.

A new CNN/Opinion Research Corporation Poll suggests that by a 2-to-1 margin, Americans blame Republicans over Democrats for the financial crisis that has swept across the country the past few weeks — one factor that may have contributed to an apparent increase in Barack Obama’s edge over John McCain in the race for the White House.

In the new survey, released Monday afternoon, 47 percent of registered voters questioned say Republicans are more responsible for the problems currently facing financial institutions and the stock market, with 24 percent saying Democrats are more responsible. One in five of those polled blame both parties equally, and 8 percent say neither party is to blame.

Is it possible that these registered voters are basing their opinions without the full facts? Well, I’m sure the polls would not reflect so favorably for Barack Obama if the American people were properly informed that Fannie and Freddie co-opted over $120,000 to Barack Obama over less than four years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Perhaps the polls wouldn’t reflect so negatively for Senator John McCain if the public were informed that during the same timeframe Obama was pocketing money from these corrupted institutions, John McCain was fighting to reform them.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

Ed Morrissey explains why this is important, and why John McCain needs to push back against the way the media has painted this.

We can play blame games for the next several months and years, but what would be the point? In this case, there is a point, and it couldn’t be more clear or important. We have two candidates running for President who would bring much different styles to executive authority over regulatory responsibility. Barack Obama and his allies took the money and stayed on the sidelines rather than take proactive action to resolve the credit crisis. McCain and his co-sponsors of this bill had the right idea and instincts, but could not get any cooperation from Clinton, Schumer, or Obama.

In simple summary, Republicans including John McCain tried to prevent this crisis back in 2005, and Democrats like Barack Obama chose self interest over doing so. Can we expect the media to report these facts? Of course not. Pesky facts only get in the way of agendas.

(Original here)