Kelo, GM, and the Stimulus: Three Examples of Government-Induced Failure
These examples all clearly demonstrate that government should be the last place people look to for solutions to economic problems.
Instead of rolling the dice on a single company’s fortunes, concocting a grand scheme that was problematic even in a healthy economy, and snookering the Supremes into believing they had something that would work, New London and Connecticut officials should have been working on making their city and state more hospitable to private development and business in general.
Alas, Nutmeg State Governor Jodi Rell’s tax-raising second term has become a case study in how supposedly fiscally conservative Republicans allow themselves to get captured by entrenched bureaucracies. The Tax Foundation rates the state’s business climate as 38th best in the nation. Meanwhile, even acknowledging that it includes education and is slightly lower than the previous year, New London’s 2009-2010 budget of $79 million seems excessive; 42% of its money comes from state and federal aid.
Instead of sending tens of billions down a rat hole and ending up with a company that still loses money, GM should have been allowed to fail on its own. An intervention-free bankruptcy would have required all parties involved to take the haircuts necessary to emerge with a better chance of long-term success. Instead, here’s a dirty little secret: according to one of the United Auto Workers’ own communications to its members, whatever “concessions,” if any, that were made during the months before the company emerged from bankruptcy involved “no loss in your base hourly pay, no reduction in your health care, and no reduction in pensions.”
And finally, instead of embarking on a campaign of wasteful spending using Keynesian tactics that failed to work during the 1930s under Roosevelt and during the 1990s in Japan, Congress — in early 2008 when the first signs of a stumble appeared — should have permanently cut federal income and capital gains tax rates to below where they have been since 2003. This step would have given businesses, investors, and entrepreneurs more capital with which to make wiser resource allocation decisions. At the very least they would have invested in things and in places that really exist. Such a move would at a minimum have reduced the impact on the overall economy of the government-driven abject regulatory failure known as the housing downturn and could conceivably have prevented the recession completely.
If private developers, private-sector companies, or investors make bad decisions or fail to manage their projects well, the damage is usually limited to their own immediate circle. But we all pay, and usually much more dearly, when governments try to take their place.
The micro and macro lessons are clear. So why do statists keep doing things that don’t work?
It could be that they are so blinded by their ideology that they are intellectually incapable of learning from their mistakes. But it’s much more probable that most of them have learned and simply don’t care. They would prefer having more power and control over a situation involving mediocrity and malaise to having less control over one of growth and prosperity. What they are trying to do to the best health care system in the world, the cost and permanent damage of which would over the long term dwarf the three examples I have cited here, demonstrates why the second alternative is more likely the correct one.
I can think of a few Democrat Congress persons who have a grasp of economics and the importance of private property and capital. Kent Conrad and Ben Nelson demonstrate a working knowledge of economics. The overwhelming majority of them don’t seem to have any education in how capitalism and free enterprise work to advance society. These uneducated people have a pernicious perspective on our economy born of ignorance and miseducation. I am constantly amazed at how uninformed they are and how much power they have.
The bailout of GM/Chrysler and the “stimulus” are monuments to the stupidity of liberal policy. Each is a naked payoff of a constituency, organised labor. Each embraces Keynesian economics, a demonstrably failed theory that continues to be troted out by leftists every time the economy turns down.
Previously I have considered purchasing automobiles from both of the now government owned automobile companies. Never again. I just purchased a new car, a VW which sits in our driveway with our Ford. I won’t even rent a product from the Government owned car companies.
This country will continue to decline as long as the majority party favors the SEIU and UAW more than the companies that actually employ people.
“But it’s much more probable that most of them have learned and simply don’t care. They would prefer having more power and control over a situation involving mediocrity and malaise to having less control over one of growth and prosperity.”
They also take for granted that their affluent lifestyles are not in jeopardy. The current health care proposals, for instance, have zilch to do with them. These “elites” will continue to receive the best medical attention on this planet. The rest of us will be paying the price. Progressive ideology allows the favored ones to pretend they are looking out for the poor and disenfranchised. This is nothing more than pure self delusion. The elites are worrying about themselves, first, last, and foremost. At the moment, they are willing to pursue soft totalitarian tactics. But that won’t last—if they perceive the common citizenry dares to oppose their power grab.
The reason that the statists in Congress are unable to recognize failure when they see it is because they are lawyers. They are trained to make an argument. They are not trained to recognize the truth. Facts are there to be manipulated, or left out, if possible.
Jack, (3) you write: “Lawyers are trained to make an argument. They are not trained to recognize the truth. Facts are there to be manipulated, or left out, if possible.”
Jack, I agree with you, with one addendum.
It’s something no one’s said, and the result of my trying to connect all dots. Here goes. Because of Obama’s actions over the last ten months,
I am forced to conclude that he is purposefully trying to destroy this country as we know it, to bankrupt it, shred its constitution, turn it
into something foreign, something unAmerican. What do you call someone out to destroy the United States of America?
