Instead of an automaker bailout

The right thing to do would start with putting all the companies in bankruptcy and reorganizing them into viable going concerns. Continuing with tough love from there, solutions should include...

** Eliminate outrageous and uncompetitive Union Contracts

** Eliminate the so called “pools” of employees who are being paid to do nothing

** Eliminate present management whose only skills are lobbying Washington for the “status quo”

** Provide retraining opportunities and relocation assistance for the redundant.

Obviously, the retiree pensions will have to be turned over to the PBGC, the underfunding of which will have to be made up by the Federal Government. But better to fund just the retirees than to try to prop up the whole dysfunctional edifice of the Big Three automakers.

Surviving employees of the reorganized entity (or entities) should be shifted to portable IRA’s and 401K’s for which they themselves are responsible for funding. Defined Benefit Plans are an albatross that no one can carry, including public entities such as City Governments.

The argument in favor of the $25 billion bailout purports to be “saving jobs”. But most of the money would go to the UAW to fund retiree health care. This will do nothing to make the industry more viable or save jobs, (many of which are people in the paid-not to work “job banks” anyway).

Any taxpayer funds for the Big Three are a misallocation of scarce resources and a waste. It is time to rationalize the industry through the bankruptcy courts and get on the road to real recovery!

Everybody wants some

Nearly five decades after John F. Kennedy inspired Americans to ask what they could do for their country, the new national sentiment seems to be, “Ask what your country can do for you.” In fact, it could have been an ’08 election slogan. How many times did we hear jubilant Obama supporters exclaim how the government was going to pay their mortgage and buy them gas? Unfortunately, they aren’t the only ones hoping to get a pocket full of newly minted change.

Unexpected voices have joined the entitlement choir. It isn’t just the grievance industry who wants politicians to redistribute the wealth from those who have earned it to those who have not. Middle class families and businesses of all stripes have come to feel entitled to other people’s money. They may criticize big government in the abstract but fiercely defend their government loan, farm subsidy, business incentive or government program. To borrow a line from Van Halen, “everybody wants some/ I want some too/ Everybody wants some!/ Baby, how 'bout you?”

The real legacy of the bipartisan accord between liberals and big government Republicans is not the $10 trillion national debt levied on the next generation, but the spread of government dependency to the formerly self-reliant.

Even the once tough pioneer-spirited state of Colorado has been seduced by Washington largesse. Only days after the election, several Colorado business leaders told the Rocky Mountain News how they would like the new president to spread the wealth around. Their Christmas list includes funding for individual homebuyers, money for the state, health care for their employees and, of course, subsidies for their industries. It reads like a conversation between Orren Boyle and Wesley Mouch of Atlas Shrugged.

They are not the only ones. After a $1 trillion bank and Wall Street bailout, Congress is talking about bailing out automakers and sending cash to the states. In the new state stimulus package, Congressman Ed Perlmutter is hoping for energy sector giveaways. Congresswoman Diana DeGette and Congressman-Elect Mike Coffman want cash for infrastructure. Of those interviewed by the Rocky Mountain News, only Rep. Doug Lamborn seems to understand that “giving aid to states and their taxpayers at the expense of placing an equal burden upon federal taxpayers” is a bad choice.

“There are severe limits to the good that the government can do for the economy, but there are almost no limits to the harm it can do,” observed Nobel laureate economist Milton Friedman. The government cannot produce jobs or wealth out of a hat. To give to some through handouts, bailouts, subsidies, and grants, it must take from others. The government burdens entrepreneurs, investors, and consumers, the true engines of a vibrant, free economy, through taxation and regulation and further weakens the dollar through debt spending.

Anyone who lived through the 1970's saw firsthand what government intervention can do. Nevertheless, a new poll shows 72 percent of Americans are looking to the new president to revive the economy. Some 44 percent of Republicans joined nearly all Democrats in this false hope. I’d be willing to bet that a significant percentage of these Americans expect to get a check, a program, a subsidy, or an incentive for themselves, their business or organization.

Proponents of limited government should be worried. We’re counting on the predictable failure of liberal government policies to pave the way for a conservative comeback like they did in 1980 with Ronald Reagan. There is a worrisome difference between then and now, however. Americans nodded when Reagan said, “In this present crisis, government is not the solution to our problem; government is the problem.”

