Thursday, November 13, 2008
In the past two months, we've spent more than 300-billion dollars attempting to fix the financial markets. And we're looking at spending more than another 300-billion dollars in the next few weeks.
Since then we've heard that our automobile industry needs help. Another 25-billion dollars. And the leadership of the national legislature, Senator Harry Reid and House Speaker Nancy Pelosi, are talking about adding billions more. There are estimates of increasing our national deficit by more than two trillion dollars.
Let me tell you a little secret: when companies go bankrupt, their assets don't disappear.
That may be puzzling for some. How can a thing be destroyed and still exist?
It is true that this kind of question boggled early scientists. Take a log. Burn it. Weigh the ash. Where'd all the weight go? It was reasonable to assume that what actually made a log a log was constituted of elements that only weighed as much as the ash that was left after burning it. And to listen to folks like Congressman Barney Frank talk about the auto industry, it's this kind of "sleight of hand" that's taking place in describing the need to save the auto industry.
So, for Senator Reid, Congressmen Pelosi and Frank, it's easy to deceive others into believing that if we allow the auto companies bankruptcy, all that will be left will be a pile of ash.
If only that were true.
I remember a mortgage I had with a savings and loan institution back in the 1980's. That S & L failed. Hooray! I had a free house!
But that isn't how it works, is it? Even though the institution that I had my mortgage with failed, the asset value of the failed S & L still existed. (I didn't even get a brief holiday on mortgage payments.)
So what happens when a company goes bankrupt? Whether its a bank, or an insurance company or, an auto manufacturer?
It's a recognition that the return on the value of the assets don't pay for the cost of those assets.
In the socialist dialectic is the trivialism, "To each, according to his needs. From each, according to his ability." The first corollary of socialism is, property is a form of theft. How does property rise to the level of theft? Because it fails to meet the re-distributionist promise of "to each, according to his needs."
If you've ever read any of the German philosophers or economists, you've been exposed to this kind of re-definition of words in common use. (Gawd, I read "Critique of Pure Reason".) There is a constant attempt at creating equivalence between different concepts. This attempt at creating equivalence usually ends with a necessary equivocation. It requires administration of the Afpel Test. (The Afpel Test is stated thus: if I really, really, really believe a thing to be true, it must be true.) Equivocation is defended based upon the intrusion of a concept called "duality". Under duality rules, a thing may be a thing and not a thing at the same time.
And nobody says this better than a German metaphysician.
The problem of socialism is the problem of definitions. If you start with the idea that property is a form of theft, socialists have a problem telling you what a thing is worth. What an asset is worth. What a "bad" mortgage is worth. There is a process that defines such things.
And that is the market.
Whether it is an automobile brand, fer instance "Chevrolet", or a mortgage located in the bad part of town in Detroit, the quickest way of finding out the value of either asset is to hold an auction, invite interested parties to the bidding, and sell the assets.
Wow. That was easy.
So what is holding up these auctions?
There is an uneasy feeling among socialists that if they begin to act like capitalists, the jig, as they say, will be up. And, of course, there is their version of a Contract With America. Their contract is made up of promises to different "victims" groups. If you're a non-victim you probably don't even know how many victims groups there are out there. The largest of these victim groups we will refer to as "the unions".
The failure of socialism is the same failure that socialists use to describe the failure of capitalism: greed. But I would argue, that some greed is better than another. (Wudya expect? I'm an avowed free marketeer!)
As I relate in my Econ 101 posts, Joe was driven to increase his production of carrots in order to achieve a surplus of carrots. And with that surplus he was able to improve the quality of life through trade and barter. His life was richer. But that pre-supposes a thing. The product of his effort is his property.
Joe is a capitalist bastard. Under socialism, Joe must turn over the surplus of his needs so that others may have what they "need". (When we begin the examination of Economies of Scale in the Carrots and Bicycles series, we're going to find out that there are different productivity increases that rely on the addition and subtraction of various inputs in the Product Transformation Curve. This will allow us to examine the productivity returns on the basis of what inputs are used. These changes in productivity will allow us to allocate the value of the inputs in terms of a generalized statement of profit.)
Socialists have a different starting point than you and I. You and I see the value of our work as resulting in a direct benefit to ourselves as individuals. Socialists see your making more money or owning more land or having a better car or having a nicer house as proof that private property is a form of theft.
