Honey I Think We Took A Wrong Turn

Greetings Congressman XXXXXXXXX,

Thank you for your letter regarding the current automobile manufacturer crisis. I applaud your fortitude in opposing bailouts or loans and your thoughtfulness in offering a different tack. I am sure that local car dealers are frustrated with having too many unsold vehicles on their lots. This no doubt stems from the credit crunch precipitated by the Democrats’ mismanagement of Fannie Mae/Freddie Mac and somewhat to the high price of many domestic vehicles, which is part of the broader automaker problem. Unfortunately I believe that offering a consumer tax credit to purchase those vehicles is only a short-term band-aid which will not cure the bigger disease in the industry. Additionally, it once again uses the federal tax code for social engineering, something that I loathe.
There is no doubt that cars made by the Big-3 are too expensive. The problem does not stem from corporate jets and bigwig bonuses. One factor is too much intrusive federal (and state) regulation of automobile standards. These ridiculous rules put too much of a burden on the carmakers, thus preventing them from making cars that people actually want to buy and can afford. The standards don’t really save lives or the environment. Secondly, union influence over the automakers’ business practices has become too onerous and too expensive. This has only happened because the federal government has empowered the unions thusly. The total benefit packages for autoworkers are insane and financially unsustainable. There is absolutely no reason for workers to have this much influence over private businesses. And they wouldn’t, save for the Congress- mostly liberal Democrats. Other than egregious safety violations or abusive tactics, workers should have no further say in how a private company runs its business. If they don’t like it, they can find a job elsewhere.
So both of the major reasons for the failure of the automakers falls back in the lap of the federal government. The last thing we need is for the feds to try and fix the situation! The best thing that they could do is to get out of the mess. Strip the unions of their unreasonable power and rescind the insane regulations. Then hands off! Let the automakers go through Chapter 11, reorganize, dump the old union contracts and get about building cars that Americans actually want at prices they can afford and that compete with other manufacturers. This talk about the Big-3 being too big to fail is silliness. We are not talking about failing; we are talking about reorganizing and emerging stronger and more competitive. Many airlines have successfully navigated this process. Maybe the federal government should consider it. When I was taking flying lessons the instructor taught me that when a plane is stalling and going into a spin I had to take my hands off of the controls to let the plane stabilize. That violates all of your natural instincts. But trying to fight the spin is certain death. We need the federal government to do the same thing in this, and many other situations. Unfortunately, the nature of the government and politicians is to always try to do something in every situation. After all, isn’t that what we hired them for? To simply do nothing seems irresponsible, right?
I seriously think that we would all be better off to send the President, Supreme Court, House and Senate home and pay them to sit there and do nothing for two years. For as we learn in medicine, first do no harm. The private market is a great thing when allowed to work unfettered. However, it has not been allowed to work freely in the automobile industry for many, many years. It’s time to get back on the right road.
By the way, I believe that these principles should also be applied to the health care system. Ah, but that’s another topic for another day.
Thanks for your service Congressman!

No More Blood From Turnips

If the President directs Treasury to bail out the automakers in defiance of the Senate decision last night, then it is about time for the American people and corporations to start withholding their federal income tax payments. We must protest and starve this ersatz, unconstitutional federal government into submission.

It's Time to Pay the Piper

If you think about the current economic mess in which we find ourselves and all of the talk about a 40% loss of value in the stock market, nothing has really gone away. Dirt, buildings, cars, trucks, houses, television sets and shoes are all still here. None of that has disappeared. Credit and the money value of business have decreased, but those are not actually real. They are only psychological constructs. Money is not based upon anything like say, gold. Money and credit are only agreements between people. They only exist in people’s minds and imaginations.
The real culprit here is easy credit and the false demand driven by it. This is true for individual families, corporations and government at every level. The current collapse has been inevitable for decades. And there is plenty of blame to go around. Those responsible for extending such credit are culpable as are the people and institutions who kept lapping it up and spending this fake money like there was no tomorrow. With regard to the national debt we would say, well we just owe it to ourselves. When that was actually true it was still a bad thing because it would strap our children and grandchildren with a horrendous tax burden to service the debt. But now, we actually owe a huge chunk of our national debt to foreign powers such as China, not necessarily good friends and who certainly don’t have America’s best interests foremost in their plans.
This addiction to credit and wild spending is every bit as powerful a force as addictions to tobacco, alcohol, drugs, sex and gambling. And every bit as hard to shake. It sneaks up on you so gradually and by the time you realize that you have a problem you are probably past the point that you alone can do anything to stop it. For decades our society has been driven by the relentless push to achieve and acquire, achieve and acquire. Keep up with the Joneses. We are bombarded constantly and everywhere by Madison Avenue marketing exhorting us to buy, buy, buy! More, more, more! You deserve it-NOW! Don’t wait, use the plastic. Have it today. Pay for it, well, never. Tomorrow never comes. Twelve months same as cash. No payments no interest for a year. We are pressured by our co-workers, neighbors, friends, relatives, children and their peers. We must keep up appearances. We have to have the newest, flashiest and fastest. This easy credit has put people in houses, cars, big-screen televisions and clothing that they cannot really afford and should not be buying. This same mind-set also applies to corporations and governments. The sky-rocketing demand for all of these goods and services has been built upon a precarious house-of-cards for many years. Fake credit providing fake money driving fake demand creating fake business growth creating fake jobs with fake income and resulting in fake tax revenues culminating in a fake economy with a fake GDP and fake growth rate. Well, the predictable explosion of the comical mortgage market was the card on the bottom. When it was pulled out the whole house has come tumbling down. Sadly, this has been obvious for years. It had to happen. It needed to happen. Like a drug addict, at some point someone has to take the needle away and let the patient go through the horror of withdrawal. It’s ugly and painful, but it’s the only way to ultimately survive. Then, after it’s over someone must always watch out to stop the addict from going back to the drug.
For many years the hole in the bottom of the boat was small enough that we could just bail the water out and stay afloat. Adding more fake money and credit to cover the bad worked for a while. Now the hole in the bottom of the boat has become so large that bailing will no longer work. We have to plug the hole first. That means no more easy credit, no more borrowing. We must cut back on spending and go to a cash-only, pay-as-you-go basis. That applies to individuals and families, corporations and governments from your city all the way up to the federal government. We cannot print any more funny-money lest we risk creating hyper-inflation which will only greatly exacerbate the problem, not solve it. People must go back to my grandparents’ budget strategy. You live below your means, save money and pay cash for the things that you really need and at a level that you can really afford. That will mean smaller homes, modest cars, fewer vacations, smaller television sets and non-designer clothes for many. It will also mean understanding delayed gratification. You save for things that you really want and put off buying them for years until you can pay cash for them. That’s right, 23 year-old college graduates don’t deserve to buy a BMW, a 5-bedroom house, Fila sneakers and 70-inch home theaters for probably another 20 years. So sorry. These federal bailouts and loans must stop. They only serve to forestall the inevitable correction that our businesses and economy must go through. If we don’t, the problems will only fester and grow bigger beneath the surface to erupt later in a much bigger disaster. Let’s get our national withdrawal over with and reset the economy on saner foundations. Pay now or pay later. The price will be much greater and more painful if we wait until later.