Why the bailout will kill good business

Ford did more than just offer credit.  They have improved their product, introduced cutting-edge technology, and built the kind of efficient vehicles the incoming Obama administration wants.  The pricing is still not as competitive as it needs to get against Toyota and Honda, but Ford has moved in all the right directions — and they have built buzz in the car industry which they hope to convert to better sales.

And after doing all of that, the government plans to restore the credit of the two companies who have not succeeded in improving their product or their sales.  This is what is wrong with government bailouts of private enterprise at their core.  They subsidize failure and penalize success.  The government will wind up distorting this market just as surely as they did the housing and lending markets, pushing Ford to the side as GM and Chrysler get a head start on their domestic competition.

Instead of picking winners and losers, and of burdening manufacturers and other markets with social-political engineering like CAFE standards, Congress should butt out and let private enterprise fend for itself.  Only when the Congress ex machina ceases to exist will the stakeholders in the auto industry — management, labor, and suppliers — start negotiating in earnest to rescue their own pocketbooks.  Now, though, that healthy process ends up being a “competitive disadvantage” to subsidized competition.

• [22] President Bush and Barack Obama have joined forces to ask Congress for the second $350 billion of the $700 billion financial bailout.
• As the federal bailout takes shape, [23] many states continue to spend money at boom-time rates even though revenue is sinking.
• Obama has [24] already shelved a major portion of the business tax component of his stimulus plan.
• Obama’s plan to close prison at Guantanamo [25] will take at least a year.
• [26] Israelis are united on Gaza as censure rises abroad.

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URL to article: http://blog.heritage.org/2009/01/13/morning-bell-will-chu-let-america-power-up/

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But if taxpayers really do have to shell out all that money as they see their neighbors — or even themselves — getting laid off and being foreclosed on, they should at least see how the money's spent.

The incoming Obama administration can improve on this by pushing for more transparency and accountability. But will it?

House Banking Committee Chairman Barney Frank, D-Mass., whose advocacy of forcing banks to be instruments of social justice helped cause the mess we're in, is also pushing TARP reforms that would impose "the most stringent nontax executive compensation restrictions" — including forbidding golden parachute payments to executives and applying executive pay limits retroactively.

Unfortunately, this is what the lack of transparency and no clear strategy for exactly how the rescue money would be used has set us up for: The micromanaging from Washington of the biggest financial institutions.

Surprise: Obama to issue order to close Gitmo in first week

• 13 years ago in his State of the Union Bill Clinton said that “the era of big government is over.” But Thursday, [8] President-elect Barack Obama said government was the solution.
• President-elect Barack Obama’s Treasury Secretary nominee Timothy Geithner is planning to include reauthorization of the second $350 billion into Obama’s stimulus plan and plans to give the bailout cash to [9] municipalities, small businesses, homeowners and other consumers.
• 90% of donations received by Obama’s inauguration fund so far have been raised by well-heeled fund-raisers, including Wall Street executives [10] whose companies have received billions of dollars in federal bailout money.
• The U.S. Treasury has [11] failed to reveal its strategy for stabilizing the financial system, not answered questions asked by a government watchdog, and has done nothing to help struggling homeowners, a report being released Friday charges.
• As deputy attorney general in 1999, Attorney General nominee Eric Holder Holder pressed subordinates to drop objections to clemency for 16 members of [12] violent Puerto Rican nationalist organizations.

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URL to article: http://blog.heritage.org/2009/01/09/morning-bell-workers-deserve-better-than-a-big-labor-lackey/

Barack Obama, it is said, will inherit the worst times since the Great Depression. Not to minimize the crisis we are in, but we need a little...

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Not to minimize the crisis we are in, but we need a little perspective here.

The Great Depression began with the Great Crash of 1929. By 1931, unemployment had reached 16%.

By 1933, 89% of stock value had been wiped out, the economy had shrunk by one-third, thousands of banks had closed, a third of the money supply had vanished, and unemployment had reached 25% — among heads of households. And in those days, there was no unemployment insurance, no Medicare, no Medicaid, no Social Security, no welfare.

FDR's answer: vast federal spending, tough new regulations on business and higher taxes — like Herbert Hoover before him, only more so.