You, as a member of this society, are a victim of this theft. (Well, mebbe not you, but take a look around your town. You'll soon find a victim of this theft.) So the Socialist impulse is to create a society where all of us have the same opportunity. The opportunity to have a bunch of stuff.
And who are the most represented victims of this form of theft in America? Union members. In their "us versus them" mentality, any surplus created by any form of economic activity is surplus that should go to labour. The fact that the Chairman of the Board of General Motors makes more than the guy working on the production line is proof to these people that private property--and by extension, the recipients of the surplus of this bountiful system--is a form of theft. Theft from the worker who labours on the line, stuffing the pockets of the Fat Cats with dough. It ain't fair!
Sure. But let's take a quick look at the market for labour. Particularly, the market for labour in the automobile industry:
(Thanks to Rodger at Are We Lumberjacks, who stole it from somebody else.)
Minimum wage in Oregon is $7.95 an hour. Since we have government picking winners and losers for us, if you choose to enter the job market, the state is going to guarantee you an hourly rate of at least this amount. (The fact is, few people worth hiring are paid this amount, but remember, this is a government statement of what people's labour is worth. Let's just take them at their word for the moment.)
What we see is that the average wage of workers is quite a bit higher than the wage level mandated by the state. (Would this average drop if we removed the minimum wage? I would assert most assuredly so. But, the unemployment rate would drop. Hmm. Too many goals.)
What this snapshot of wages should allow you to address is one of the reasons why the Big 3 automakers are having a problem making any money. Did you know that the price of labour in manufacturing a car is higher than the price of all the other inputs? Buy a new car for $20,000 and more than half of that is the labour cost.
The funny thing about mandates: they cost us all a lot more money.
Just as the energy companies are having to pay for their success with silly government mandates for "green" energy, the automobile manufacturers have had to pay for their success with silly mandates, too. Because politicians can implement their opinions in a very unique way. If their opinion is, we need to have higher mileage standards for automobiles, they just pass a law. In the real world, this is called Engineering Made Easy.
The practical implications of mandating automotive efficiency standards on manufacturers is lost on these people. What does Nancy Pelosi know about making a payroll? Barney Frank? Harry Reid?
It doesn't matter to these people. And, they'll tell you that to your face.
See, even though Nancy has beaucoup bucks, she got hers by doing the right things for America. When the head of Wells Fargo makes beaucoup bucks, he's getting his by ripping off the common man. She is entitled to her wealth. You are not. Even if you're making less than the guys on the line of the Big 3 automakers. They make more because they belong to a union. (Carrot and stick.)
So, how do you cash in? By joining a union.
Problem is, the unions are killing the Big 3. But not to worry. Barney Frank sez we're going to use TARP money to bail out the Big 3. Because we can't afford to lose that many union jobs.
I love it when government picks winners and losers. The winners here? The big automobile union. The loser here? Everybody else. (And you know what's funny? They're borrowing from your children and grandchildren to help their constituency out. Hilarious, no?)
We can't afford a war being waged against us by foreign terrorists. But we can afford spending three to five times as much to save an endangered species. The Automotive Union Worker.
Wednesday, November 12, 2008
Monday, November 10, 2008
Legislation will combat climate change through renewable energy and energy efficiency efforts, green buildings and electric cars
(Salem) – As part of his 2009 legislative agenda, Governor Ted Kulongoski today announced a series of climate change legislation to be considered in the 2009 legislative session. Joined by Peggy Fowler of Portland General Electric and Mark Edlen of Gerding Edlen Developers, the Governor presented his agenda at the Center for Health and Healing at Oregon Health and Science University, highlighting green buildings and electric cars as two fundamental components to the climate agenda.
“We have made great progress in the fight against climate change over the last five years, but that was just the beginning,” Governor Kulongoski said. “This next session we must be bolder, more strategic and even more visionary if we want to reach our greenhouse reduction goals and truly pull ahead of the pack, leading our country and the globe on green living and green working.”
The Governor’s climate change agenda for 2009 centers around four key areas: Greenhouse Gas Reductions; Energy Conservation and Efficiency; Renewable Energy; and Sustainable Transportation. Each area contains concepts that reduce greenhouse gas emissions, encourages alternative power and vehicle use, drives innovative energy technology development, provides energy efficiency information to consumers and protects low income energy users.
