Best option to avoid a massive federal bailout

Sounds good to me:


Give States a Way to Go Bankrupt

[...] In the decades since the constitutionality of municipal bankruptcy was affirmed by the Supreme Court, the most serious obstacle in practice has been the rule that only insolvent municipalities can file for bankruptcy. Because a struggling city theoretically can raise taxes or slash programs, it often isn’t clear if even the most bedraggled city needs to be in bankruptcy. In 1991, a court concluded that Bridgeport, Connecticut—which wasn’t anyone’s idea of a healthy city—had not demonstrated that it was insolvent, and rejected Bridgeport’s bankruptcy filing. To avoid this risk, without making bankruptcy too easy for states, Congress would do well to consider a somewhat softer entrance requirement if it enacts bankruptcy-for-states legislation. Current corporate bankruptcy does not require a showing of insolvency, and the new financial reforms allow regulators to take over large banks that are “in default or in danger of default.” Although these reforms are in other ways deeply flawed, the “in default or danger of default” standard would work well for states.

Given that a new bankruptcy chapter for states would clearly be constitutional, and the entrance hurdles could easily be adjusted, the ultimate question is whether its benefits would be great enough to justify the innovation. They would, although a bankruptcy chapter for states would not be nearly so smooth as an ordinary corporate reorganization. When a business files for bankruptcy, the threat to liquidate the company’s assets—that is, to simply sell everything in pieces and shut the business down—has the same effect on creditors that Samuel Johnson attributed to the hangman’s noose: It concentrates the mind wonderfully. Because creditors are likely to be worse off if the company is simply liquidated, they tend to be more flexible, and more willing to renegotiate what they are owed.

One can imagine something like a liquidation sale for cities and even states. Indeed, in the early 1990s, professors Michael McConnell and Randal Picker proposed that Congress amend the existing municipal bankruptcy chapter to allow just that. They argued that many of a city’s commercial, nongovernmental properties could be sold in a municipal bankruptcy, and the proceeds simply distributed to creditors. (They also suggested that municipal boundaries could be dissolved, with a bankrupt city being absorbed by the surrounding county.) Although California has taken small steps in this direction on its own—it recently contracted to sell the San Francisco Civic Center and other public buildings to a Texas investment company for $2.33 billion—it seems unlikely that Congress would give bankruptcy judges the power to compel sales in bankruptcy. Nor could it do so with respect to any property that serves a public purpose. Liquidation simply isn’t a realistic option for a city or state. (The same limitation applies to nation-states like Ireland and Greece, whose financial travails have reinvigorated debate about whether there should be a bankruptcy-like international framework for countries.)

With liquidation off the table, the effectiveness of state bankruptcy would depend a great deal on the state’s willingness to play hardball with its creditors. The principal candidates for restructuring in states like California or Illinois are the state’s bonds and its contracts with public employees. Ideally, bondholders would vote to approve a restructuring. But if they dug in their heels and resisted proposals to restructure their debt, a bankruptcy chapter for states should allow (as municipal bankruptcy already does) for a proposal to be “crammed down” over their objections under certain circumstances. This eliminates the hold-out problem—the refusal of a minority of bondholders to agree to the terms of a restructuring—that can foil efforts to restructure outside of bankruptcy.

The bankruptcy law should give debtor states even more power to rewrite union contracts, if the court approves. Interestingly, it is easier to renegotiate a burdensome union contract in municipal bankruptcy than in a corporate bankruptcy. Vallejo has used this power in its bankruptcy case, which was filed in 2008. It is possible that a state could even renegotiate existing pension benefits in bankruptcy, although this is much less clear and less likely than the power to renegotiate an ongoing contract.

Whether states like California or Illinois would fully take advantage of such powers is of course open to question. During his recent campaign, Governor-elect Jerry Brown promised to take a hard look at California’s out-of-control pension costs. But it is difficult to imagine Brown taking a tough stance with the unions. Even in his reincarnation as a sensible politician who has left his Governor Moonbeam days behind, Brown depends heavily on labor support. He doesn’t seem likely to bring the gravy train to an end, or even to slow it down much.

But as Voltaire warned, we mustn’t make the perfect the enemy of the good. The risk that politicians won’t make as much use of their bankruptcy options as they should does not mean that bankruptcy is a bad idea. For all its limitations, it would give a resolute state a new, more effective tool for paring down the state’s debts. And many a governor might find alluring the possibility of shifting blame for a new frugality onto a bankruptcy court that “made him do it” rather than take direct responsibility for tough choices.

This brings us back to the issue of federal bailouts. When taxpayer-funded bailouts are inserted into the equation, the case for a new bankruptcy chapter becomes overwhelming. And it’s a case for Congress to move now on the creation of a state bankruptcy law.

