Bailout pork

USA Today article:

The relationship of catfish to economic stimulus might not instantly be obvious, but to the Catfish Farmers of America, it's perfectly plain that $50 million in government assistance would help avert a collapse of catfish farms that would spread further economic pain in already depressed Southern states.

The American Library Association says $100 million for libraries would help people get back to work, and the American Association of Port Authorities wants $6.8 billion for harbor maintenance as part of an economic plan. The National Retail Federation wants a series of tax-exempt shopping days. The Air Transport Association has a $4 billion wish list for runway construction and new avionics, and the National Automobile Dealers Association wants a "cash for clunkers" program that would help people trade in old, inefficient cars for new ones.

What's much less clear is how to spend all that money in ways that will actually help the economy, rather than fund nice but non-essential projects, or utterly wasteful ones that reward campaign contributors or help a powerful member of Congress build a bridge to nowhere. In ordinary times, the idea of bailing out the catfish industry would be laughable, and perhaps it still is, but if that's your livelihood, or the biggest employer in your town, suddenly it's not so funny. The problem is, just about every industry and special interest could make the same pitch.

And that, folks, is the fundamental problem with government choosing who lives and who dies.

Maybe there are simply too many catfish farmers producing more supply than the market demands, driving down prices across the board. Rather than propping up the whole industry with subsidies and bailouts, we need to let a few go out of business. This will reduce supply and cause the price to rise naturally until the remaining efficient producers are profitable.

The same can be said for all industries (and farmers).

It will certainly be painful for those impacted, but better for the nation as a whole.

Wow, just wow

WSJ article:

President-elect Obama has pledged a $1 trillion stimulus package. To put it in perspective, that sum would exceed, in inflation-adjusted dollars, government spending on the New Deal, the
savings-and-loan crisis and the Marshall Plan combined, according to Bianco Research.

USA Today article

This [stimulus package] is expected to carry a price tag of as much as $850 billion over two years. How much is that? Think of it this way: It's twice the $425 billion (adjusted for inflation) it took to build the 42,700-mile interstate highway system started in the 1950s, and more than the entire cost of the Vietnam War ($698 billion). It's huge.

So-called income inequality

This weekend I read an article in the AJC about so-called income inequality.

It had the typical AJC slant. For example:

• Is the middle class no longer being left behind?

In Georgia, the answer to those questions up to now has been no, according to data released earlier this year by the U.S. census.

While the typical Georgia family’s income hasn’t grown so far this decade, after accounting for inflation, the well-off got better-off.

The number of Georgia households making more than $200,000 a year jumped more than 70 percent between 2000 and 2007, while the number of households making less than $75,000 stayed relatively stagnant. Some of that trend was the result of wage inflation, since the income brackets were not adjusted for inflation since 2000.

That sure looks to me like like something got better! More and more Georgian households are earning more than $200k. Isn't that upward mobility? It doesn't say that those earning more than $200k made even more and everyone else lost. It says *more* are getting richer, and those who aren't getting richer are about the same.

It goes on in much the same vein for awhile, then reaches what the author presents almost as a snide toss-off comment:

Experts cite differing reasons for the growing gap, partly depending on where they fit on the political spectrum.

Republicans tend to call it a natural consequence of free markets and innovation, such as advances in technology, which drives up the incomes of some but also displaces other industries and workers.

This make sense to me, but I guess I'm on that end of the political spectrum the author is discounting. It is certainly a truism that, except for professional athletes and supermodels, those who make their living with their brains will earn more than those who make their living with their bodies. Remember, farriers and buggy-whip makers were in displaced industries.

I remember fairly recently a plant in metro-ATL was closed and some 300-400 workers lost their jobs. There was a sob story in the paper that highlighted the 27-year worker who cried "I don't know what I'm going to do now. This is all I know." (Something like that). This plant made cassette tapes. I wondered strongly at the time how many of those people honestly expected that the demand for cassette tapes would remain high enough to keep them employed? I wondered how many of them had CDs and digital answering machines? CDs were introduced in the 80's so they had something close to 20 years to contemplate the potential for cassette tapes to loose their luster, just like they surpssaed their vinyl bretheren (who surely faced similar problems). In fact, cassette tapes sales surpassed vinyl LP sales in 1982, and CD sales surpassed vinyl LP sales in 1988, and CDs surpassed cassettes in 1992.