“We have reached another historic moment in our understanding of the environment – and the economy,” the Governor said. “The unregulated and unmitigated emission of CO2 and other greenhouse gases into the atmosphere is changing our climate, threatening our ecology, keeping us dependent on foreign sources of energy, and – if nothing is done – is a missed opportunity to reinvent our national and state economies.”
The major elements of the Governor’s climate change agenda include developing net-zero energy use building codes, expanding the Business Energy Tax Credit to new more efficient vehicles, development of energy performance certificates for homebuyers and a regional cap and trade program to reduce greenhouse gas emissions.
“We must continue to be aggressive in creating the tools we need to solve the global warming crisis – and in doing so, strengthen our economy and preserve our quality of life for our children and grandchildren,” the Governor said. “My agenda is broad. It is ambitious. It is comprehensive. And the time to put it into action is now.”
For a complete description of the Governor’s entire 2009 climate changes agenda, click here.
Committee delivers recommendations for comprehensive statewide transportation investment, creating jobs, strengthening the economy and reducing carbon emissions
Salem – Today Governor Ted Kulongoski received a report from his Transportation Vision Committee outlining a comprehensive transportation plan for consideration as the Governor develops his agenda for the 2009 legislative session.
“One of the most important investments we can make during a slow economy is in public works projects, such as transportation,” Governor Kulongoski said. “An investment in transportation creates jobs immediately. The state is committed to doing its part and I look forward to working with our congressional delegation to make this investment in transportation infrastructure a national priority so we can get Oregonians back to work.”
Last year, Governor Kulongoski convened three workgroups composed of business leaders, legislators, local and state officials, transportation stakeholders and sustainability and land use experts to develop recommendations for a comprehensive transportation package for the 2009 legislative session to meet immediate needs and create a framework for future action. The workgroups focused on three areas: Governance; Public Awareness; and Vision.
“Oregon’s transportation system is not currently equipped to respond to the needs of a global economy, increases in population, rising energy costs, and our obligation to reduce greenhouse gas emissions,” the Governor continued. “To address this challenge, we need a comprehensive strategy that reaches statewide, creates jobs, provides for continued investment over the long-term and helps reduce carbon emissions.”
The Governor outlined five core principles to guide the development of the committee’s recommendations: economic development; local decision-making; sustainability; transparency and oversight; and statewide distribution.
“After a year of work and hundreds of volunteer hours from experts across the state, we've presented the Governor with a report that charts a new course for transportation in Oregon,” said Pat Reiten, Chair of the Governor’s Transportation Vision Committee. “It departs from our traditional approach, which has led to fragmented and underfunded transportation programs, and puts us on path toward a sustainable transportation system that includes all modes to move people, goods and services safely and efficiently, and funds our system for the long-term.”
The report delivered to the Governor today includes recommendations for reducing vehicles miles traveled in urban areas, a dedicated fund for non-highway transportation investments, a new transportation utility commission, and dollars for rural counties hit hardest by the scheduled sunset of the federal forest payments. The committee also recommends a series of funding options, including bonding, a new vehicle title fee, and a path to transition away from the gas tax as the central funding source for transportation.
“I appreciate the work of everyone involved in this report,” the Governor said. “I did not issue an easy charge. This kind of review and comprehensive look at our transportation infrastructure was long overdue. I look forward to reviewing the recommendations and having a lively but respectful discussion with the legislature and the public about the need to make key investments to strengthen our economy and create thousands of family-wage jobs.”
The Governor will use this report to inform his transportation agenda for the 2009 legislative session, which he is scheduled to present to a joint hearing of the Senate and House Transportation Committees on Monday, November 10, 2008.
For a link to the report, click here.
Sunday, November 9, 2008
Stole this from Max. Watch the vid. Read this post. Oh, and read this post by Max.
I started out posting a comment to an article on MaxRedline's site. As it lengthened, I realized that I should post here, and provide a link to this, instead of a lengthy comment. If folks wanted to read my thoughts at length, this is the place for that. Right?
I've been watching the Texas Book Fair on C-SPAN2.
I'm not surprised by some of the commentary being offered about the then upcoming political campaign. Senator Obama is viewed as articulate. Senator McCain? Not so much.
