Bailout & stimulus

Obama Motors revs up

President Obama claims to "have no interest" in running General Motors. He does so with a straight face - and the same monotonous cadence that he employs whether condemning North Korea for nuclear explosions or joking with Jay Leno. But his actions, as well as his words, betray him. The significance of the bankruptcy and restructuring of General Motors isn't that it happened but the way it happened.

His protestations notwithstanding, this is Barack Obama's General Motors. Just read from his statement earlier this month:

** "Two months ago, I laid out what needed to be done to save two of America's most storied automakers."

** "I made it clear that I would not put any more tax dollars on the line if it meant perpetuating the bad business decisions that had led these companies to seek help in the first place."

** "I decided, then, that if GM and Chrysler and their stakeholders were willing to sacrifice, then the United States government would stand behind them."

Which is more absurd - his implication that he is the embodiment of the U.S. government or that a former community organizer, part-time lawyer, part-time lecturer, part-time author, and fulltime politician knows beans about running the nation's largest automaker?

Then again, Nancy Pelosi and Harry Reid scolded the auto execs last fall for flying - instead of crawling - to D.C. to ask for a government bailout and then arrogantly demanded that they come back when they have a "viable plan."

Not that it's ridiculous to demand a viable plan. What's ridiculous is the assumption that the Speaker, the Majority Leader and most other Beltway politicians could recognize a viable plan for a 25-cent lemonade stand - much less a multi-billion-dollar auto company.

Remember, the reason government is funded by taxes is because it produces almost nothing that people will pay for willingly.

It wasn't necessary for President Obama to interject himself into these proceedings. As Commentary magazine columnist Jennifer Rubin points out, GM and Chrysler have had bankruptcy attorneys working on those plans for months.

"Why make this all about the president throwing his weight around and personally firing the head of a major corporation?" she asks.

The simplest explanation is that Obama wants these details signed, sealed and delivered to prevent their scrutiny in a court of law where, for example, the United Auto Workers Union would not get preference over holders of secured corporate bonds.

As Hans Bader points out at OpenMarkets.org, "the UAW will receive at least ten times as much value as the bondholders even though the bondholders are owed more ($27 billion vs. $20 billion). This is neither legal nor fair."

Which brings us to President Obama's oft-repeated claim that his decisions are guided by the way they "affect the daily realities of people's lives."

Well, the ordinary folks whose retirement or savings were ravaged by automakers' plummeting stock prices are suffering doubly from Obama's devastating policy to force them to take pennies on the dollar if their portfolio also included GM bonds, which were once considered relatively safe.

By contrast, the very labor unions whose bloated benefits and anachronistic job protection schemes put GM at a competitive disadvantage are now rewarded with nearly $10 billion and 17.5 percent ownership in the company.

While Obama says UAW will be required to make "painful sacrifices," the union boasts that its members will see no reduction in 'base hourly pay, no reduction in health care, and no reduction in benefits."

Might the $13 million that UAW spent on last year's election have tipped the scales in its favor? Heavens, no!

So, GM hinges its recovery on the marketing genius of politicians who gave us Medicare, Social Security, Amtrak, a 3.4-million-word tax code, and $11.3 trillion in debt.

It's hard to imagine how a fire sale administered without Obama's oversight could have been more destructive or more expensive.

Mark Hillman served as senate majority leader and state treasurer. To read more or comment, go to www.MarkHillman.com

Presidential hectoring hurts economy

When Richard Nixon was in the process of damaging the American economy back in 1971 via wage and price controls, closing the gold window, etc., he used aggressive rhetoric to support his actions. I remember specifically his demonizing of financial "speculators". He virtually spat the word: Speculators! The epitome of evil, right? This week Obama was doing much the same thing to hedge fund managers and others, bullying them, calling for them to sacrifice, implying that they are unpatriotic, giving them the full load of overbearing denunciation. As if he had any clue what he was talking about.

Well, it turned out that the "speculators" were right and Nixon was wrong. And today, for the most part, the financial managers are right and Obama is wrong. When it comes to the economy, regardless of political party, the rule is: The politicians are always wrong. Regarding the economy, government has a reverse Midas touch: everything it touches turns to c**p. In recent years Congress touched the housing market via subprime loans, and we are now living with the result. Now the government is aggressively touching the financial markets in general, and the auto industry in particular. The results are predictable.

Republican leaders today, including the establishment wing of leaders on their "listening tour", tell us that the GOP must offer an affirmative alternative to Obama's massive taxing, spending and borrowing policies. They can't combat something with nothing, they say.

Wrong, wrong, wrong. The correct approach is to educate the voters to the truth, rather than to compete with Democrats in pandering to their ignorance. The truth is that the free market, if allowed to operate, will ruthlessly correct the financial imbalances more quickly and more thoroughly than any government programs will. Government interference will just prolong the disease and the pain, and will mess up the economy for years. That's what FDR did in the 1930's, and that's what Obama is doing now.

Government has a legitimate role in enforcing contracts and in prosecuting fraud, insider trading, and other criminal activity, and in enabling a level playing field. But politicians have no ability to manage anything at all. When government attempts to override the market and to manage the economy on a large scale, the resulting economic system is called fascism. I recommend reading all about this in Jonah Goldberg's recent book, "Liberal Fascism".

Here are two informative rebuttals to Obama's hectoring of financial managers and his damaging actions in the financial markets. There's this one by Bill Frezza at Real Clear Markets. And this one by Cliff Asness at Business Insider.

If economics bores you or you think you can't understand it, please give these two articles a shot. The authors make the issues quite clear.