With the presidential election just two years away, the pressure to bail out California, Illinois, and perhaps other states is about to become irresistible. As we learned in 2008 and 2009, it is impossible to stop a bailout once the government decides to go this route. [...]

I think we NEED a state bankruptcy law. I don't see another viable alternative. Bailouts just increase debt without solving the problem.

It was hard to chose excerpts, it's worth reading the whole article. There are many examples given that back up what is being said.


Also see:

Government Employee Unions are Ruining Us
     

Government Employee Unions are Ruining Us

SOMEBODY'S GOTTA SAY IT ... GOVT. EMPLOYEE UNIONS ARE THE ENEMY

Here come the howls of outrage. "You are anti-union." Well, you're only partially right. I'm anti-government employee union. I don't have a particular problem with the legality of private-sector unions, so long as: (1) Employees vote by secret ballot as to whether or not the union will be formed; and (2) No employee should ever be forced to join a union nor should they be forced to pay dues to any union.

Government employee unions? Those are a completely different matter. These are people who spend millions of dollars to elect their bosses and then demand raises, pension plans and other benefits of those very bosses with threats that they will fire them if they refuse to go along. The taxpayers then have to pay for these bloated salaries, pensions and benefits. If more money is needed to pay the union tab, the unions then start spending millions on campaigns to raise taxes. It was government labor unions that were the primary financiers of the recent campaign to initiate a state income tax in the State of Washington. Why? The state needed the money to fund their classy ride.

It was John F. Kennedy who gave federal government employee unions the right to engage in collective bargaining. This was done not through legislation, but through an executive order. Franklin D. Roosevelt campaigned federal employee unions ... Kennedy presented this wonderful gift to the American taxpayer.

Here's something the Republicans can address. They need to begin making the case immediately for decertifying all federal government employee unions. For decades the primary advantage of being a federal employee was relative job security. Now these people make more than their counterparts in the private sector, they have better pension plans and better benefits ... and, as I said, they elect their own bosses. It needs to end.

Government employee unions are destroying California, and are about to do the same to the rest of the country:

AND THEN THERE'S CALIFORNIA

Perhaps more so than any other state, California's financial troubles can be placed at the doorsteps of California's government employee unions. In California unionized prison guards can earn over $100,000 a years. The unions are clearly bankrupting the state, and they show no sign of slowing down. And just who was it that gave California government employees the right to engage in collective bargaining? Why .. that would be none other than Jerry Brown when he was governor the last time. And who did the dumb mass voters of California just put back into the governor's office? Again ... Jerry Brown. Businesses and high-achieving individuals are bailing out of California right and left. Can't blame them.

It's just this simple ... government employee unions are at war with the taxpayers. The unions realize this ... the taxpayers don't seem to. Helluva way to fight a war.

Oh ... by the way. You do know which side The Community Organizer is on, don't you?

California and other profligate states are failing due to government employee unions strangling them. We must NOT bail them out:

Smash the Union Thugocracy
Republicans must not bailout profligate states nor the unions behind them.

One of the first orders of business in the next Republican-controlled House of Representatives will be the demand for bailouts of states that have been especially profligate: California, New York, Michigan, Illinois, and Connecticut. Throughout 2009 and 2010, these states stayed above water with repeated infusions of federal cash. These one-shot stimulus payments must be repeated each year. They are all non-recurring expenditures requiring separate annual appropriations.

The Republican House must say no and hold the line, stopping this raid on the federal Treasury. The cry in the caucus must ring loud: “No More Bailouts.”

But, as the Republicans demand fiscal discipline and refuse to make the citizens of other, more responsible states subsidize California and New York’s wayward finances, we need to focus on the union power that has forced states, localities, and school boards to raise taxes, borrow money, and — ultimately — depend on federal bailouts.

These unions have forced contracts on their states, localities, and school boards which provide for ever higher wages, benefits, and pensions. Even now, teachers are on strike in a suburb of Pittsburgh because they feel a 4.5 percent annual wage increase is inadequate.

The House must create a federal bankruptcy procedure for states that cannot make ends meet requiring — as in corporate bankruptcies — that state governments abrogate all their union contracts. The new state bankruptcy procedure should offer all states — and through them, their localities, counties, and school boards — the ability to reorganize their finances free of the demands of their union agreements.

This measure will return our state and local governments to the sovereignty of the people and take them away from the “thugocracy” of public-employee unions.

When states such as California and New York come to Washington begging for relief, they will threaten us with the closure of their schools and the release of their prison inmates if we deny them subsidies. Liberals and President Obama will try to portray the battle as schoolchildren versus niggardly Republican legislators.

