Category Archives: Society

“Nothing Is Free”

Posted on by

I never thought I would say this: Cubans understand economics better than Americans.

In 1932 Lionel Robbins defined Economics as “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

I think that is not true any more. At least, not here.

Economists should study and report on who produces, distributes, and consumes goods and services, how they do it, and where it happens. The “soft science” of economics allegedly uses empirical data but in reality is now a political exercise. In today’s scientific environment, we know more about Global Warming than we know about the economy and there is certainly more politics than science in the climatology data.

In Cuba, nothing is free, reports the Miami Herald. The Cuban people pay for it [all] with their work.

“A Cuban gets a salary of 500 pesos a month (about $20) and is told that education and healthcare are free,” Uva de Aragon of FIU Research Institute told the Herald last week. “Nothing is free. The Cuban people pay for it with their work.”

What a concept. Health care. Food. Housing. Consumer goods. All related to the sweat of one’s brow.

Despite the media furor, have you noticed that you don’t directly pay for your health care? Most of us don’t. Most of us have “insurance” (or Medicare or Medicaid). When was the last time anyone reading this brought a home-grown chicken to the doc’s office to pay for the visit? Or traded an hour of computer service for it? Since there is a disconnect between the delivery of the service and the payment for same, we don’t care that the cost has spiraled out of sight. The incoming Administration and the Congress want to take over Health Care to save you money. Right.

The Cuban earns 500 pesos a month from the state. The rest of his or her production stays in the hands of the state to pay for that “free” care.

Education has long been publicly funded by land taxes. Since states like Vermont and Florida take those real estate taxes straight to the Capitol and dole out payments to the local schools, there is a disconnect between the delivery of the service and the payment for same; the cost has spiraled out of sight. Now that real estate values (and the taxes collected) have dropped, the Miami-Dade schools will sue the State of Florida for the “lost” revenue. Right.

The Cuban earns 500 pesos a month from the state. The rest of his or her production stays in the hands of the state to pay for their “free” schooling.

Food (so far) hits most Americans in the pocketbook. OK, except for those on Food Stamps. Oh, yeah, and except for the taxpayer-funded farm subsidies that keep prices artificially low. Still, most of us spend part of our paychecks at the supermarket every week.

The Cuban earns 500 pesos a month from the state. No free lunch there, either, since he has to pay for his meals out of the 500 pesos (about $20). It costs most American families more than twenty bucks to hit the Mickey D Supper Club once.

Congress and the Fed believe we can spend our way out of any problem–health care, food, housing, bad loans. That’s probably true if there is enough earned income to tax to do so.

Uh oh.

Congress and the Fed (and apparently the Miami-Dade school superintendent) believe we can spend our way out of any problem by printing more money.

And nobody in Congress has broken an honest sweat in years.

Here’s the reality check. If I take a fine art photograph, print and frame that photograph, and sell that photograph to Joe next door, I will receive cash money which I can then spend in the grocery store or at the gas pump. If I don’t take that fine art photograph, or print and frame that photograph, or eventually sell that photograph to Joe, I will have no money for food or gas or my tax bill.

Any Congress Critter who doesn’t understand that dooms you and you and you and me.

Bashing – III

Posted on by

I love that General Motors has retired two of five corporate jets.

I do not love that Congress spent their time bashing Ford CEO Alan Mulally, Chrysler CEO Robert Nardelli, and General Motors CEO Rick Wagoner for flying privately to the hearings. What should the CEOs have done? Driven to Washington?

Has anybody in Congress ever looked at the Presidential fleet?

Has anybody looked at how Congress Critters prefer to travel? Can you spell c-o-r-p-o-r-a-t-e jet? Or the Air Force C-20? The C-20 aircraft provide “distinguished visitor airlift” for military and government officials. What’s a C-20? That would be a Gulfstream IV. As an aside, General Motors leases the G-IV aircraft Mr. Wagoner used. We taxpayers own the C-20 G-IVs.

Gee, ya think the Congress critters could maybe perhaps be bashing the wrong target?

It is far, far easier to tear down what you cannot possibly create on your own than it is to create something tangible.

I promised a solution somewhere in this series. Here it is.

Warren Buffett says the only possibilities left for the automakers are a bailout or bankruptcy.

Sorry, Mr. Buffett. You’re wrong. Bankruptcy is not an option.