Since then too many people have come to see government as their source of hope and have no qualms with being its object of charity. Is America already so far down the road to serfdom that we're forgetting what it was like to be free?

Krista Kafer is a Denver-based education consultant, frequent cohost on Backbone Radio, and regular columnist for Face the State.com, from which this is reprinted by permission.

Long melodrama of financial folly

To the extent we temporarily humble ourselves by taking a lesson from history, it might be possible to see the current economic tumult in a different light. Economic panics have occurred every few years; they usually last a couple of years and are followed by an even more manic run-up of the markets. The modern use of central banks to infuse money into the system often leads to inflationary price increases on the heels of responding to political demands for a cure to a recession. But, sometimes the cyclical fluctuations portend bigger events are in the offing.

When an economy transitions from agriculture to industrial or, as might be the case today, from a post-industrial to an information economy, we often bear witness to major depressions or hyper-inflation, followed by war and revolution. It's when a tsunami hits instead of "surfs up!'.

After WWII we had severe recessions in 1948, 1953 and 1957. After WWII, billions of $$ of public debt were being monetized by the Fed, interest rates had been suppressed and the gold standard was being diluted. This had all followed cyclical expansions in 1924, 1936 and 1955. The Great Depression and WWII were obviously big punctuation marks in a long narrative.

Now, I would argue we crossed a big divide in the 1957-58 time-frame. Not only was this when the Salk polio vaccine would become generally available but, society would, also, begin to shift gears from the patriarchal, republican Eisenhower post-war years, to a more modern era characterized by John F. Kennedy, television and a man on the moon. But, there is one background story that needs telling.

In 1958, AT & T, America's largest employer and pension plan trust decided, for the first time, to make investments in the stock market rather than just hold US securities and bonds in their portfolio. In this same year, Lehman Brothers,(the same major Wall Street investment bank that recently failed in the 2008 financial meltdown) launched the biggest IPO in mutual fund history. In the months that followed Lehman sold 16 million shares, using a nationwide network of 640 brokerage firms. It is interesting that this mutual fund had originally been a private fund created by Lehman and 28 wealthy Ford executives after the death of the anti-semitic Henry Ford.

Thus began Society's lurch towards the use of the stock market to underwrite pension plans. The concrete began to set-up in the mid-1970s with the enactment of ERISA which turned over billions of dollars of pension and health benefit dollars to the labor unions resulting in everything from the financing of Las Vegas to today's investments in real estate, hedge funds and the stock market.

All of this has pivoted on two countervailing forces, that often work in tandem. First, was the freeing of the U.S. from the gold standard and the enabling of the Federal Reserve(eg. Allan Greenspan) to expand the money supply, and influence the economy through monetary policies. The second has been the ever-increasing concentrations of wealth in the upper 5% tier of society and the pensions of the Fortune 500 and labor union dominated organizations. These forces live by virtue of credit fueled by low interest rates and an ever-increasing money supply. Recession only slows the steady advance of inflation that leads to $50,000 automobiles and $500,000 homes. . The enthusiasm for the coming of this modern manic-recessive, bi-polar world was best expressed by Sumner Slichter, a Harvard economist who wrote in the fall, 1957, Harvard Business Review that creeping inflation was not to be feared because rising prices reduced the impacts of panics(recessions), wages would steadily increase and technological progress would advance. He brought music to the ears of the political establishment who felt it also contributed to a vibrant trade union movement.

Unfortunately, when the masses are at the heights of delusion and mania there always seems to be one odd fellow who wants to play the role of Cassandra. It was best expressed by Malcom Bryan, a past president of the Atlanta Federal Reserve Bank and an adviser to the American delegation at Bretton Woods (which set in motion the elimination of the gold standard and government's massive meddling in economic affairs). Here is classic Bryan:

"So, the proposal (Slichter's ideology), is on the one hand, that we take from the naïve or the trusting and, on the other hand, that our defalcations be effected on the installment plan, lest doing the job all at once, we might be caught at it. Let us be clear what is being asked, when we are now urged to a policy of either intentional or connived-at-inflation, is that we sell our honor. What altar of expediency is high enough and what bribe is great enough to absolve us from such perfidy? If this language be deemed unduly pungent, what other language shall be used? I believe that no greater delicacy of expression is warranted if we speak out of one side of our mouths to give ingratiating reassurances and out of the other side of our mouths to plan the undoing of men we have enticed and are enticing.