Economic ignorance is pervasive, and it’s not an accident. The elected class has a vested interest in keeping the citizenry in a perpetual state of economic ignorance.
Citizens who are ambitious and self-reliant have less need for government. In fact, those citizens cringe at the thought that government might interfere with their pursuit of prosperity. The knowledgeable and self-reliant don’t want Congress to “fix” the economy. Rather, we want them to undo all the other false fixes that they have concocted over the last 20 years.
Economic ignorance is pervasive because education is primarily a government-controlled activity. If the education industry were to raise a generation of self-reliant free marketers, that would serve to disempower the elected class.
The elected class will never do that.
“…GM should have been allowed to fail….”
Who said that?
Tom Blumer.
Tom Blumer? Who’s Tom Blumer?
I dunno. Some guy.
“Tom Blumer? Who’s Tom Blumer?”
What is your point? The only thing that matters is whether his point is accurate. Can you provide an argument why we should not have allowed GM to go bankrupt? If you can’t—could you please remain quiet? You are simply wasting our time.
4. An enemy.
6. And if John McCain had said that along with allowing all the investment banks to fail, he’d be President right now.
#6, the substantive weight of your argument is overwhelming. (/sarc)
The statists believe arrogantly that past statists have done something wrong in acting their ideology; however, the truth is Statism is a failure & will always fail. Yet the statists never see the truth. I believe they are blinded by their ideology & awful all consuming power lust. For instance, the Porkulus has been shown to be an abject absolute failure, yet the insular, arrogant boobs in Washington DC want another “stimulus” bill to cover their naked rear-ends for the 2010 elections. The second proposed “stimulus” is a band-aid to cover up Porkulus’ failure & give cover to the Democrats for the 2010 elections. The problem remains the general public did not want the first “stimulus” & does not want a second one. The Democrats are blithely playing with fire & headlong into political suicide. The worst is that the politicians cannot see themselves they are headed over a cliff in 2010…
If we did the opposite of everything Obama, Pelosi, Reid and the left has proposed, we would have a chance.
These people have placed us (America) on the path of destruction. The national debt has gone from $3 trillion in the mid-1990s to $6 trillion in 2002 to $12 trillion in 2009 and will be over $14 trillion in 2010. This is an exponential curve that is unsustainable. The increase in the price of gold is in USD only, reflecting a currency that is being debauched by Bernanke and Obama. If interest rates go to 10%, then roughly 70% of tax receipts will go to interest alone and the deficit will accelerate. (I know where rates are today and there are many factors, including the symbiotic and economically dysfunctional relationship with China, that would go into such a scenario.)
The collapse of the USD will result in a severe depression will have people trade freedom for bread and a reordering of the world order.
If you think I am crazy, Société Générale recently advised clients to be ready for a possible “global economic collapse” over the next two years. (See: http://www.telegraph.co.uk/finance/economics/6599281/Societe-Generale-tells-clients-how-to-prepare-for-global-collapse.html)
The absence of government is anarchy. Think of tribal societies if you want to think about life, the lack of prosperity and absence of freedom when anarchy rules. Totalitarian forms of government, including monarchies to fascism to communism, ultimately turn the citizenry in to indentured servants to a political class. The founders understood all of this. The limited government established in our Constitution and Bill of Rights was designed to give people the best opportunity to pursue life, liberty and happiness. It was not designed to remove every risk from everyone’s life (i.e. the unattainable goal of the nanny state). It was designed around individual freedom and responsibility and the ability to keep the fruits of one’s labor (whatever that may be). As a result, our form of government produced the greatest, most prosperous and freest society in history.
Failure has been a key to the success of America. Through failure, excesses are purged, assets move into the hands of competent managers, jobs are lost but more are gained and the poor become rich and the rich become poor via entrepreneurial initiative. It’s called creative destruction. Today, we have institutionalized failure with the bailouts and in doing so set the stage for own demise.
Working through failure can be painful for both individuals and societies. However, we can recover. The elections of 2010 are the first step of many in stopping the concentration of power in Washington and starting down the path that we return America to limited government. Freedom burns in the hearts of most people. I hope that the events that have brought us to today will motivate people to take up the cause of freedom, to not forget the cost of freedom borne by those who came before us and to pay the cost necessary to stay free.
Best wishes to everyone.
Well summarized. A prior PJTV post had two numbers that have stuck in my mind and should be formed into some sort of rallying cry. Medicare wastes $60 billion of taxpayer money each year to fraud (never mind those amounts spent legitimately but inefficiently and unnecessarily). Compare this with $8.3 Billion that represents the total profits of the ten largest private health care providers – those evil, greedy inefficient companies targeted by Obamacare proponents. How can this all be happening? Where are the adults in charge?
If someone were intent on destroying America as we know it, what exactly would they do differently than what Obama, Pelosi, Reid, and company are doing right now?