The Depression lasted until war orders from the Allies brought U.S. industry back to life. Before 1940, not once did unemployment fall below 14%. In May 1939, Treasury Secretary Henry Morgenthau testified:

"We are spending more money than we have ever spent before, and it does not work. . . . I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises.

"I say after eight years of this administration we have just as much unemployment as when we started . . . and an enormous debt, to boot."

Politically, the New Deal was a smashing success, with FDR's landslides in 1932, 1934 and 1936 virtually wiping out the GOP.

Yet, economically, the New Deal was a bust, failing utterly to restore prosperity. Despite the indoctrination of generations of schoolchildren in New Deal propaganda, that is the hard truth.

Already staring at a $1.2 trillion dollar deficit for the year ending Sept. 30, about 8% of the entire U.S. economy, Obama intends to add a stimulus package of $700 billion to $1 trillion, yet another 5% to 7% of gross domestic product. The resulting deficit would be twice as large as Reagan's largest, 6% of GDP, which was the largest since World War II.

And how is this Niagara of money to be spent?

Hundreds of billions will go out in checks of $500 to $1,000 to wage-earners and individuals who do not even pay taxes. This is much like the George McGovern "demogrant" program of 1972, where every man, woman and child, if memory serves, was to get a $1,000 check from the U.S. government.

Other hundreds of billions will go to shore up state and municipal spending. Other hundreds of billions will go for "infrastructure" projects, another name for earmarks, which is a synonym for pork.

Now, as Obama does not intend to raise taxes, at least now, he is going to have to borrow this near $2 trillion from foreigners or U.S. taxpayers, or the Fed will have to create the money. Undeniably, this will have an impact upon the economy. But what will that impact be?

Where in history, other than World War II, is there evidence that such a mass infusion of spending restored prosperity?

Obama and the Democrats are taking a historic gamble, not only with their careers but with the country. If this monstrous stimulus package — plus the trillions in hot money — do not work, if the two ignite rampant inflation — rather than real growth — we are all out of options. The toolbox is empty.

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Gupta, who is not only a highly regarded neurosurgeon but a professor and CNN medical correspondent, is also opposed by Michael Moore, with whom he had a 2007 television run-in. Moore happens to be a good friend of Conyers, a supporter of nationalized health care and opponent of Gupta's appointment.

Buchanan: Israel’s staging a “blitzkrieg” on its Gaza “concentration camp”

Not the first time a Nazi analogy has tripped lightly from his lips in this area, although like Cardinal Martino, he doesn’t quite have the stones to own up to what he means. He’s not comparing Gaza to a German death camp, you see, just to your average, run-of-the-mill concentration camp. The fact that he coughed up the word “blitzkrieg” literally in the same breath is but an unhappy coincidence.

Remember when deficits were evil?

Part of this gets driven by panic.  A few years ago, Alan Greenspan famously criticized what he called “irrational exuberance” on Wall Street, causing a brief market downturn.  What we have now could be called “irrational despair,” the notion that this recession will be greater than anything ever seen since the Great Depression.  Barack Obama today offered the reversal of FDR in his speech, in which he seemed to say that the only thing we don’t have to fear is fear itself.

All of this hysteria goes to one purpose: to create a sense of panic that will make any government intervention seem rational and reasonable.  Instead of taking policy one step at a time, schemes and plans get made only to be eclipsed by even more grandiose schemes and plans without ever having tried anything else first.  The TARP plan was never even given the chance to work, thanks to a panicked Secretary of the Treasury who literally begged for its funding and then used the money to start nationalizing private enterprises.

What gets built in a panic will not get dismantled when the hysteria ends.  We are creating a baseline of expected government costs that the Wall Street Journal warns will endure as an expectation.  America saw this after FDR’s New Deal and LBJ’s Great Society.  Once Congress establishes a new level of confiscation and spending, it never reduces it — and only on occasion has kept it from growing.

Perhaps we have gone too long between recessions to understand how to handle them.  We had much worse economic prospects in the 1970s and had much less panic involved at the time.  We saw then what massive government intervention produced — inflation, stagnation, and regulatory paralysis.  Instead of drafting massive amounts of investment-capable capital out of the markets, we should be clearing the way for its use.  Let’s hope it doesn’t take another decade like the 1970s for people to remember that.