But the real fight will be between schoolchildren and citizens on the one hand and unions on the other. The House must shape the issue so that it exposes the real cause of the state shortfalls: The excessive agreements public employee unions have won over the years.

The unions are about to fall prey to what Margaret Thatcher identified as the terminal drawback of socialism: Eventually, you run out of other people’s money.

Such an approach will also have a larger political impact. [...]

The article goes on to describe how public-employee unions used their tremendous power to in the recent election. The Democrats they elect are answerable to the government employee unions, not the taxpayers who have to pay the bills. We are becoming slaves to government employees.

The people of the Obama administration like to talk at length about "greedy" businesses. What about the "greedy" government unions, who are destroying us? This abuse MUST come to and end.

States that want bailouts, should be forced to declare bankruptcy, and dissolve their government employee unions. Those unions would first be given a chance to work with their state governments, to balance their budgets and avoid bankruptcy. If the unions refuse, let them be dissolved. Before they destroy us and themselves by collapsing our currency with debts.
     

The Fannie and Freddie Question

In a previous post, I mentioned that Fannie and Freddie were costing taxpayers about $7 billion dollars per month. Is it time for them to go? A good case can be made for it:

Say Goodbye to Fannie and Freddie

[...] Fannie and Freddie had a license to print money. They could borrow at an interest rate only a bit over the Treasury rate and then accumulate large portfolios of mortgages and mortgage-backed securities earning the market rate. What a deal — borrow at the low rate, invest at a higher one, hold little capital and let the federal government bear the risk! Investors enjoyed high returns, and management enjoyed high salaries. Incidentally, politicians also got a steady flow of campaign contributions from the companies’ executives.

Fannie and Freddie’s risky policies led to their near collapse; in September 2008, the federal government brought them under federal conservatorship. Fannie and Freddie have cost taxpayers about $150 billion so far.

On Tuesday, the Obama administration plans to hold a conference to address the question of what to do with the two companies. Clearly, it would be an inexcusable mistake to reconstitute them as private companies in anything close to their prior form. Some people have suggested recasting them as a single new “Fan-Fred agency” that would continue to securitize and guarantee home mortgages. It’s true that Fannie and Freddie played an important role in developing the market for mortgage-backed securities. But they have completed that work, and they should not be preserved in any form. They should be thanked for their successes and gracefully retired.

Can the home mortgage market stand on its own, without support from federally sponsored mortgage companies? Experience tells us that the answer is an unambiguous yes. [...]

Read the whole thing for the nitty gritty details. There are many reasons why they should not continue, but this administration has been supporting a lot of things that should have died a natural death. We shall have to wait until Tuesday to see what they will do. Since Fannie and Freddie are government creations, and Big Government is growing not shrinking, I'm not confident that they will be retired. If they are kept, the question will be: "At what cost?"
     

Which one do you believe?

Here is an advertisement from GM, spinning their BS:




Here is a version where someone dubbed it over with a new soundtrack, which explains what REALLY happened:



H.T. to Maynard at TammyBruce.com.

I'll bet by Monday, the 2nd video is going to get yanked off of Youtube.


Also see:

Ford: The way to run an Automobile Company

Let the Automakers Fail - and be Reborn

     

Beware of Greeks bearing Red Flags

Greeks protest austerity cuts at May Day rally

Athens, Greece (CNN) -- Greek protesters clashed with police who fired tear gas during the annual May Day rally on Saturday in Athens, where thousands of people gathering for the event seethed over government belt-tightening plans to deal with the country's debt problems.

Waving red flags, the crowd at times surged toward the line of police, who wore helmets and carried riot shields. The police pushed them back each time.

[...]

About 12,000 people were protesting in Athens, and rallies were also taking place in the northern city of Thessaloniki, the spokesman said. Protesters there smashed two ATMs, the glass frontage of a bank, and a car, but no one was arrested or being questioned, the spokesman said.

The annual May Day rally has taken on an angry tone this year as the Greek government prepares to enact austerity measures to cap its large deficit and massive debt.

The package of measures was expected to be revealed Sunday. It is likely to include cuts in civil servants' salaries, pay freezes, reductions in pension payments, changes to tax rates, and increases in the value-added tax consumers pay on purchases, Ilias Iliopoulos, the general secretary of the public sector union ADEDY said Thursday.

The International Monetary Fund and the European Union are discussing a bailout for Greece, whose economic problems threaten the stability of the common European currency, the euro.

The amount of the aid package being negotiated was not clear, but the IMF and EU are likely to demand the austerity measures as a price for a bailout.

