Cash for Clunkers?
I just read that 4 out of 5 new cars sold through the “cash for clunkers” program were foreign brands. True, some foreign models are assembled in American factories, but even then, the far greatest stimulus through this program is to the foreign parts manufacturers, foreign assembly plants, and foreign owned businesses. The “cash for clunkers” program also seems to have helped Toyota get on track to become the largest auto producer in the world. (WSJ 7/29/09)
I am sure that this program does help many (not all) dealers, car salesmen, and financial institutions in the U.S. I’m also sure it has provided some benefit (at least temporarily) to the American auto industry. But, I wonder if that was the best way to spend $3 Billion (so far) of taxpayer money?
What if…
What if that $3 Billion had been allocated to small business in general. Money for expansion and growth. Money for new startups. Money for R&D. Money to retrain the unemployed. This is where meaningful re-employment will take place. Small businesses have virtually unlimited needs in order to achieve the economic recovery mandate set out for them by the current administration. And yes, small business may be the most innovative—but to innovate “quickly” they need to have access to capital. The $3 Billion just spent would have gone a long way to accomplish this.
That’s my take—what’s yours?
Home Businesses…Beware!
Seventy percent—around 21.1 million—U.S. businesses have no employees, and many, many of these businesses are conducted out of the owner’s homes. This practice has been ongoing for generations, if not centuries. It is a time-honored and normal entrepreneurial endeavor.
However, that may be coming to an end, at least in part. I ran across a post in makezine.com, by Robert Bruce Thompson, a chemist with several books to his credit, among them, An Illustrated Guide to Home Chemistry Experiments. Thompson’s post is a little scary, and should be soberly considered by all entrepreneurs who work in their homes. Excerpts would not do justice to Thompson’s post, so I will include it in its entirety below:
The Worcester Telegram & Gazette reports that Victor Deeb, a retired chemist who lives in Marlboro, has finally been allowed to return to his Fremont Street home, after Massachusetts authorities spent three days ransacking his basement lab and making off with its contents.
Deeb is not accused of making methamphetamine or other illegal drugs. He’s not accused of aiding terrorists, synthesizing explosives, nor even of making illegal fireworks. Deeb fell afoul of the Massachusetts authorities for … doing experiments.
Authorities concede that the chemicals found in Deeb’s basement lab were no more hazardous than typical household cleaning products. Despite that, authorities confiscated “all potentially hazardous chemicals” (which is to say the chemicals in Deeb’s lab) from his home, and called in a hazardous waste cleanup company to test the chemicals and clean up the lab.
Pamela Wilderman, the code enforcement officer for Marlboro, stated, “I think Mr. Deeb has crossed a line somewhere. This is not what we would consider to be a customary home occupation.”
Allow me to translate Ms. Wilderman’s words into plain English: “Mr. Deeb hasn’t actually violated any law or regulation that I can find, but I don’t like what he’s doing because I’m ignorant and irrationally afraid of chemicals, so I’ll abuse my power to steal his property and shut him down.”
In effect, the Massachusetts authorities have invaded Deeb’s lab, apparently without a warrant, and stolen his property. Deeb, presumably under at least the implied threat of further action, has not objected to the warrantless search and the confiscation of his property. Or perhaps he’s just biding his time. It appears that Deeb has grounds for a nice juicy lawsuit here.
There’s a lesson here for all of us who do science at home, whether we’re home schoolers or DIY science enthusiasts. The government is not our friend. Massachusetts is the prototypical nanny state, of course, but the other 49 aren’t far behind. Any of us could one day find the police at the door, demanding to search our home labs. If that day comes, I will demand a warrant and waste no time getting my attorney on the phone.
There’s a word for what just happened in Massachusetts. Tyranny. And it’s something none of us should tolerate.