Bankruptcy is attractive because it allows the companies to void their union contracts and turn over their horrendously expensive pension obligations to the taxpayers. The serious downside is that no manufacturing company recovers from bankruptcy. Would you buy a $30 grand widget if you knew there would be no warranty service or even parts available next year? Nobody would. The serious downside is that half of American manufacturing workers will find themselves out of work within 12 months. The serious downside is that some huge number of individual American shareholders (including me) will lose even more from their retirement funds because bankrupt company stocks evaporate.

But a bailout isn’t the answer, either.

I have a three-part plan. 1: Americans need an attitude adjustment. 2: Carmakers need an attitude adjustment. 3: Congress needs an attitude adjustment.

First, remember what your mother taught you: If you can’t say anything nice, don’t say it at all. Bashing a business leader for doing something you know nothing about does absolutely nothing productive. If you do that, stop. The corollary to mom’s adage is simple. If you hear someone else bashing American business, stop them.

Second, American automakers need to get ahead of the curve on market prediction, manufacturing planning, and management.

GM is now working overtime in Texas to make trucks because they shut their truck plants down too early. Not enough of the American auto production lines are flexible. And ongoing layoffs have stripped American companies of their best and brightest workers (that’s not just an automaker problem. At Motorola, for example, product developers with excellent rankings are next up for layoff because all of the “average” and “good” engineers are already gone.)

Finally, the automakers do need some Congressional help. Congress can pass a law. Change labor laws to let the automakers void their union contracts. Then give those horrendously expensive pension obligations to the Fed. That’s going to happen whether we taxpayers like it or not.

Give us that kind of bailout and Messrs. Mulally, Nardelli, and Wagoner can take UAW President Ron Gettelfinger out to the woodshed and beat him until they have appropriate contracts for all the employees as well as for Messrs. Mulally, Nardelli, and Wagoner. After all, if the union folk must give up half their pay, the CEOs can give up most (90%?) of theirs.

We need to do something. Chrysler is probably worth about a billion dollars on the market. Ford’s market cap is $4.04 billion today. GM’s market cap is below Ford at just $1.91 billion. Bill Gates, Mr. Buffet, or the U.S. Congress could simply buy all three on the open market and even though it would be a better investment than the bank bailout has proven to be, that latter is a bleak thought.

Bashing – II

Posted on by

Politics bashing bidness, otherwise known as the famed and apparently widely sought-after Rectal-Cranial Inversion.

Have you noticed the direct correlation between Nancy Pelosi’s statements and the stock market tumbles? Consider this. Every 400 point drop in the Dow has come immediately after Ms. Pelosi mounted her podium.

Is it something in the water? Is it genetic? What is the matter with politicians in general, with Democrats in particular, and with Ms. Pelosi specifically? Are they just plain stupid or is it their God-given mission to ruin America?

We’ve been riding a couple of horses in this series: bad science and bad management.

Global Warming is a good example of Not-So-Real science. The popular press and the Congress would have us believe that all scientists agree on the causes and outcomes of Global Warming. And yet. And yet the National Climatic Data Center reports that global temperatures in 2006 were the third coldest on record.

Meanwhile, Weather Channel founder John Coleman wrote, “There is no significant man made global warming. There has not been any in the past, there is none now and there is no reason to fear any in the future. The climate of Earth is changing. It has always changed. But mankind’s activities have not overwhelmed or significantly modified the natural forces.” Mr. Coleman may be a whackjob but he is a whackjob with better scientific credentials than any national elected official.

That must be why Ms. Pelosi (with the help of Mr. Gore) will once again proclaim that Congress has more scientific knowledge than the actual scientists. The Democratic Global Climate Control machine just keeps on trucking. So to speak.

And then there is business.

Here’s a typical recent comment: “Automakers don’t need a bailout. Look at the airlines.”

And another: “General Motors doesn’t make cars that people want to buy.”

Hello?

It may be true that American automakers can survive without an infusion of loan funds but that airline analogy is just plain wrong. The airlines are a service business. Automakers make actual products.

Which company sells more cars in the world, General Motors or, say, Citroen? How about General Motors or, say, Volkswagen? Oooh, I know. How about General Motors versus, say, Toyota? Yeah, yeah, there is a real battle between the General and Toyota over which is the largest automaker in the world but the fact remains that millions literally millions of people have bought, are buying, and will buy brand new General Motors vehicles this year. That doesn’t add up to “not making cars that people want” even inside the Beltway.

Econ 101: You can fix labor problems by cutting wages, particularly in a service business. You cannot make fixed assets cost less by cutting income.