Greece's national debt of 300 billion euros ($394 billion) is bigger than the country's economy, and some estimates predict it will reach 120 percent of gross domestic product in 2010. [...]

It seems like everyone is wanting someone else to bail them out, instead of learning to live within their means. We will be looking at similar "austerity measures" here in the USA, if we keep pursuing the course of unsustainable spending and borrowing. Follow the link for more info, photos and video.


Here are some photo's from their other protests over the last few years:



It's no accident that the "flag poles" are so sturdy; they double as weapons:



But the Reds also use petrol bombs too:



I can see why the German's don't want to bail Greece out. Do it for them once, and they would then expect it, again and again, endlessly. The Red Flag folks would demand it.


Also see:

Greece bailout drama: It's only just begun

Let Greece Have Its Default
     

A "Bank Tax" for banks that paid back bail-out money?

While others who received bail-out money and have NOT paid it back...



There Is Nothing Fair About Obama’s Wall Street Bailout Tax

[...] President Obama aims to tax banks who received bailout money, despite the fact that they’ve already paid back the bailout money. That policy might “feel” good or sound good to those who are angry at Wall Street, but in practice it isn’t good. Consumers – those same unemployed Americans whose pain Geithner so deeply feels – will be the ones who pay that penalty.

Despite Geithner’s concern over being “fair,” the president is awfully willing to accept unfairness in order to achieve his political ends. The bank tax, itself, is patently unfair. Firms who already paid-back bailout dollars will be taxed in order to “pay for” the bailout, but firms who haven’t repaid bailout dollars (General Motors, Chrysler, Fannie Mae, Freddie Mac) get off scot free.

Then there’s the inherent unfairness of the backroom deals secured to pass the president’s health care plan. The president picked winners and losers to win the votes he needed. There’s nothing fair about giving away the farm to a select few, while others are left out in the cold.

Fairness is defined as “being free from self-interest, prejudice, or favoritism.” That’s not the kind of treatment the president is doling out. It’s a paradox of logic, it’s a philosophical compass gone haywire, and it’s what’s guiding the president’s economic policies.

Not only is it unfair, the cost of the tax will be passed onto the taxpayers, who supplied the bail-out money in the first place. Doubly unfair!
     

Ford: The way to run an Automobile Company

Ford Reports Nearly $1 Billion Profit
The latest and strongest sign of the automaker's comeback comes as it pays down debt and adds to U.S. market share

It's now fair to declare Ford Motor (F) an unqualified turnaround story.

The company reported a $997 million third-quarter profit on Nov. 2, adding profits to gains in market share and improvements in quality since CEO Alan Mulally took over in September 2006. The nearly $1 billion profit is a $1.2 billion turnaround from the third quarter of last year. The company also generated $1 billion in cash and paid down $2 billion in debt.

"Ford is making tremendous progress," Mulally said on a conference call. "Our transformation is working."

Strong earnings are a big victory for Ford and Mulally. The company has been far stronger than rivals General Motors and Chrysler (FIA.MI), gaining market share this year. But looking healthier than GM and Chrysler, both of which were in bankruptcy earlier this year, was hardly a great feat.

Ford still has a big debt load, something that GM and Chrysler were able to greatly reduce in bankruptcy. The company dropped long-term debt to $23 billion. But adding short-term debt and obligations to the UAW's retiree health-care trust, Ford's debt is estimated at $38 billion. It's a disadvantage, but Barclays Capital analyst Brian Johnson says Ford should have enough cash to meet its needs. [...]

Ford is succeeding, but it has to compete with failed companies who are unfairly being subsidized with taxpayer's dollars. Why is the government using our tax dollars to reward failure, and to compete against successful privately owned companies?
     

Letting Banks Fail "Gracefully"

The Myth of Too Big to Fail
When it comes to banking, size isn't the only thing that matters.

[...] When the news of Wachovia's failure first reached Federal Deposit Insurance Corporation (FDIC) Chair Sheila Bair, she wanted to liquidate the bank and cut into the pocketbooks of its investors -- as she had done with Washington Mutual, the largest U.S. bank failure ever, a few days prior. But Tim Geithner, then president of the New York Federal Reserve Bank, argued strenuously for Bair to invoke her agency's "too big to fail" exception and spend more money to cover the costs of the bank's sale. He worried another collapsing bank would only intensify the financial panic at a time when the government's hands were tied. (While the FDIC can liquidate a commercial bank like Wachovia, the Fed doesn't have the tools to shut down financial institutions, only the ability to prop them up with loans.)