Here is an interesting follow-up from Mr. Deeb’s daughter:
I am the daughter of Victor Deeb and what they did and took from my father is not only unfair but devastating to an old man whose life for the last 40 years has been chemistry. They not only took all of his chemicals (which he used in his research for non-toxic sealants for baby food jars) but 20 years of notes that were valuable only to him. Now his research notes have magically disappeared into thin air. Can someone tell me where the justice is in that?
-m deeb
What do you think—could anything like this happen in your town…in your neighborhood? Homeland Security and the Patriot Act have changed the landscape in the U.S., and it does make a person wonder…….
Foreign Lending to the United States
Have you ever wondered which countries have loaned money to the U.S.? We hear a lot about China loaning us money, and before that it was Japan. But, that is not where the foreign lending ends—take a look:
- China – $767.9 Billion.
- Japan – $686.7 Billion.
- Caribbean banking centers – $213.6 Billion. (Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Netherlands Antilles, Panama.)
- France, India, Korea, Turkey – $204 Billion.
- Oil exporters – $192 Billion. (Algeria, Bahrain, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Oman, Qatar, Saudi Arabia, U.A.E., Venuzuala.)
- Russia – $138.4 Billion.
- Channel Islands, Isle of Man (U.K.) – $128.2 Billion.
- Brazil – $126.6 Billion.
- Egypt, Israel, Italy, Netherlands, Norway, Thailand – $124.3 Billion.
- Luxembourg – $106.1 Billion.
- Belgium, Canada, Chile, Colombia, Malaysia, Philippines, Sweden – $89.5 Billion.
- Hong Kong – $78.9 Billion.
- Taiwan – $74.8 Billion.
- Switzerland – $67.7 Billion.
- Germany – $55 Billion.
- Ireland – $54.7 Billion.
- All other countries combined – $156.7 Billion.
This adds up to almost $3.3 Trillion, or almost a third of the U.S. debt. With the U.S. economy on the rocks, and more money needed to pay for Congressional spending, about the only place the U.S. can get that money is from foreign investors—thus raising the stakes in foreign ownership of America.
Just one more thing for business owners and individuals alike to think about.
Who’s In Charge?
I seem to recall that, in his last press conference, President Obama said the government was not going to run auto companies. I guess I must have misunderstood what was said, because here is what BusinessWeek writer David Welch said in a recent article.
“Make no mistake: The Whitehouse and the task force overseeing the restructuring of both GM and Chrysler since February are calling the shots.”
You can take a look at Welch’s complete article here, but I will point out a few interesting highlights from his article in the following.
“Treasury has a couple dozen staffers and executives from Boston Consulting Group (BCG) scrutinizing operational details at the car company. (BCG is getting paid $7 million from the government for its work on both GM and Chrysler.)”
“Some GM insiders fret that Treasury’s key players have precious little industry experience.”
The head of the Treasury Task Force is Steven Rattner, the Wall Street financier and co-founder and Managing Principal of the investment firm, Quadrangle Group. (Yes, this is the same Rattner who is being investigated for his alleged connection to a scandal involving a New York State retirement fund.) No one on the Treasury Task Force has any experience in the car industry.
Welch also reported that a dozen Treasury staffers and outside consultants recently descended on GM, and pushed them to dump Buick and GMC, in addition to Pontiac, Hummer, Saab, and Saturn. The staffers said that Toyota was successful with just two brands—Toyota and Lexus—why couldn’t GM just sell Chevrolet and Cadillac? After GM pointed out that Buick and GMC were moneymakers, and that Buick was in high demand in China…Treasury relented.
Treasury and BCG were not finished, however. The staffers and consultants made GM managers jaws drop when they questioned why GM was spending money to continue development of the Volt. Apparently, Treasury thinks the current lineup of gas-guzzling Chevrolets and Cadillacs is just fine.
Not to be outdone by staffers, one Treasury Official wanted to know when the new Chevy Malibu would go on sale. It has been in showrooms for 18 months.
I’ll bet Ford is glad they didn’t take any bailout money from the government.