What I saw at the big protest

Many folks in Denver are mad and appear not ready to accept our government as it currently stands. More than 5000 people made it a point to congregate at the state capitol under a sunny, warm sky at noon on Wednesday, TAX DAY. The most accurate statement that can be made about the rally is that: Once again, the people “get it,” but the politicians and the media, still do not get it. Let me make my point:

The people really do get it: There were signs all over the place decrying the rise of socialism, higher taxes ahead, government bailouts, the loss of economic freedom, etc. There was even a sign saying, “I left a socialist country for this?”

Most notably there were constant calls for Tax Ritter to show up. A mom likened herself to a rattlesnake that warns its prey before its deadly attack. Politicians take warning was her final statement. Another man told the crowd how “pissed off” he was. To make his point, he repeated his chant as he listed all the ills of our current government policies. He did this to repeated cheers from the crowd. Another speaker called for a third party, as he reminded us that both the Dems and the Repubs got us into this mess. I loved the guy that opined: Kick all the bastard out!!!

Now we get to the media. I’ve got to call out the Denver Daily News. The headline read: Tea-d off over illegals” by Peter Marcus. Wednesday April 15, 2009.

I called Mr. Marcus who told me he had no agenda by highlighting the Illegal issue. When I challenged him, he told me he mentioned the tax issues in the second paragraph and that showed he didn’t have an agenda. Folks, this is the problem with the media today. For someone to take that stand; shows either complete disregard for reality or an agenda. That agenda being, let’s highlight the Illegal Immigrant issue rather than the real tax issues.

It has also come to my attention that many of the major media outlets treated the Tea Party rallies with the same approach. That being: This is just another right wing attempt to rally the Republicans for the next election cycle.

The media's approach just makes my point: The media thinks it makes the news and they hate the fact that they are losing power over the people.

Don't miss Tea Parties 4/15

Tax, spend, borrow and regulate are the four horsemen of American socialism under Obama and Ritter. Intrusive government now tramples our liberties with a brazenness that would amaze those old Boston patriots who dumped the tea in '73. Tea Party protests will happen in many cities on Tax Day, Wed. April 15. I'll be taking part and so should you. Here's the information you need. Denver Metro Area City: Denver When: April 15, 12:00pm - 1:30pm Where: West steps of the Capitol, 200 East Colfax

El Paso County City: Colorado Springs When: April 15, 12:00pm - 1:30pm Where: Acacia Park at 225 N Nevada

Routt County City: Steamboat Springs When: April 15, 12 noon Where: County Courthouse Lawn

Mesa County City: Grand Junction When: April 15, 12:00pm - 1:30pm Where: Soccer stadium at 12th Street and North Avenue, corner across from Mesa State College

Larimer County City: Fort Collins When: April 15, 12:00 pm - 2:00 pm Where: Fort Collins City Hall, 300 Laporte Avenue

City: Loveland When: April 15, 4:00pm - 7:00pm Where: 205 E Eisenhower Blvd, Loveland, CO 80537

Weld County City: Greeley When: April 18, 11am – 2pm Where: Bittersweet Park at 35th Ave. and 11th St.

Pueblo County City: Pueblo When: April 15, 4:00 pm Where: Pueblo County Courthouse, 215 W. 10th St.

Fremont County City: Cañon City When: April 11, 12:00 pm Where: Veterans Park

Contact names for these and other Colorado cities, along with Tea Party details for many other states and cities, are at this link. To sort by state, scroll to the bottom of that page. Site also lists numerous organizers and contacts for the three events mentioned above.

The Tea Party phenomenon of 2009 is one of the most powerful grassroots movements our country has seen in a long time. People are rising up to defend individual freedom, personal responsibility, limited government, and free markets.

Be part of it on April 15! I'll see you there.

Henry Ford rolls over

Barack Obama has now unveiled the next iteration of America's new industrial policy, and if you own shares of Ford Motor Company you have every right to be angry. The bailout of GM and Chrysler and the intrusion of the White House on their corporate governance is now part of a program to pick the winners and losers in the U.S. auto industry. The President has made it clear that GM will not fail due to ineptitude, decrepitude or attitude, and the full faith and credit (such as it is) of the United States has now interceded to ensure it. The market no longer is working, because your government wants the UAW to have jobs, and is willing to use your tax dollars to fund them. And, of course, it wants American auto companies to build small "green" cars, and now that it controls the behemoth that is General Motors, you can bet that they will -- whether you want to buy them or not. And what of Ford Motor Company? The company that brought you the modern automobile industry has, of course, struggled over the past year in a tough market. But due to superior products and better management, Ford has managed to resist the need for tax payer dollars. In a true market, Ford would now be enjoying the fruits of its effort by gaining on GM and Chrysler -- both of which would now be in bankruptcy. The company's employees and shareholders would now be benefiting from the demise of two of its main competitors and be rewarded for its ability to negotiate the difficult waters of CAFE standards and tough credit by surviving in the short-run and and expanding in the long-run. A great American success story, right?

Only not in Obama's America -- where it is more important to reward vested interests than it is those who play by the rules and do a good job. Why should Ford be in a position of watching its two primary domestic competitors receive government aid that will make them leaner and more effective competitors? How is that fair? What is the incentive for doing a good job and not needing a hand out if it puts you at a strategic disadvantage? This is the ultimate moral hazard -- that it is actually better to fail than to succeed, because the government will be there to save you. No matter what.

And don't be mislead. The taxpayer is now on the hook for saving GM and Chrysler. And if you work at Ford or own Ford stock -- tough luck. You will have to sit back and watch as the government puts is ample resources into making your competitors stronger. You lose for winning. What an ironic place to be for the company that Henry Ford built -- the man that created the foundation for mass production, who developed the Model T and established the roots of the modern transportation industry. A man built to compete, with a legacy that is now threatened by the ultimate in non-competitive forces.

One thing you can be sure of: somewhere in his grave in the Ford Cemetery in Detroit, Henry Ford is rolling over.