Geithner, now the Treasury secretary, made the right decision at the time, but it was a terrible precedent to set. Sending the message that the government won't let large banks fail in a crisis gives them an unfair advantage over their smaller competitors. Worse, if bankers are rewarded for success and insulated from failure, there is little incentive for prudence and smart management -- the problem of moral hazard.

Of all the Orwellian phrases to arise from our financial crisis -- "troubled assets," "stress tests," "capital infusion" -- "too big to fail" is perhaps the most hated and least understood. Many populists and progressive economists have called on the Obama administration to bust up the banks and make them smaller. "Just break them up," economist Dean Baker argues. "We don't have to turn Citigroup and Bank of America into hundreds of small community banks, just large regional banks that can be safely put through a bankruptcy."

The administration hasn't pursued that course of action, in part because of the political power of the banks and in part because breaking them up isn't as easy as it sounds -- it is hard to know what the right size for a bank is, especially in an increasingly global financial market. Further, the importance placed on the issue of size is deceptive: The problems that caused the 2008 crash also had to do with leverage, liquidity, and the complex connections between banks. The banks tied themselves into knots neither they nor their regulators could untie.

"The problem we have had isn't that institutions were too big -- it was that there was no uniform way to let them fail without causing an absolute market meltdown," Arthur Levitt, the widely respected former Securities and Exchange Commission chair, told the House Financial Services Committee in September.

If we want to clean up the financial mess, we have to realize that the size of institutions is a secondary problem. We must also accept that some facets of our current system are here to stay. Shrinking the financial sector will be slow going, so we're best off watching it more closely, forcing institutions to put stronger safety nets in place, and, most important, helping them fail gracefully when they make mistakes.

[...]

Perhaps the kind of restrictions that progressives wanted to put on the initial bailout loans -- strict compensation limits, firing existing management, and even more stringent rules -- should be codified so they will be clear if and when bailouts are needed again. The goal would be to penalize executives, not institutions, so the people at banks have the incentive to perform.

Regulatory reform is not just about providing new structures and tools. Reform is also about putting in place politicians and regulators who are willing to take the banks to task. The administration's proposed approach to the problem of systemically risky institutions would require the secretary of the Treasury to green-light any response to their failure, whether that response is bankruptcy, government-assisted liquidation, or even another bailout. That means direct political accountability to the president instead of the "Republic of the Central Banker" that we saw in 2008 as the Fed single-handedly undertook massive efforts to protect the financial system without any checks on its power -- or its spending.

Looking back on last fall's argument between Geithner and Bair over what to do about Wachovia, it's clear that Bair was right in principle -- using federal money to keep bad banks alive isn't a good idea. Geithner was right in practice -- letting another bank fail would have only intensified the financial panic at a time when the Fed didn't have the right tools to solve the problems further bank failures would cause. What we need is a rulebook that doesn't force regulators to choose between those two approaches. We need a system designed by someone like Tim Geithner -- and run by someone like Sheila Bair.

This was an interesting article. It's about creating a system that allows banks to fail gracefully when they screw up, to suffer the consequences for their bad decisions, but without dragging down large sectors of the economy with them. This article was about finding solutions to achieve that, not partisan bickering. I appreciated that.

     

Democrat Gamble makes Republicans Scramble

Harry Reid has criticized Republican's for not being bipartisan enough, claiming that they want President Obama to fail. But how can they be "bipartisan", if by definition it means jumping off a cliff with the Democrats? Is not agreeing to mutual suicide really "wanting Obama to fail"?


Ironically, I think if the Democrats would have worked on a truly bi-partisan approach to solving the crisis, they could have, with Republican help, insured Obama's success for improving the economy and creating jobs. Instead, they are taking a terrible gamble that seems suicidal to many of us.

This article in the San Francisco Chronicle attempts to make a very positive pitch for Obama's budget and the Democrat's agenda. But even with all the gushing and praise, it acknowledges many of the risks being taken:

Obama taking big political risk with budget

[...] After two years of protecting her conservative Blue Dog Democrats by signing off on farm subsidies and avoiding immigration votes, Pelosi has signaled a leftward shift, warmly embracing the Obama budget as the culmination of a vision she has fought years to achieve. "We are very excited, I guess is the word," Pelosi told liberal media representatives last week. "Now we have a president who shares our values and has the right priorities."

Like former President Reagan, who inherited an economic calamity from a deeply unpopular predecessor, Obama is using the crisis to change government's role in the economy. "We are at an extraordinary moment that is full of peril but full of possibility," Obama told PBS' Jim Lehrer, "and I think that's the time you want to be president."

If the polls are accurate, the economic meltdown has altered public attitudes about government, be it the appetite for health care reform, regulation of banks or higher taxes on the wealthy.

