You are currently browsing the category archive for the ‘Economic Policy’ category.

Normally I don’t really like Roger Cohen’s op-eds in the New York Times (and the Times has quickly worn thin on me – as well as Roger Cohen –  with their persistent and pugnacious anti-Israel slant) but every so often he does write up a fairly nice piece.  His op-ed Age of Outrage is particularly good.  In this op-ed, which I will only summarize here (it is left as an exercise for the reader to read the op-ed for themselves), Cohen focuses on the current outrage that has boiled over in the UK into riots and how the Germans have managed to avoid the same level of disaffection with globalization and the shift in the world economy that is now spreading throughout the UK, Spain, Greece and other countries (and which is spreading – albeit not with the same level of furor as in the UK – to the US).

The best part of the op-ed is actually the first comment that was posted by Doug Terry of the Terry Report (Doug, like me, is a resident of the Washington D.C. metro area).  His comment is very apropos:

One of the best ideas need not come from the Germans. It is simply this: let’s not go overboard with the doom and gloom. The UK, and Europe, have surely gotten themselves in a pickle, but let’s not jump in the barrel with them.

There is a terrible dislocation going on in the US in regard to jobs moving overseas, chasing lower wages, longer working hours and a compliant, no benefits workforce. What can we do about it?

1. Find a way to decouple the paydays of CEOs and other top management from the performance of their stock. Require a 50 or even 70% tax rate on stock gains made in a public corporation while an executive is serving and for five years afterward. Compensating people to ruin companies and cash out with hundreds of millions of dollars must stop.

2. Demand that all American founded corporations declare whether they are, or are not, still American companies. If, like GE, they take in over 50% of their revenues from overseas and if they no longer wish to be American companies, then decouple the benefits, tax breaks and protections they get.

3. End “special purpose corporations”, which are little more the sly means of doing secret and/or dirty deals by their large corporate creators.

4. Monitor corporations for compensation relative to total profits and profits as a percentage of revenue. Make the information public, so that citizens know when a corporation is basically getting rich, as Wal-Mart does, by keeping employees on low wage scales.

5. Change the pro-corporate slant of court rulings by changing laws and, if necessary, Constitutional amendment. Balance must be restored between citizen and corporate power.

6. No more free lunch for broadcast companies which pay nothing for television and radio licenses and keep those licenses for generations, unless they sell them for many millions.

7. Develop comprehensive policies to encourage job creation and new business development. Reward companies for creating jobs here.

The above says a lot – and could go further if we mix in the concept of term limits for politicians (no more “careers”), campaign finance reform (to eliminate the power of SuperPACs, PACs, and corporations), and tax code reform (and I mean REAL tax code reform – no more of this band-aid on top of band-aid nonsense).  If we could do what Mr. Terry suggests above from a corporate governance perspective and what we need to do in terms of term limits, campaign finance and tax code reform, we may go a long way to righting the ship that is the United States and to steer it back to a more prosperous future for everyone.

Advertisements

I recently came across an MSN article that was published recently on how a bill is currently winding its way through the halls of Congress that is essentially a “cash for clunkers” concept to encourage Americans to trade in their old vehicles and buy new ones. The general concept, on the whole, is not bad — American car buyers will get rid of their old, gas-guzzling vehicles and buy more fuel efficient (and hopefully less polluting) cars to replace them. The upshot is that theoretically America’s car fleet will, on the whole, go up in fuel efficiency which means that our gas consumption should, theoretically, go down and therefore our reliance on oil will, theoretically, go down.

On pure face value this is absolutely a “good thing”. However, the way the government is approaching this (and how the interests in Congress are shaping this bill) worries me. The government will offer consumers a $4500 voucher if the vehicle that they purchase gets 10 miles per gallon (mpg) more than the vehicle they are scrapping. If the new vehicle only gets 4 to 9 mpg more then the old one then the voucher is only worth $3500. And that’s just for cars. For light trucks the mileage gain would only have to be 5 mpg and 2 mpg for the respective vouchers.

Ok, yes, it’s an incentive (just like the incentive that sales tax on new vehicles purchased this year between February 17, 2009 and the end of the year will be deductible on your income taxes next year). The idea is to spur the American consumer to go out and “shop” (sound familiar?) and spend money they may not even have on a big ticket item (i.e. durable goods). In theory, Americans buy vehicles, old gas guzzlers are scrapped, car sales — which are about as anemic as they come — are boosted, and the automakers get a bit of a reprieve from the recession.

The problem is that this is money that the American government doesn’t have. Yes, we could just print more money and, voila!, we’ll have the money for this program. But to do so we must tread carefully. We are already seeing the effects of printing more money as the value of the U.S. dollar is declining with respect to other currencies. Other governments are becoming increasingly concerned about their investments (i.e. U.S. Treasury Notes) in the United States and may slow down or stop buying them altogether. With increased dollar circulation we are diluting the value of the dollar and driving inflation. This is what happened in the mid- to late-late 70s and early 80s and it took the Fed quite a bit of time to take enough dollars out of circulation to help stem the tide.