Back to the article, and this is the most telling paragraph, the toss-off:

Others argue that the gap has been growing because the affluent have benefited from Bush administration tax breaks. Meanwhile, middle-class and poor Americans have seen their incomes fall behind the wealthy as employers cut health and pension benefits, and the government trims spending on education, health care and child care.

Reading this another way: "When the government allowed some people to keep more of what they earned, they got richer. Those who depend on the government got poorer when the government cut back." Typical.

Tragedy of American Compassion

This is a book I've been reading on and off (more like thumbing through and reading chunks, it's a bit of an academic slog). This quote has fascinated me:

Lyndon Johnson's economic advisors warned in 1964 that the poverty rate, in the absence of federal action, could be as high as 13 percent by 1980. After sixteen years of multi-billion dollar programs, the poverty rate at the end of that year was--13 percent.

It goes on to say:

Lack of mobility was not caused by lack of opportunity--the dramatic successes of immigrants from Asia and Cuba during [the time period] shows that. Those who adopted the traditional work-hard-and-rise pattern by staying out of the welfare system usually succeeded in rising--but native-born Americans who took advantage of the proffered liberality stayed put. Some welfare recipients even gave up jobs and educational opportunities in order to remain in the poor but secure spot that welfare payments afforded them.

My next car will *not* be a Chrysler/Dodge (or GM)

Since my college "beater" (mazda 323), all our cars have been Chrysler or Dodge. Over the years, we've had a Sebring, 2 Dodge Durangos and a Chrysler 300M parked in our garage. There was a Saturn in there somewhere, too. My parents drove Chrysler's for many years, and even my mother-in-law has also had two Durango's after she replaced her Chrysler Concorde.

This moring when I was driving to work (in my 300M) I heard Pres. Bush's presser where he gave the auto makers (Chrysler, GM) $13.4B in loans, basiclly requiring them to promise to try to do better. There's $4B more in the wings in case they need it too. There's a scary threat of calling the loan if they haven't made progress on their promises by 31 Mar 09. Does anyone think that's going to happen under an Obama/Pelosi/Reid troika?

I called Mrs. Percy to tell her what I just heard on the radio. We both said, talking over each other at the same time, "I guess we've bought our last Chrysler product, GM too for that matter."

Comparing GM against Toyota

Bailing out the Big 3 is a bad idea all around (as was the financial industry bailout--two wrongs will not make a right here). Here's a perfect example of why (from WSJ article):

But the $15 billion auto rescue plan failed in the Senate last week. As Minority Leader Mitch McConnell said, the American taxpayer should not be asked "to subsidize failure." The failure can be seen in the comparative financial data: both Toyota and GM, for example, made about 9.4 million vehicles last year. But as Investors Business Daily notes, Toyota made a profit of $1,874 per car, while GM lost $4,055 per car, or $38.7 billion, and almost all of those loses were due to its U.S. operations.

Consider also that GM lost billions in a failed partnership with Fiat, and ultimately paid Fiat $2B just to get out of the deal. GM also posted total net loss of $1.419B in 2004 and $2.697B in 2005, years in which the economy was not collapsing! According the the GM's annual report "The 2005 total net loss is primarily due to the impact of Delphi benefit guarantee charges offset by favorable income tax items." In other words, they lost billions of dollars on their Delphi parts manufacturing subsidiary as they had to rework the UAW's benefits package. Oh, and that seems related to the fact that Delphi was in Chapter 11 bankruptcy!

Yes, I've been too busy to update

I was sick for awhile and then had to catch up back at work.

Here's just a tidbit for the moment. Something about the Big 3 bailout failure last night:

The group came close to agreement, but it stalled over the UAW’s refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

Reid called the bill’s collapse “a loss for the country,” adding: “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”

It's now 1:35, and although the market was down earlier, it stands at DOW +12...oops, now back to DOW -9. If that's what Harry Reid "dreads" he's got a weak constitution. Maybe later in the day it gets scary?