"What you've got is a context that makes a very ambitious budget strategy possible in a way that wouldn't be possible in times we would call normal," said Bruce Buchanan, a presidential scholar at the University of Texas. "This is a rare moment." [...]

I read the whole thing. I can follow the logic of the arguments being put forth in favor of what's being done. Yet I can't see that it's going to work, because it's the same flawed logic that got us into this mess. Even the article warns there are a number of pitfalls that could cause it to fail:

[...] Historically, a president's first year is almost always his most productive. "If you can't do it in your first term with your first budget, you almost never get a chance to do it later," said Stan Collender, a veteran budget expert now with Qorvis Communications, a Washington public relations firm. And when a new president comes from a different party than his predecessor, big changes are expected. [...]

President Obama's $3.6 trillion spending and tax plan is the most ambitious effort to shift the federal government's role in the economy since former President Ronald Reagan's in 1981. But instead of rolling back government, Obama advocates spending in three key areas, each dependent on the others. If Congress declines to raise taxes on carbon emissions, for example, money for the middle-class tax credit vanishes, forcing the deficit even higher. [...]

If Obama would only cut taxes to create jobs and increase investment, he would increase the tax revenue from new and expanding businesses, which could fund many of his programs. A true bi-partisan compromise could have achieved that. The problem is, in the name of "fairness", he's instead punishing business with higher taxes, causing investors to sit on their money, shrinking the tax payer base, and borrowing trillions to pay for the Democrat's massive budget agenda. It's growing a bubble that's bound to burst.

Debt is the problem, not the solution. Many Republican's turned against George Bush and the Republican Party for continuing to spend money we don't have, increasing our debt massively and weakening the dollar. And now ironically, Obama is compounding that problem.

If it works I'll eat these words, but I honestly don't see how it can. Jimmy Carter threw endless money at problems, with very bad consequences. It's looking more and more like Barack Obama intends to do the same.

This Administration is still new, and they could conceivably learn from their mistakes. Carter didn't learn from his mistakes, and had one term. Will Obama?


Related Links:

More than a bad day: Worries grow that Barack Obama & Co. have a competence problem

Is Obama taking on too much at once, at economy's expense?

President Obama: a "Leader" or a "Figurehead"?

Does Obama Know What He Is Doing?

HANSON: Maxing out a crisis card
     

"Reality Check" for USA is long overdue

Whether it's passing failing students through the education system and letting them graduate, uneducated and unemployable, or bailing out failing auto industries instead of letting them be replaced with non-failing ones, it's the same thing. Postponing reality only makes your reality check much harsher when it finally, unavoidably arrives.

Postponing Reality

Some of us were raised to believe that reality is inescapable. But that just shows how far behind the times we are. Today, reality is optional. At the very least, it can be postponed.

Kids in school are not learning? Not a problem. Just promote them on to the next grade anyway. Call it "compassion," so as not to hurt their "self-esteem."

Can't meet college admissions standards after they graduate from high school? Denounce those standards as just arbitrary barriers to favor the privileged, and demand that exceptions be made.

Can't do math or science after they are in college? Denounce those courses for their rigidity and insensitivity, and create softer courses that the students can pass to get their degrees.

Once they are out in the real world, people with diplomas and degrees-- but with no real education-- can hit a wall. But by then the day of reckoning has been postponed for 15 or more years. Of course, the reckoning itself can last the rest of their lives.

The current bailout extravaganza is applying the postponement of reality democratically-- to the rich as well as the poor, to the irresponsible as well as to the responsible, to the inefficient as well as to the efficient. It is a triumph of the non-judgmental philosophy that we have heard so much about in high-toned circles.

[...]

Detroit and Michigan have followed classic liberal policies of treating businesses as prey, rather than as assets. They have helped kill the goose that lays the golden eggs. So have the unions. So have managements that have gone along to get along.

Toyota, Honda and other foreign automakers are not heading for Detroit, even though there are lots of experienced automobile workers there. They are avoiding the rust belts and the policies that have made those places rust belts. [...]

It's worth reading the whole thing. Thomas makes an interesting comparison with the horse and buggy industry, and the businesses supporting horses and horse-transportation, that were displaced by the automobile. There were no bail-outs or stimulus packages for them. Somehow, everyone adapted without a diaper-changing government spending tax dollars to keep dying industries going.

People have no respect for "easy" money that they don't earn. Government has no respect for our money, because they don't earn it. The government doesn't need to reform the auto industry (the free market is doing that), the Government itself needs to be reformed. From the WSJ:

Let's 'Restructure' Washington While We're at It
Congress is at least as unresponsive to consumer demand as Detroit.