Ms. Pelosi is playing pur sang politics with a single objective. I believe Ms. Pelosi understands that she cannot ever look good. Therefore she must make everyone else look bad. If the Global Warming political argument destroys American industry and if she can force the automakers into bankruptcy, she believes she can rescue the teeny-tiny-and-oh-so-grateful remainder.

Assuming that any American employers last long enough to be “saved.”

Is it something in the water? Something in the air? Is it genetic? Maybe we need a government-funded study.

Or not.

Bashing – I

Posted on by

I followed a Subaru out the causeway the other day. It got me to thinking.

Coupla things have gone wrong for our kids in the past 40-or-so years. Unfortunately, it’s my fault. And Anne’s. And Bob’s. And Sal’s. And Dangerous Bill’s. And Linda’s. And Gene’s.

Ooh, there ya go. Let’s blame it all on Geno even if he is too old for the blame.

Our generation started out anti-war and ended up anti-everything. Want to put up a windmill to save us from imported oil? Somebody will protest. Want to shoot a terrorist? Somebody will protest. Want to manufacture widgets in Vermont, make some money and put folks to work? Somebody will protest. Want to cut a mangrove? Somebody will protest. NIMBY (Not In My Backyard) wasn’t coined by George Orwell. It came from the baby boomers.

That negativity has spread so it overshadows everything American.

We see one side of it in Jeremiah Wright who said blacks should sing “God damn America.”

We see the other side in that Subaru driver. See, there is a large and growing segment of America bashers who believe anything accomplished here is necessarily flawed and anything built here is necessarily shoddy.

Malcolm Bricklin made a deal with Subaru in the 60s to form Subaru of America and to introduce their cars to the United States.

I almost bought a Subaru Brat in 1978 or ’79. This scaled-down clone of the El Camino and the Ranchero from Chevy and Ford came with 4WD, an optional turbo charger, and standard rust. It was not a good car for Vermont and it cemented my expectations about Subaru quality for a couple of decades, despite the Legacy which was a decent, mainstream car and despite the fact that my daughter and son-in-law are on their third “Subi.”

I’ve looked pretty carefully at this now “National car of Vermont.” Subaru has built owner loyalty among yuppies by building what they see as an economical alternative to the Chevy, Ford, Jeep, and Volvo lines. It’s a worthwhile car.

Subi buyers, with their brethren Honda, Saab, Toyota, and Volvo buyers, won’t consider an American car. America-bashers believe German cars offer superior luxury and performance. America-bashers believe Japanese cars offer more dependability and fuel economy. America-bashers believe Scandinavian cars offer higher safety and quality. (It’s worth noting the Subaru plant in Lafayette, Indiana, the original Honda plant in Marysville, Ohio, the Nissan plant in Smyrna, Tennessee, and the Toyota plants in Alabama, Indiana, Kentucky, Texas, and Virginia. Saab is a wholly owned subsidiary of General Motors. Volvo is a wholly owned subsidiary of Ford.)

Domestic manufacturers have cars that lead in all these areas. In the J.D. Powers June survey, Mercury passed Honda and the Chevy Malibu was one of the best new vehicles of the year. The Detroit News reports that the survey results are “a pretty good predictor” of long-term vehicle quality and consumer satisfaction. Despite that, the domestic manufacturers may never overcome the usually uneducated bias among America-bashers, particularly those in the general press.

I have examined and driven the world class cars from Cadillac, Chevy, and Ford. The big Caddy STS V-8 can out-luxe and outhandle the Mercedes C300 and it gets 25 mpg on the highway. (Don’t believe me? The 2008 CTS outscored both the Mercedes and the BMW 328i in Consumer Reports’ sport sedan review.) The Corvette can stomp pretty much any sports car on pretty much any road. And it gets better mileage than the Caddy whilst idling down the Interstate. And then there is Malibu. 30 mpg. Comfortable. Good performance. Good fit and finish. Anne drives an Accord. The Malibu is simply better. (Consumer Reports again: “This is a heavy hitter that competes head-on with Camry, Accord, and Altima … Really no reason for GM to build the G6, Aura, Impala, or LaCrosse anymore – just sell these instead.”)

I learned to appreciate the Subaru so it is possible to change people’s minds. Maybe.

I guess others think their “foreign” cars are better than “American” cars. I guess the America-bashers are wrong. Again.

For the record, I have indeed put my money where my mouth is. I own GM stock. I drive a Camaro convertible (29.6 mpg on I95 with the top down in October) and a Silverado.