The integrity of our conduct is critical. Even if we ignore past savers(pensioners) in money forms, which would be a great scandal, we at least have a responsibility, binding in conscience, to present and future savers(pensioners) in money forms. If a policy of active or permissive inflation is to be a fact, then we can rescue the shreds of our self-respect only by announcing the policy. That is the least of the canons of decency that should prevail. We should have the decency to say to the money saver(pensioner), "Hold still, Little Fish! All we intend to do is to gut you!""

The short term injection of trillions of dollars of government-created money into the global economy to ward off recession will have long term unintended inflationary consequences. The effects we are experiencing today are the culmination of decades of decision-making that pushed us over the precipice onto a slippery slope; that we now find ourselves on the precipice should be no big surprise. Government offers us only a branch to self-arrest our fall into the chasm. If the characters in the drama were moral it would be a 'tragedy' in the classic sense. But, these individuals are amoral at best and therefore, it is comedic, a farce, a melodrama complete with villains. The popcorn on the table is being spilled on the floor with the peanuts. You have just finished the first act of a very long opera.

Greenspan's clowns & McCain's weasels

With the election behind us, it's time now for another installment of good news and optimism, of the kind you can find nowhere else, and probably wouldn’t want to anyways. No matter what the weather is doing outside, no matter what the papers may say, I’m always sunny on the inside, because that’s just who I am. 1. Bach’s Mood Music. When we read anything about the economy these days, we should have Bach’s “Toccata & Fugue in D minor” playing in the background.

2. Recession Graphs. Some analysts are predicting an “L-shaped” recession. Some say it will be a “V-shaped” recession. Some say “U-shaped.” But I say it will be a “Clown-shaped” recession, with a graph that resembles the mug of Maestro Greenspan.

3. Capstone. How ironic that a former disciple of uber-capitalist Ayn Rand helped turn public opinion against free markets, ultimately paving the path to a more socialist government.

4. Close the Door Behind You. How sad that the only elected politico hammering the banks on their taxpayer financed “executive bonuses” is that bald whiny little Henry Waxman. Democrat. Where the heck are the Republicans? Perhaps they sit away in silence, counting campaign contributions. Time to go, folks, time to go….

5. Oops, I guess they’re already gone. Nice try from McCain there in 2008, but no cigar. Not even a cigarillo. It just goes to show ya – Neoconservatism never pays.

6. McCain’s Weasels. As predicted, the knives have come out of the McCain camp contra Palin. They waited a full 24 hours after the election to unsheathe and slice away in full pettiness mode. Glad to see Michelle Malkin and RedState tracking down the leakers, holding them accountable.

7. Relatedly. I don’t like the kind of women that don’t like Sarah Palin.

8. No Foreign Cars. If we bail out GM, and then Ford too, we will have enacted an ex post facto form of trade protectionism. If a taxpayer saves money buying a Toyota, but then must pay more taxes to bail out GM, what’s the point in buying a Toyota? Might be simpler to just raise tariffs on imports. Or better yet, pressing the logic, ban them altogether.

9. Ricardo’s High-Water Mark. The global free trade consensus seems poised to diminish. But, worry not, this won’t be your grandfather’s Smoot-Hawley. To save itself, America will soon feel a need to re-industrialize. You know, actually make stuff. Right here at home. Pretty soon this will be the accepted wisdom. How did it ever come not to be?

10. Corollary. Sans free trade, the EU will find itself en route to disintegration. Which would be just fine, really.

11. With Bones in their Noses. Power traveled further from Truth under the Bush Administration. Truth became less powerful, as our democratic republic became less constitutional. The Paulson Plans cases in point – an open-air looting of America, no congressional oversight. The elite strategy of profit-taking up to the point of bankruptcy and then, too big to fail, chiseling out their taxpayer bailouts. Wealth thus transferred from Wal-Mart shoppers towards Saks Fifth Avenue. Meanwhile, the masses have no idea what’s happening. They cannot penetrate today’s propaganda, much less tomorrow’s. When potential leaders arise capable of pointing out sundry truths to such corrupt power, the cannibals generally arrive in the nick of time.

12. Feeling Vindicated. Early spring this year, predicted deflation on the near-horizon. And so now here it is. And it’s actually not all bad. Diminishes the power of the state, and those overly connected to the state, over time. Might even slow down a certain socialist in the Oval Office. So of course deflation will be fought tooth and nail. It will become the Enemy. Osama Bin Deflation. But the powers that be may have been too greedy in the recent past to win this fight now. The little guy may accidentally walk away with this one.

