Do they even want a recovery?

The four reasons we're facing a jobless recovery, outlined the other day by Martin Hutchinson of Money Morning, are on target in my opinion. Here's the link. Developing his analysis further, I think what's really going on is this... ** When they “put America to work” with government jobs, they are paying them by extracting wealth from the more productive private sector and diverting it to a quarter of a million morons raking leaves in National Parks (basically an assumption of and the redirecting of State welfare payments, no more or less).

** Or the money is borrowed, which will “crowd out” private investment.

** The trouble is, once the spending peters out, the economy starts going south. (government jobs have no multiplier effect). Then they will say “we need another stimulus”! But by that time, they will have to pay 11% to sell treasuries.

** And as this interest rate works its way through the economy, the economic contraction accelerates as does inflation! They will get into a vicious spiral downward.

** Another aspect: should there be even a hint of a recovery, taxes will be slapped on, The present administration is salivating to raise taxes to finance more government programs and bureaucracy, which is paving the way to turning the US into an Argentina, complete with capital flight to Asia.

** The real way out is to give tax breaks and subsidies to entrepreneurs to start businesses and decrease the size of government. This generates demand for goods and services and employment, which is self-sustaining, actually increasing the size of the economy. But that would be “giving tax breaks to the rich”, something the Marxist-Socialist-Progressives CANNOT DO IDEOLOGICALLY! They would rather send every welfare-freeloader a couple of hundred bucks to piss away at the liquor store, and think that will revive the economy!

** Therefore, the country’s economy will NEVER recover until the Marxist-Socialist-Progressive Obamaites are removed. But judging from the ACORN voting irregularities and the coming census and gerrymandering that’s coming, they may NEVER be removed. This could very well be the end of the prosperous and free America we have known over our lifetimes.

Obama squeezes the grocery clerks

“What’s good for grocery clerks is good for America,” proclaimed David Peterson in a Denver Post opinion piece on June 8. Peterson cleverly echoed a similar claim about General Motors from days gone by, but his well-intentioned article was lacking in reality. He says, “In countering recessions, there are but two antidotes: Either increase government spending or increase private employment and income. Either has the same effect: Because of more income, there is an increase in aggregate demand and as more factories and companies begin producing again, the feedback loop turns positive.”

His article goes on to say that companies that can afford to raise wages, such as Kroger, should do so because it will help the company in the long run. Peterson states too many companies are laying people off because of the short sightedness of the CEO’s. This view actually perpetuates a recession. While his article advocates private sector involvement versus government involvement, which I agree with, he fails to account for one of the reasons for the layoffs. Let me explain…

CEOs are by nature visionaries and forward thinkers. Their primary job is to protect the bottom line and create value for the shareholder. One of the main reasons there are negotiations on labor contracts and layoffs are because of the impending tax increase on all businesses by the Obama administration. Wait a minute, you say, the federal tax for the highest earners -- keep in mind this is true for S-corps, LLC’s, etc… as these are pass thru entities -- is ONLY going up by 4.6 percentage points from 35% to 39.6%. But do the real math. This is 13% more money out of your pocket in taxes. If you make $100 that you make, instead of the current $35 in taxes, you will now pay $39.60. That extra $4.60 is an increase of 13% on what you used to pay. Make sense?

So now in light of that, companies are realizing that they are going to have to do more with less. Companies’ available cash to pay employees, expenses, etc will go down because of these new taxes. This impending tax code is no incentive for companies to hire more people. Any smart business owner is working as fast as possible to protect the interest of the shareholders. Companies are laying off people preemptively before this tax increase comes down the pike. In an altruistic sense, it would be great if healthy companies paid more but these companies realize in a short time that they are going to be penalized by the government. In other words, the wage payer is getting punished by the wage earner. Wake up America!

As Lincoln so eloquently stated,"You cannot help the poor, by destroying the rich. You cannot strengthen the weak, by weakening the strong. You cannot bring about prosperity, by discouraging thrift. You cannot lift the wage earner up, by pulling the wage payer down. You cannot further the brotherhood of man, by inciting class hatred. You cannot build character and courage, by taking away men's initiative and independence. You cannot help men permanently, by doing for them what they could and should, do for themselves."

Govt. car ads & other flagrant fouls

Watching the NBA finals, you couldn’t help but notice the new GM commercial. What has American business come to? We have a company that owes people and companies billions of dollars and is now in bankruptcy. The majority of this company is now owned by us the taxpayers. Does anyone find it ironic that of the billions of dollars owed to their creditors over 160 million is owed to ad agencies? I wonder what ad agency is now doing these commercials and getting paid while the other ones are likely never going to get paid. That’s right; it’s the White House doing these commercials with their own camera crew. My frustration does not lie in the fact that GM is in bankruptcy but the fact that this answer could have been arrived at much sooner. The government should not be in the business of running companies. When the government decides to run a business they always have constituencies to look after, which is the antithesis to capitalism. Remember the definition of capitalism according to Webster is, “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”

In this case, the union workers and retirees were taken care of at the expense of the bondholders (some of whom were other retirees). All though the government says that it does not want to have their hands in the day to day operations of GM, we all know that will not happen. The US government is going to have a seat on the board. This tells me that the government will definitely be giving direction to what cars will be made. If this is the case, we will soon have cars that none of us want.

My impression of this administration was that it was going to seek to be “fair”. Their actions with GM leave no impression of fairness. At the end of the day, the administration will seek to keep their constituents happy regardless of the business sense that these policies make. Just as sports reveal character, so does the current policy of the White House. I might add that this policy is lacking in character.

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

Insanity of higher CAFE standards

Here we are again, faced with another cramdown policy by the misguided but ever hard-charging President Obama . This time it’s raising fuel-economy standards. Instead of waiting until 2020 to increase the standards, now the President is saying 2016. I think he really wants all the car companies to go out of business. Now before you criticize me by saying I’m not a friend of the environment, let me say that I am a conservationist but at the same time I’m not in the business of making decisions rooted in untruth. Let’s take a look at what previous fuel standards have accomplished. Since 1975 we have had fuel efficiency standards, but they have done little to help reduce carbon emissions. In his book Spin Free Economics, Narmin Behravesh demonstrates the inefficiency of these standards. Here is an excerpt from his book:

“To begin with, they (fuel efficiency standards) don’t necessarily reduce total fuel consumption. In fact, more fuel efficient cars can, perversely, encourage more driving. Similarly, while the mpg per ton of cars has improved about 20 percent in the United States in the last two decades, average car weight has risen ( heavier vans and SUBs now account for half of all light-vehicle sales, compared with 20 percent in the 1980’s), so the mpg per vehicle has actually fallen about 10 percent.”

Wait a minute here; is Behravesh saying that fuel efficiency has decreased? That is exactly what he is saying. Is not the definition of insanity, doing the same thing over and over and expecting different results? So if the goal is to decrease carbon emissions would it not make sense to do something different instead of the same thing over and over?

I’m not writing to propose an alternative to the fuel standards, but to show the ineptness of the government’s policy. But perhaps a solution to not only this problem but many others would be that of a consumption tax. Talk about fairness, this eliminates the IRS and you only pay for what you use. But I digress. The point is, insanity is not good policy.