Congress has been suitably tough in its advice to Detroit, calling for "a complete restructuring" of our failing auto makers. But how about restructuring Washington? The federal government is a giant Rube Goldberg machine that not only wastes hundreds of billions of dollars each year but also burdens local governments and the private sector with legal requirements that no longer serve the public good. Congress should take its own advice and retool Washington. Here's how:

[...]

- Streamline management. The federal government employs about 2.5 million civilians (including the Post Office), about 10 times the number directly employed in the U.S. by Detroit. The bloat is legendary. In his study on "thickening government," NYU Prof. Paul Light found that some government agencies have 32 layers of management, compared to five layers in most well-run companies.

Civil-service rules make hiring an ordeal and firing practically impossible. Rigid job classifications are far more onerous than UAW work rules, guaranteeing massive inefficiency. At many federal agencies, people shuffle back and forth, passing paper from one level to the next, doing nothing useful. Civil service needs to be overhauled.

- Make products that the public wants. Congress is in the business of making and revising laws. But it almost never goes back and reviews unintended consequences. Pick up any volume of the U.S. Code and ask yourself whether the detailed provisions of that law make sense today.

Take something relatively innocuous, like the requirement in the 1996 Health Insurance Portability and Accountability Act to maintain the privacy of patient information. One effect is lots of forms -- over $1 billion worth annually. Compliance also stifles important activity: For example, research on heart-attack recovery at the University of Michigan slowed to a crawl when only one-third of the sample bothered to complete the necessary HIPAA paperwork.

- Enhance competitiveness. Washington's failures are far more significant to the economy than Detroit's. The federal government not only is over seven times larger than Detroit in annual expenditures but it also establishes the legal platform on which the entire U.S. economy operates. The legal infrastructure that Congress has provided is a huge, internally inconsistent mess, requiring businesses, hospitals and schools to negotiate a maze of legal detours. Day-to-day, teachers, doctors, business managers and government officials are unable to make sense of ordinary choices. Law has effectively removed the freedom needed to take responsibility. [...]

There's more suggestions, with examples, it's worth reading the whole thing. One thing they mentioned that I didn't excerpt was farm subsidies. They may well be worth reforming, but I'd be VERY careful about cutting or reforming funding to something as essential as our food supply. But the rest is an excellent comparison of our government to the failing automakers. They suffer from the same problems. Both are strangling from bureaucrats, unions and needless paperwork. In both cases, major reforms are needed.
     

Totally electric cars not viable any time soon

I'm all for "green" technology, but only when it actually works. At this point in time, the best "green" cars we can make won't be electric ones. Consider this:

Politically inconvenient truth about electric cars

[...] Mr Sarkozy’s own government commissioned months ago one of France’s leading energy experts – Jean Syrota, the former French energy industry regulator – to draw up a report to analyse all the options for building cleaner and more efficient mass-market cars by 2030. The 129-page report was completed in September to coincide with the Paris motor show. But the government has continued to sit on it and seems reluctant to ever publish it.

Yet all those who have managed to glimpse at the document agree that it makes interesting reading. It concludes that there is not much future in the much vaunted developed of all electric-powered cars. Instead, it suggests that the traditional combustion engine powered by petrol, diesel, ethanol or new biofuels still offers the most realistic prospect of developing cleaner vehicles. Carbon emissions and fuel consumption could be cut by 30-40 per cent simply by improving the performance and efficiency of traditional engines and limiting the top speed to about 170km/hr. Even that is well above the average top speed restriction in Europe, with the notable exception of Germany. New so-called “stop and start” mechanisms can produce further 10 per cent reductions that can rise to 25-30 per cent in cities. Enhancements in car electronics as well as the development of more energy efficient tyres, such as Michelin’s new “energy saver” technology, are also expected to help reduce consumption and pollution.

Overall, the Syrota report says that adapting and improving conventional engines could enhance their efficiency by an average of 50 per cent. It also argues that new-generation hybrid cars combining conventional engines with electric propulsion could provide an interesting future alternative.

By combining electric batteries with conventional fuel-driven engines, cars could run on clean electricity for short urban trips while switching over to fuel on motorways. This would resolve one of the biggest problems facing all electric cars – the need to install costly battery recharging infrastructures. The report warns that the overall cost of an all-electric car remains unviable at around double that of a conventional vehicle. Battery technology is still unsatisfactory, severely limiting performance both in terms of range and speed. The electricity supply for these batteries would continue to come from mostly fossil sources.

The misgivings over the future of the electric car may explain why the French government appears to have spiked the report. It probably considers it politically incorrect [...]

