An Elephant in Donkey Land

December 19, 2008

Bush Hands UAW Bailout Illegally

Filed under: Economy — conservativelawstudent @ 8:38 pm

Not to mention one of the worst, if not the worst decision he has made in a running string of bad decisions. As I have written about before, the American auto industry is in shambles. It is partly about management, but most of this has been caused by the UAW. And make no mistake, this bailout is for the UAW. This will not work, and they will be back within months asking for more. But next time, Ford will be included.

LET.THEM. FAIL. Much like a forest fire is a healthy thing for the forest, when a bad business model fails, it is bad in the short term, good overall in the long term. There will be a vacuum that will be quickly filled by better, more efficient companies.

Not to mention that using TARP funds for this is illegal. The funds for TARP are for “financial institutions.” The Big Three are most certainly NOT financial institutions. Although the definition in the statute is very broad, with the phrase “including, but not limited to,” that does NOT give the government carte blanche to give money to anyone in need. Yes, it will be hard. Yes, a lot of good people will lose their jobs. If there is anyone who knows what that is like, it is me. But it is necessary. And exactly where is this money coming from? Where are these TARP finds coming from? The government HAS NO MONEY! They are in a deficit. A big one.

Bush has been a complete and utter disappointment over the last year. Other than his foreign policy, he has me completely disgusted with the government as a whole. We are slipping very quickly into socialism.


November 25, 2008

The difference between right and left economic theory

Filed under: Economy — conservativelawstudent @ 4:41 pm

Normally, when a conservative and a liberal start arguing about economic theory, it ends badly, and both sides are only more entrenched in their opinions than before.  This stems from the facts that they tend to argue the branches of their theories against each other, rather than go back to the place of common thought and argue the first place of divergent opinion.  For example:

If you have 10 people stranded on a desert island, each with $100 American in their pocket.  This means that there is a total of $1,000 on the island.  What is most money one person can make in one year?  A liberal would think that the answer is $900.  They already have $100, and they can only make what everybody else has in total.  A conservative knows this is wrong.  Money isn’t “made” by taking from one, but rather by the circulation of that money.  If Joe gives to Bob to build him a house, now Bob has more money.  Bob then gives to Jim to make him some food.  Jim then gives to Bill to protect his newly found restaurant, and so on and so forth.  The more money that is circulated around the island, the more money they all make, the more moeny they all spend, and each has a quality of life that gets exponentially better.  All of the things stated before can happen instantly, and there is no limit to what each can make.  In theory, each could make $3 Trillion every day!  This is a VERY simplistic way of showing how economics work, but it can be extrapolated to entire countries, like, say, oh, I don’t know, how about the US?  

What liberals want you to believe is that there is only so much money out there, and that to bring up the lower class, one must take from the upper classes and give it to them.  Where they go wrong is that an economy can grow and bring everybody up, including the lower classes, while not arbitrarily lowering another class down.  This is why conservatives are constantly clamoring for lower taxes.  In the hypo above, if there was on Senator on the island, who didn’t produce anything but offered valuable services to the others, the others would have to pay him, most likely in the form of taxes.  Well, if those taxes are too high, nobody has the power to purchase any goods or services from the others, and the economy of the island grinds to a standstill.  It is similar to the US economy — if the government takes too much of the producers money, they cannot purchase any goods or services from others, and everybody suffers.  

Where too many of the arguments that happen go wrong, is that the arguments stem from the higher taxes part of the theory, not the basic divergent theories about wealth creation.  This leads to two people arguing two different points in two different theories, and makes each mad until they just drop the conversation.

I will post more on how the island can teach us about the securities meltdown in a later post.

November 24, 2008

Big Three denied bailout. . . for time being

Filed under: Economy — conservativelawstudent @ 10:27 pm
Tags: , ,

As far as I’m concerned, having worked in the auto industry for the better part of a decade, the Big Three can just be allowed to fail. And they will. Even with a “bailout,” their management schemes and processes are so backwards and horribly executed, that a bailout will only delay the inevitable. Not to mention the union effect, which makes vehicles built in non-union shops upwards of $3,000 less for Joe Public to purchase.

Let’s take a better look at some of the arguments I have been hearing lately:

Argument 1
“They wouldn’t be in this situation if they made a quality product.”
This is not true. They have been making quality products, at times, in certain vehicles, and they still do not sell. Why not? Because you can get a comparable product, with the same quality, for less money built in a non-union shop. Why? Because you are not paying for the newspaper reader on the line making $90,000 a year. You are not paying for literally millions of unbelievably great pensions out there for these guys that worked on the line. You are not paying for the best of the best health care for these guys working 8-5, punching the clock on the way in, going out of their way to not go out of their way to help anyone else, and you are not paying for companies paying for workers who are not working.
From the management side, well, those of us on the ground floor have seen this coming for a long, long time. We have tried to make decisions based on what would be best for the long term, only to be shot down because some cell in some spreadsheet would all of the sudden not be green. And some manager in charge of that cell in that spreadsheet, who was not going to be the manager of that cell past another six months did not want to have to explain why, even though that cell is no longer green, it was good for the company long term.

Argument 2
“If they can just get through this, they’ll be all right.”
This is just wrong on so many levels. For the reasons stated above, nothing would change. The companies would take the money, continue business as usual, and we would be in the exact same position 3 years down the road, if it even took that long.

Argument 3
“They bailed out Wall Street because it is so integral to the economy, so is the auto industry.”
False. Wall Street is the backbone of all industry. Without the ability to borrow money, no industry can survive. The entire chain of product and process breaks down, no work gets done, nothing gets built and nothing gets purchased. The auto industry is a cog in the machine of US economy, but so was the railroad at one point. Not to say that we have reached a point where cars are obsolete, but just because a certain industry is a large part of the economy, most certainly does not mean that the economy cannot go on without it. It will fail, and it will be rebuilt, from the ground up.

What needs to happen

If they decide to go ahead with another crap sandwich for the auto industry, it needs to be with serious conditions. The first is to either dump or re-negotiate with the UAW. I would say dump it, scrap it, let them strike and be proud to say nasty things to people going into plants, making decent money and building quality product. UAW Ron Gettelfinger already has stated that his union workers will not negotiate pay or benefit cuts, so send them out. The next is to take the management of all three companies and fire them. One by one, all at once, whatever. Go find some smart managers from outside the auto industry, from companies that have succeeded, that know how to succeed, and install them in place. Then watch the fun as OEM/supplier relationships are restored, costs of doing everything go down as decisions are made with long term success in mind, rather than just looking good tomorrow, and parts are built better and more efficiently, driving up quality in the end product as well. I would rather my tax money did not go to these idiots, because this kind of good thinking would go unheralded, and we will be talking about this again in the near future, but it is a necessary step if the Big Three are to survive.

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