“Tis better to rule in Hell than to serve in Heaven.”
-John Milton
That is the essence of the liberal bureaucrats’ perspective.
Always has been. Unfortunately, they are now leading us into hell at an astonishing rate.
In order for Obama to be the world’s first post-American president he has to do exactly what he is doing, while Pelosi and Reid have to cling to his coattails. Admitting defeat now would be disasterous after having doubled down.
The purpose of the government is to be the police and referee. Now government is the player and competitor. It can only succeed by failing as long as it can rewrite the rules. “When in the course of human events. . .” begins the next chapter.
There is an article that I have quoted so many times the past couple of months that I have saved it. It compares Obama to Gorbachev and ruminates that both will see the destruction of their respective nations.
Both men have been praised for their wonderful temperaments, and their ability to remain unperturbed by approaching catastrophe. But again, the substance is different, for Gorbachev’s temperament was that of a survivor of many previous catastrophes.
Yet they do have one major thing in common, and that is the belief that, regardless of what the ruler does, the polity he rules must necessarily continue. This is perhaps the most essential, if seldom acknowledged, insight of the post-modern “liberal” mind: that if you take the pillars away, the roof will continue to hover in the air.
More from this piece.
A variant of this is the frequently expressed denial of the law of unintended consequences: the belief that, if the effect you intend is good, the actual effect must be similarly happy.
Very small children, the mad, and certain extinct primitive tribes, have shared in this belief system, but only the fully college-educated liberal has the vocabulary to make it sound plausible.
With an incredible rapidity, America’s status as the world’s pre-eminent superpower is now passing away. This is a function both of the nearly systematic abandonment of U.S. interests and allies overseas, with metastasizing debt and bureaucracy on the home front.
This is from a Canadian who, I think, sees us very well.
When evaluating all this spending and waste, recall that in 2008, the per capita family income in the U.S. was $50,233. How government can claim it is “creating or saving” a single job when it costs more than the total annual income of almost 4 whole families is well beyond me.
14. “Tis better to rule in Hell than to serve in Heaven.” -John Milton
No, these are the words of Satan as written by John Milton.
And remember, Bill Ayers dedicated Rules For Radicals to Satan…the first community organizer.
We are so screwed.
This is quickly becoming Satan’s day. It won’t last long, but it will be more horrible than anyone can image. Of course, if you believe, this won’t be an issue.
When faced with War Department corruption, Senator Truman said “Find me the guy who wrote the check…”
and that method of investigation got him to the (Vice) Presidency.
#19
Bill Ayers didn’t write ‘Rules for Radicals.’ The author was Saul Alinsky, a much older and more intelligent, albeit evil, writer than Ayers. Ayers was still in guns and bombs mode when Alinsky wrote that and died not long after.
Alinsky was a far more effective, and thereby destructive, thinker than Ayers could ever hope to be. Alinsky’s work have deeply influenced two Presidencies to date. Everybody knows about Obama but did you know Hillary is also a big fan, writing a thesis paper praising Alinksy and revealing much of her future political leanings. It no wonder she and Obama reached an understanding that integrated her into his circle.
http://www.msnbc.msn.com/id/17388372/
Saul Alinsky wrote RFR. Not Bill Ayers. But yes, he did. Only, technically, to Lucifer.
HisCross: Sad to hear it. If I were saved, and those I loved weren’t, I’m not sure I’d actually be saved at all. But that’s a theological issue.
While I’m on it,
Saul Alinsky:
Lest we forget at least an over-the-shoulder acknowledgment to the very first radical: from all our legends, mythology, and history (and who is to know where mythology leaves off and history begins– or which is which), the first radical known to man who rebelled against the establishment and did it so effectively that he at least won his own kingdom — Lucifer.
Herman Melville:
“… and so the bird of heaven, with archangelic shrieks, and his imperial beak thrust upwards, and his whole captive form folded in the flag of Ahab, went down with his ship, which, like Satan, would not sink to hell till she had dragged a living part of heaven along with her, and helmeted herself with it.
“Management believes these adjusted financial measures provide meaningful supplemental information regarding GM’s operating results because they exclude amounts that GM management does not consider part of operating results when assessing and measuring the operational and financial performance of the organization.”
Wouldn’t this make the government appointed CEO lable for criminal penalty under Sarbanes-Oxley?
“I just purchased a new car, a VW which sits in our driveway with our Ford. I won’t even rent a product from the Government owned car companies.”
VW is partially owned by the state of Bavaria (I believe 30%). Also, they are horribly unreliable. Ford, however, is clean.
Just wait until the failing MSM gets a big bailout from the communists in the white house. Then our government, the communists in the White House, will control the mass media in our country. That will be fun. Don’t all you Democrats think so? The time to defeat the communists was 2008, not 2010. Soon we will be called the People’s Republic of North America and we will still all be pontificating about winning the next election. The fix is already in.