Gee, I can hardly wait for these folks to take over my health care.
A New Capitalism?
After writing the post on “The Nationalization of Big Business,” I received a number of emails and comments that made me take a closer look at this issue. Since I’m not a futurist, economist, nor academic, I rely on the following definition of capitalism, which pretty well spells it out for me.
Capitalism is an economic and political system characterized by a free market for goods and services and private control of production and consumption.
Princeton University’s Wordnet defines capitalism as an economic system based on private ownership of capital…antonym of socialism.
To me, capitalism means that if the market (we consumers) likes what a business has to offer, we buy from that business and it becomes successful and continues to grow and prosper. If the market does not like what the business has to offer, we don’t buy from that business and it fails. That is the simplest form of capitalism. Capitalism is totally market driven, and it has worked well for American companies for a very long time–until now.
Now, although we have over 30 million American businesses that fit the basic definition of capitalism…Robert Reich, former Secretary of Labor, has pointed out in a recent article, that we also have companies which operate outside our capitalistic system, because they are no longer accountable to the market. If they were accountable to the market they would close–with mass loses of jobs, which would heavily impact our entire economy. Therefore, they cannot be allowed to fail, because they are too big to fail.
So, if we have companies that are not accountable to the market, and operate outside our capitalistic system, who should they be accountable to? If some of these companies can only survive by living on taxpayer’s money, shouldn’t the taxpayers hold them accountable? Unfortunately, that would mean the government would become involved in the operation of these companies, and does anyone think the largest bureaucracy in America can better manage them?
There are no simple answers, but lots of questions-for instance:
- When is a company, no longer accountable to the market, and becomes too big to fail?
- Should large, unaccountable, businesses be forced to break up into smaller, more manageable (and accountable) units…similar to the former Bell system breakup?
- Should the government take control of these large “too big” companies and dictate who should manage them, and how they should be run?
- Or, should these large unaccountable companies simply be allowed to fail–putting 10′s (maybe 100′s) of thousands of people out of work?
These are pretty heady questions for just a street guy, but I would really like to hear the opinions of anyone out there who wonders what is happening to our capitalistic system–and should it be happening? Better yet, how can it be made more successful in our global economy?
The Nationalization of Big Business
Good grief, what has happened to America’s capitalistic, free enterprise system? As a red-blooded American, native Michigander, and alumnus of Kettering University, I am more than a little shocked, disappointed, and angry at what I see as a major blow to free enterprise, and more importantly, to democracy. Here’s why:
Following is a condensation of a couple of articles that came to my attention today. These are excerpts from an article by Monica Langley and Neal E. Boudette in the WSJ’s Morning Brief, and an article by Dr. Jeffrey Feldman in the Huffington Post.
WASHINGTON — Inside a windowless, ornate room Thursday (3/26) just across from the Oval Office, President Barack Obama and a group of senior economic advisers began the job of remaking the American automobile industry.
The first order of business: Oust General Motors Corp. Chief Executive Rick Wagoner.
Steven Rattner, a former investment banker who is heading the administration’s auto restructuring; chief economic adviser Lawrence Summers; and Treasury Secretary Timothy Geithner were among those gathered around the polished wood table of the Roosevelt Room in the White House’s West Wing. They were there to decide under what conditions the government would continue to prop up once-powerful Detroit car companies GM and Chrysler LLC. At Thursday’s meeting, once the Obama administration concluded the pair were running out of money, their effective dismantling began.
The White House meeting at which Mr. Wagoner’s fate was decided came five days before a March 31 deadline when the administration was set to rule on the viability of the companies.
The auto team (headed by Steve Rattner) prepared briefs for Mr. Obama on his options, as well as viability reports on both companies. The car team wanted an executive who could accelerate the changes it (the administration) desired. Mr. Wagoner didn’t have any support within the group. “This is Obama, and symbols of change are important,” said one person familiar with the situation.