This pretty much fits in with many of the things I've read. Improving conventional gas combustion cars to be more efficient, and improving hybrid cars until batter technology improves. If we are going to think seriously about having "greener" cars, we have to be PRACTICAL, by supporting what works, not POLITICALLY CORRECT by insisting on promoting technologies into the mainstream that cannot perform yet.

That is one of the things I find worrisome about our own Congress and their Auto Industry Bailout plans. Congress seems hell bent on forcing the introduction of electric cars, before the technology is good enough. They can throw a lot of our tax money down the drain on political correctness, forcing the mass production of inefficient, overpriced electric cars that no one will buy. No one can waste money like government can.

The suggestions in the French report for improving gas combustion engines would do a lot to help reduce carbon emissions, but it's being repressed in favor of an untenable solution. You have to wonder if the real motive isn't to reduce carbon emissions, but to reduce personal freedom and capitalism by restricting transportation choices?

Environmentalism is increasingly being used as an excuse to promote other, hidden political agendas by the Left. We must be wary, and carefully separate authentic environmentalism from the political kind.


Related Links:

Congressional Motor's New Car of the Future

Ford Motor Company is profitable - in Brazil
     

Ford Motor Company is profitable - in Brazil

It's one of the most advanced and efficient car manufacturing plants in the world, and they aren't begging for a bailout. It's worth noting the reasons why. Here is a 3 minute 33 second video of Ford's plant in Brazil:



They would like to build such efficient manufacturing plants here in the USA, but they can't, because of the stifling unions that won't allow changes in the manufacturing process. So American jobs continue to go overseas, and Americans won't buy cars with bloated prices due to extra costs created by union demands. So we need to bail-out the unionized auto-makers, so taxpayers can subsidize the unions and the cars they make that aren't selling?


Related Link:

South of the equator, Ford and GM prosper

Congressional Motor's New Car of the Future

From IowaHawk: Lemon.

It's in the way you dress. The way you boogie down. The way you sign your unemployment check. You're a man who likes to do things your own way. And on those special odd-numbered Saturdays when driving is permitted, you want it in your car. It's that special feeling of a zero-emissions wind at your back and a road ahead meandering with possibilities. The kind of feeling you get behind the wheel of the Pelosi GTxi SS/Rt Sport Edition from Congressional Motors.

All new for 2012, the Pelosi GTxi SS/Rt Sport Edition is the mandatory American car so advanced it took $100 billion and an entire Congress to design it. We started with same reliable 7-way hybrid ethanol-biodeisel-electric-clean coal-wind-solar-pedal power plant behind the base model Pelosi, but packed it with extra oomph and the sassy styling pizazz that tells the world that 1974 Detroit is back again -- with a vengeance.

We've subsidized the features you want and taxed away the rest. [...]

Do follow the link and read the whole thing, it's deliciously rude!


Related Links:

SO THE AUTO BAILOUT IS DEAD ... FOR NOW

Let the Automakers Fail - and be Reborn
     

Let the Automakers Fail - and be Reborn

It's ok to let them fail, because they won't disappear. They will go through bankrupcy, re-structure, and return to business without the unions that are currently choking them to death. George will explains:

In Detroit, Failure's a Done Deal

WASHINGTON -- "Nothing," said a General Motors spokesman last week, "has changed relative to the GM board's support for the GM management team during this historically difficult economic period for the U.S. auto industry." Nothing? Not even the evaporation of almost all shareholder value?

GM's statement comes as the mendicant company is threatening to collapse and make a mess unless Washington, which has already voted $25 billion for GM, Ford and Chrysler, provides up to $50 billion more -- the last subsidy until the next one. The statement uses the 11 words after "team" to suggest that the company's parlous condition has been caused by events since mid-September. That is as ludicrous as the mantra that GM is "too big to fail." It has failed; the question is what to do about that.

The answer? Do nothing that will delay bankrupt companies from filing for bankruptcy protection, so that improvident labor contracts can be unraveled, allowing the companies to try to devise plausible business models. Instead, advocates of a "rescue" propose extending to Detroit the government's business model for the nation -- redistributing wealth from the successful to the failed, an implausible formula for prosperity. [...]

We must not throw good money after bad by rewarding failure. Read the rest, to see how the unions of the big three automakers are strangling them. The other automakers in the US do not have their problems, they don't need a bail-out, because they don't have these choking unions.

The Democrats were heavily supported by the Unions in our recent elections. While it would be hard for the Dems to say "no" to an automakers bail-out, they had better be very careful. If they start throwing massive amounts of taxpayers money into a never ending black hole, in financial times like these, it could come back to bite them in the next election. It will be interesting to see how they are going to handle this.