You might wonder why I've gone off the edge with my Carrots and Bicycles posts. Had an interesting experience. Last weekend, at the 19th Hole, four of us sat for awhile enjoying the fruits of our day's labour. One of our quartet was visiting from another state. My other two gangstas were gentlemen who regularly read my postings--as regular as my postings are.
I have to give credit to North Coast Oregon for its link to my website. Our local paper is in the tank for the Leftist/Progressive movement. What North Coast Oregon does is provide links to local bloggers, whether they write about their grandkids or government. One of my local gangstas knows that I write these articles. The other doesn't. So, when our out-of-state guest started talking about why Obama was okay, I was able to sit back and listen to their responses to his assertion. And I learned something reassuring. Having some ability to articulate fundamental starting points in any discussion with a Leftisit/Progressive is a powerful place to begin such a discussion.
Somehow the notion that government programs are costless has gotten into the Lefty/Progressive head. What I heard developing during this discussion was the role of government in choosing winners and losers in our economy, and whether that was actually a policy choice we should be adopting as a nation.
I watched eyes light up as we began talking about the fundamentals of economic activity: who chooses to do what?
The question was finally asked: Why is okay to tax an increase in carrot production (if that production is intended to increase someones wealth), but you think its okay if someone simply chooses to grow gardenias for personal enjoyment? Imagine, taxing the flowers that you grow in your garden!
It is, of course, the Left's objection to purposeful, independent wealth-making that separates those two classes of horticultural endeavour. You may consume as much of our society's resources as you so choose, as long as it isn't for a wealth-producing cause.
Why else would we need government to pick winners and losers? I am haunted by President-elect Obama's declaration that he was going to used carbon tax to tax coal-fired electrical generation out of existence. But these are the great thinkers who are articulate, who cannot see that even the use of a garden to grow gardenias requires us to use energy to do so. That is, unless, we go out into our gardens and use our bare hands to dig our subsistence plots, relying solely on the vagueries of Mother Nature to provide our plots with the necessary condiments to promote the growth of our gardenias.
Garden hoes and rakes don't pop into existence magically. Although politicians--like our Governor Kulonczynski--seem to think that if they Vision a thing hard enough, miracles will occur.
Learning the fundamentals of how free markets work, and why they are preferable to other forms of market organization, is essential if you are going to take on the Unabomber visions of the Lefty/Progressives. Recognizing the sheer madness of the Left isn't enough.
You need to be able to articulate those differences. They are fundamental. I'd ask you to remember this quote from Edmund Burke, a dead guy:
"Nations are not primarily ruled by laws; less by violence. Whatever original energy may be supposed either in force or regulation, the operation of both is, in truth, merely instrumental. Nations are governed by the same methods, and on the same principles, by which an individual without authority is often able to govern those who are his equals or his superiors, by a knowledge of their temper, and by a judicious management of it; I mean, when public affairs are steadily and quietly conducted: not when Government is nothing but a continued scuffle between the magistrate and the multitude, in which sometimes the one and sometimes the other is uppermost--in which they alternately yield and prevail, in a series of contemptible victories and scandalous submissions. The temper of the people amongst whom he presides ought therefore to be the first study of a statesman. And the knowledge of this temper it is by no means impossible for him to attain, if he has not an interest in being ignorant of what it is his duty to learn."
There are reasons why Free Marketeers exist. Learning to articulately defend our free marketeers has evidenced itself too often, especially among that group that self-identifies as Ron Paul supporters. No economic system is without peril or flaw. But gaining an understanding of our economy's methods for storing and transmitting wealth will reduce the fervour of the gold and silver bugs.
It is up to you to gain currency and usage of important economic fundamentals. This is not important if you are a Lefty/Progressive. A Lefty/Progressive would never let facts get in the way of a good Vision.
I'll state it again. I am not a Libertarian. There is a role for governments to play in regulating our daily affairs. What I oppose is this complete rejection of the value of individual rights and choices. We have a Constitution to guarantee those rights. Unless you develop the tools to articulate your objections, the departure from those guarantees will continue. (By the way, there's a great book out there that is well worth your reading. But it if you have to. It's called "New Ideas from Dead Economists".) The math isn't hard. And it's an enjoyable, humourous read. Do yourself a favour. Read, write and speak. You cannot gain articulation without practise. And practise sorta implies that you're going to make mistakes. Make them now, when you're young!