A much harder decision was what to do with Chrysler. A conclusion that the company wasn’t viable could lead to 40,000 workers losing their jobs. To combat that threat, the government is negotiating with Chrysler and Italian car maker Fiat SpA for an agreement that Fiat will continue to make cars in the U.S. if it buys Chrysler, according to an official of the Obama administration.
After the Thursday meeting at the White House, Mr. Rattner asked Mr. Wagoner and Mr. Henderson to come see him the next day. Mr. Rattner broke the news to Mr. Wagoner at his office at the Treasury, according to an administration official. Afterward, Mr. Rattner met with Mr. Henderson, and told him he would take over as GM’s CEO.
Once word started to trickle out that a White House decision on the auto makers’ fate was imminent, GM officials and some Michigan lawmakers began making calls. Michigan’s Democratic governor, Jennifer Granholm, called the White House to ask for a meeting with Mr. Obama. Told she’d need to come in by Friday, which wasn’t possible, she had a personal phone call with the president and urged him to consider the communities that could suffer.
Mr. Wagoner told GM’s board Friday evening that he was asked to step down and informed directors the administration wanted a majority of them to resign, according to two GM officials. Several volunteered to quit over the weekend. Other GM officials speculated that they would also be asked to resign.
On Sunday, …Mr. Obama made one call himself to some of the Michigan delegation, including U.S. Sen. Carl Levin and his brother, Rep. Sander Levin, and Michigan Sen. Debbie Stabenow. He told them that he planned to put some administration staff into the Detroit companies, according to one person familiar with the situation.
Sen. Corker, a Republican from Tennessee, said he told Mr. Rattner on Monday that he was alarmed that the administration would dictate what kind of vehicles would be constructed. “Deciding what vehicles and plants will survive is setting industrial policy,” the senator said.
For the complete article, click here.
Let me see if I have this correct-
- The administration does not give money to the auto industry-Congress does. (Unless the Treasury dept. is diverting funds Congress provided previously.)
- The President has formed a small group of people (the auto team) who are dictating how the American auto industry will be run.
- The head of the administration’s new auto team is Steve Rattner, a former Investment Banker.
- Steve Rattner personally fired Mr. Wagoner and personally appointed Mr. Henderson as the new President of GM.
- The administration is dictating what cars the auto industry will build, and what plants will survive.
- The strong-arm tactics by President Obama and his auto team run roughshod over the Articles of Incorporation and By-laws of GM, rending corporate law meaningless. (Nationalization?)
- The President told some of the Michigan delegation he was going to “put some administration staff” into the Detroit companies.
- The auto team is doing the negotiation between Chrysler and Fiat.
There also seemed to be a few people missing from the Thursday meeting–like:
- Where was the Board of Directors?
- Where was the Michigan delegation?
- Where were the shareholders (the government is only one shareholder)?
- Where were the “car guys?”
- Where were the “union guys?”
- Where were the Congressional leaders?
- Lastly, where is the fairness, executed by the administration, between the auto industry and the banking industry?
What does Michigan think of all this? Here is what Dr. Jeffrey Feldman had to say in his article in the Huffington Post today:
Fear and anger are rising in Michigan: Fear that things are about to get much, much worse than they already are; anger that the federal government is strong arming the Mitten State just a short while after opening up America’s coffers to Wall Street with no strings attached. New York gets what it wants, when it wants it from Washington, Michigan gets slapped in the face. The fat cats on Wall Street caused this problem, they sank the economy, and they got paid off…Executives in Detroit get tarred and feathered and escorted to the door.
For the complete article, click here.
Now, I am not saying that all these things shouldn’t happen to, or within the American auto industry; nor that they wouldn’t happen anyway, but I am shocked, and disappointed, at the way events are being dictated to the auto industry by the President, and his select few, who are taking over the entire industry. That is not how capitalism works. That is not how democracy works.
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