Now, don’t get me wrong, I understand the concept of deficit spending in order to help pull us out of this economic deep dive but I tend to be a fiscal conservative in my overall outlook. Yes, in my opinion, we need to spend on health care and on infrastructure but I see this bill as another congressional way of throwing a lifeline to the auto industry when already two out of the “Big 3” (i.e. G.M. and Chrysler) have already received a huge amount of bailout money and have both declared bankruptcy. The difference here is that this is something that Washington doesn’t have to do. Already the auto makers are doing an enormous amount to try and spur sagging sales. I recently traded in my 1997 Nissan Maxima for a 2009 Toyota Prius because Toyota was offering 0% financing on 2009 Toyota Prius models (the car that just 8 months ago dealers couldn’t even keep on the lots because they were such a hot item). I did it without a government voucher and got a great deal.

There were many other great offers from Toyota as well…I just happened to be in the market for a Prius. And that’s where this bill won’t do much. In the article “Cash in on your gas guzzler” on MSN Catherine Holahan notes

Even if it passes as now written, the bill might not affect sales much. In a recent Kelley Blue Book survey, nearly 40% of car buyers said that the bill wouldn’t spur them to purchase a new vehicle. Only 13% of survey respondents said that they would be “highly motivated” to buy a new car, if the bill passed.

(Holahan, Catherine, “Cash for your gas guzzler“, MSN, May 19, 2009)

And as for environmental impact — in the current form of this bill (it was originally calling for vouchers for new vehicles that “got at least 28 mpg and new SUVs that saw 23 mpg or more.” (Holahan, Catherine, “Cash for your gas guzzler“, MSN, May 19, 2009)) this bill will do little since it has been watered down.

“This will not benefit the environment, but it will help sell a new pickup truck,” said Ann Mesnikoff, the director of green transportation with the Sierra Club, the nation’s largest environmental protection group. “They are trying to make it possible to sell anything under this bill.”

(Holahan, Catherine, “Cash for your gas guzzler“, MSN, May 19, 2009)

The clear winners in this bill are the auto dealers and the auto manufacturers (which is not a bad thing for the auto dealers given the way that G.M. and Chrysler will be cutting thousands of them off in their bankruptcy proceedings). Even the aftermarket parts industry will lose (and so will many Americans who cannot or choose not to buy a new car at this time) as the parts from older vehicles that typically get refurbished and reconditioned for replacement parts are destined for the scrap heap under this bill. Repairing older cars will become more expensive as parts become scarce. The clear losers in this bill are the American taxpayers — both present and future who will have to pay back this additional debt.

So it’s been a while since I last blogged because my time is very tight lately…I’m working, looking for a new position in the company, taking a class to get my Six Sigma green belt certification as well as a beekeeping class given by the Montgomery County Beekeeper’s Association here in Montgomery County. Even so I’m trying to keep up with what’s been going on in the state of economic affairs and last night’s New York Times story about A.I.G. is a doozie.

A.I.G., once the world’s largest insurance company and who has to date taken $170 billion dollars from the U.S. government (i.e. taxpayers) in bailout money is now planning to pay $165 million dollars in bonuses to executives in the same business unit that last year brought the company to the brink of financial collapse (Andrews, Edmund L. and Peter Baker, “A.I.G. Planning Huge Bonuses After $170 Billion Bailout“, The New York Times, March 14, 2009). The reasoning, according to the government appointed chairman Edward Liddy is that

We [A.I.G.] cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury

(Andrews, Edmund L. and Peter Baker, “A.I.G. Planning Huge Bonuses After $170 Billion Bailout“, The New York Times, March 14, 2009)

Retention bonuses? Where does Mr. Liddy really think these guys (and gals) are going to go in today’s Wall Street environment? Mr. Liddy also points out that these bonuses are contractually obligated in that they were agreed upon in the early part of 2008 — before A.I.G. fell apart and that both A.I.G. lawyers as well as Treasury Department lawyers have determined that there is no way to abrogate this contract.

This is truly an insult to the American taxpayers who are currently keeping A.I.G. afloat. In my mind these executives who are offered the bonus should be told that their services will no longer be needed if they take the bonus. The American taxpayer should not have to be continually insulted by Wall Street this way. We’re the ones who are bailing them out…it seems that A.I.G. executives still haven’t figured this out and seem to be playing the game as though they deserve this money. When will this administration and Congress get it. If they don’t find a way put a stop to this nonsense and these institutions that have taken taxpayer money in order to survive continue to behave this way then it will be the voters of this country who will make their voice known in 2010. And if that means that every single Congressman (and woman) and Senator should be voted out of office then that’s just what it might take.

September 2019
M T W T F S S
« Jun    
 1
2345678
9101112131415
16171819202122
23242526272829
30  

Feedburner RSS

Licensing

This blog is covered by a Creative Commons - Attribution, Non-Commercial, No Derivative Works 3.0 US License

Categories

Blog Stats

  • 54,266 hits

ClustrMaps

Advertisements
%d bloggers like this: