Friday, November 21, 2008

Money cannot solve the present economic fiasco

The presumption of a kid is that a parent can step in and solve everything. I know this from both sides – I looked to my dad that way; I’ve seen my kids look to me that way. But while being a parent doesn’t come with a handbook, it does confer wisdom after a while: It’s the kid that has to change; if s/he doesn’t, today’s problem will simply resurface tomorrow.

Who are the players as applied to the current economic challenges?

The kid is the mishmash of private and quasi-private entities with their hands out: The automakers, Fannie & Fannie, the banking industry, the investment community, and whoever is yet to come with cup in hand.

The parent is us – the voter, the resident, the taxpayer, the citizen.

So where does the government with its coffers hemorrhaging money fit in? They’re the new spouse – the one that likes to party, the one that likes presents, and the one that pouts when something/anything is denied to it. It’s the one with access to the checkbook and credit cards, and that undermines our discipline of the kids.

We’ve got a real problem, and it is not Corporate America: It’s Congress.

The present “credit crunch” is disturbingly similar to the 1930’s fiasco of credit depletion. The solution – the new spouse marching in with open coffers – is also too close to Depression-Era economics for comfort. A 2004 UCLA study asserted that FDR’s program actually prolonged the Great Depression by several years. A money quote from the UCLA Newsroom is chilling as we watch the actions of Congress today:

"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."

The next problem is the slow socialization of private industry in the form of labor unions. Unions had their time. It’s over. I suggest a new white-collar crime: Corporate Buggery.

We’ve learned recently that automobile wages are significant higher in The Big 3 than their foreign competitors for comparable production facilities located in the US. The assertion has been made that GM, et al., are more pension and health-care providers than manufacturers of vehicles. If labor unions want a piece of the action, then it is time that they ride the risk as well as the reward. Flush the existing contracts, and replace them with market-competitive wages and incentive bonuses.

We can’t stop looking at the new spouse’s malfeasance without considering energy policy. Two observations: We send billion of dollars a day to countries like Iran, Venezuela, Nigeria, and assorted Middle East countries with opinions and policies concerning us that range from usury to hostile; we spend billions of dollars a day on homeland security and defense, a significant portion of which is used to counter the hostile activities of these countries that is ironically funded with the energy money we put in their pockets.

Why these silly numbers? Because Congress would rather preserve a frozen tundra than keep our citizens and armed forces out of harm’s way; because Congress would rather bend to the will of the Vocal Minority (who happen to donate to campaigns more regularly) than to follow a logical energy policy. Congress tells us that drilling now won’t result in energy for ten years – they said the same thing ten years ago.

Sen. Reid, I have questions for you: Pirates just seized a supertanker full of crude oil. Are our national-security interests at stake? Should we deploy the US Navy to take control of that lawless stretch of water? Would it be better if the area of exposure to hostile takeover of our sources of energy were limited to Wall Street?

What should we do? The solution is for Congress to stop play-acting like they understand and want to help. In short: Go away.

Don’t help me rewrite my subprime mortgage by taking an equity stake in my home. Don’t take ownership positions in banks, investment firms, and perhaps automobile manufacturers.

Nothing is more embarrassing than watching Sen. Chris Dodd (D-CT) grill auto execs. Over 90% of the more than $600 million in campaign money from labor unions over the last ten years went to democrats. It reminds me of when I was 12 years old and my dad preached to me about the evils of smoking, all the time with a cigarette in his hand. The labor unions know Dodd’s theatrics are just that: A play he is staging. We deserve better. We need better.

Drill here, drill now? I don’t care where you drill – just get it on. We have domestic resources. Stop getting in the way of developing them. I think that saving my son from a terrorist attack funded by foreign-oil payments outweighs the rights of an owl and a pink flower.

We need the economy to do what it always does: Flush out the broken pieces through bankruptcy and merger. Allow competition to fill the gaps. The government’s role should be limited to supporting us directly through extended unemployment benefits and other short-term assistance measures. They need to keep their hands off the economy. It is a ship that rights itself.

These kids – the hurting entities of Corporate America – need to pay the price for their own malfeasance, even if the new spouse – Congress – enabled them.

Congress needs to stop thinking like socialists, and more like the capitalists that built this country.


  1. But they are Socialists! I vote that we give all American Citizens (that are not politicians) a very large stimulus check - say $250,000 with an immediate 25% going back to the government coffers in the way of taxes to start on green infrastructure and energy development, and the rest will actually be put back into the economy through large ticket purchases and college education. That would be stimulus that I can believe in!

  2. i think you may have something there!