13. Related Prediction. Mises will trump Keynes when all is said and done with the present economic crisis. Bad news for Bernanke-Paulson-Greenspan.

Life is grand, let us rejoice. But I repeat myself.

Yours in Optimism, Norman Vincent Peale

Bad omens for economic policy

Not for nothing has economics long been known as the “dismal science”. Not only is it inherently boring, but hardly anyone truly understands it. Even among the few with some understanding, rarely are they able to communicate it to others. Harry Truman famously demanded a “one-armed economist” because he was so frustrated with economic advisors who kept saying “on the one hand this could happen, but on the other that could happen”.

I once had the honor of serving on a board with Milton Friedman, a remarkable man who not only understood economics better than just about anyone, but who also could explain the dismal science with a clarity comprehensible even to dolts like myself. Through an amazingly popular television series in the 1970s - “Free to Choose”-and in hundreds of newspaper columns, Friedman gave to a wide audience some basic grasp of economic theory and reality. For this feat as well as being proven “right” on the Big Questions, Friedman can fairly be called the most influential economist of the 20th century.

Perhaps the greatest truth that Friedman articulated was that as a general rule government intervention is bad for national economies and free markets are good. If you ranked the success of national economies over the last century the best (e.g.- the United States) had relatively the least government intervention while the worst (e.g.- the Soviet Union) had the most. Similarly free markets did best and non-free worst.

Despite this pretty clear track record left-wing opinion has relentlessly preferred giving government the primary role in managing national economies.

We were painfully reminded of these truths during the recent economic meltdown. Anyone doubting the general economic ineptitude of government had only to watch the ludicrous and downright dangerous posturing of our Democratic Congress as the crisis unfolded.

Turning the wisdom of Friedman upside down, Democrats outdid each other in laying all possible blame on free markets. Chanting a mantra of “greed” and “corruption” (phenomena unknown in Congress, of course) they instantly fingered “Wall St. fat cats” as the villains of the piece.

Piling hypocrisy on top of absurdity, no one shouted these accusations louder than Barney Frank and Chris Dodd -who arguably had more responsibility for the genesis of this disaster than any other two people in the country. Once again was George Orwell’s famous dictum validated: The Big Lie repeated loud enough and often enough does work.

Complementing the demonization of free markets was the obscene notion that our country’s salvation was to be found in –you guessed it- massive government intervention.

Blending irony with hypocrisy and betting on public memory loss many of the very same people (e.g. Chris Dodd) who had whooped through the landmark deregulatory legislation signed by Bill Clinton repealing the Depression era Glass-Steagall Act now howled that the economy desperately needed wall-to-wall Congressional oversight and bureaucratic regulation of just about everything.

The Congress’ last great outburst of regulatory mayhem came in the wake of the Enron collapse. Demonstrating its usual genius for producing “cures” far worse than the “disease” Congress passed the Sarbanes-Oxley bill, a bureaucratic nightmare that delivered a body-blow to U.S. entrepreneurial activity, and drove much of it overseas.

What we are going to get starting in January by way of “fixing the economy” from the Democratic triumvirate of Obama, Reid, and Pelosi will make Sarbanes-Oxley look like a relatively minor and benign piece of progressive legislation.

Throughout our past American greatness has been driven by an engine of economic opportunity unparalleled in the history of the world. Its’ indispensable fuel was freedom- freedom to dare, to risk , to choose, to innovate, to adapt, and above all to work hard with a just expectation that one would be allowed to benefit from the fruits of one’s labor.

Today- confirmed by the late election -new doctrines are abroad in the land. They value the collective over the individual. Their hallmarks are not work, risk, reward but entitlement, grievance, and envy. The engine of opportunity is now to be lubricated with class warfare. Growth gives way to redistribution.

This scenario may seem gloomy, but that is needed to get people’s attention. America has often been likened to a sleeping giant, frequently slow in awakening to danger, but once aroused, it is capable of extraordinary feats in meeting the greatest challenges.

We must hope that that capacity is far from exhausted.

William Moloney’s columns have appeared in the Wall St. Journal, USA Today, Washington Post, Washington Times, Philadelphia Inquirer, Baltimore Sun, Denver Post, and the Rocky Mountain News.