Despite blackmail threat, Toledo should 'just say no' to bailing out North Towne Mall

First, my apologies for not posting earlier, but we were deer hunting (bow) and I have very limited Internet access. This was my third time hunting and I did get a very nice doe with what Sam describes as an excellent shot. Now, back to the news of the day....

I've previously shared with you the plans for demolishing North Towne Mall. Since then, more details have been revealed.

Under the plan, the current owners would pay back taxes (around $200,000) and fees of $70,000 for utilities and other costs incurred by the city. Upon payment, ownership of the property would transfer to the city of Toledo which would then borrow around $700,000 from the federal brown fields revolving loan fund (from the EPA) and pull around $100,000 from the Capital Improvement Plan fund (CIP) to demolish the buildings. The Super Fitness portion would remain.

A new detail revealed this past week is that the current owners would have the ability to repurchase the property for the cost of the demolition, or they could benefit from the sale of the property. According to some reports, that share of the sale could be as much as $3.4 million, if the city gets the highest potential price.

This is a "developer bailout," as Councilman Adam Martinez correctly called it.

Why in the world would the the city bail out a developer? Well, as Mayor Mike Bell explains, because it's a nuisance. But then there is the dirty little fact that the current owners might have the city over a barrel. As the local paper is reporting:

Not that the city has much choice in the matter, according to Toledo attorney Matthew Fischer, who is representing the owners in negotiations with the city.

If the purchase and demolition deal does not go through, the current owners will drag out attempts to mandate demolition of the property through the court system for another two to three years, he said.

Sounds like blackmail to me - if Toledo doesn't bail out the current owners, they'll just drag out the court process several more years. In fact, the negotiations over this deal have been going on for about six months and I understand the owners wanted much more than this.

Of course, everyone 'believes' that they'll be able to sell the property 'very quickly.' But we have a prime example of why this 'belief' is nothing upon which to borrow and spend.

In 2009, city officials said the same thing about the old Southwyck Mall and nearly three years later, it's still empty. If anyone was interested in that much land to develop, they'd be looking at the Southwyck property, not waiting for the city to spend taxpayer money to clear another one.

So, despite the 'firm beliefs' of elected officials, there are no guarantees that the property won't continue to sit, cleared or not. And many Toledoans would just as soon let it sit as is rather than risk taxpayer dollars.

If the property isn't sold by 2012, the taxpayers of the city will be on the hook for repaying the borrowed federal funds. And that doesn't even get into the use of dwindling CIP funds.

For several years now, the city (with permission from the voters in a ballot issue) has been transferring money from the CIP fund into the general fund to cover every day expenses. The 2012 budget calls for a transfer of $11 million, though 2012 is the last year the city can do so unless it goes back to the voters with another proposal.

As I've previously said about raiding the CIP:

If we keep raiding our capital budget, we won't have any money for structural items like roads, which are a major expenditure out of that fund.

If my addition is correct, over the last several years we've transferred over $50 million out of the CIP and into the general fund. Can you imagine how much better our roads would be if we'd spent that money on repairing potholes and repaving rather than using it to balance the yearly budget???

We don't need to take even more money, even $100,000, from the CIP.

It's clear to see that this is a great deal for the current owners: they get the buildings demolished, the property cleared and, the longer it takes to sell the property, the more money they get.

And who, in their right mind, sets a sales price that increases the longer it remains unsold?

Yes, you heard that correctly. If the property is sold in 2012, the price per acre would be $55,000. If they sell the property in 2013, the price goes up to $57,500 per acre. And if they sell it in 2014, the price goes up again to $60,000.

And this makes sense to the city?!? This definitely qualifies for 'stuck-on-stupid' designation. By the way, they current value of the property is about $22,000 according to the Auditor's AREIS system.

Here's the thing, the longer the property sits, the lower the value will be, resulting, eventually, in a price that a private developer will find attractive. Or, if they don't pay their property taxes, the property should go to a Sheriff's sale over delinquent taxes. That, too, would result in a price that a private developer will find attractive and the property with change hands without the involvement of the City of Toledo - and, more importantly, without the involvement of tax dollars, borrowing and spending.

Thankfully, we have some members of city council who are opposed to this. Today, council will vote on the proposal. Let's just hope that more than half of them will 'just say no' to bailing out North Towne Mall.

UPDATE:

I listened to Tom Crothers on WSPD this morning when he called in to talk about this issue. He said a couple of things that don't make any sense:

* that no taxpayer money was involved - that the funds were coming in a grant from the federal government through the state and were in a revolving loan fund under the control of the city. Apparently he doesn't understand that the federal government gets its money from....TAXPAYERS!

* he said the loan doesn't need to be repaid. But he then said that the fund was repaid upon the sale of the property. Apparently, he doesn't understand the term "repaid." I understand that the fund doesn't need to be repaid to the federal government, but the fund will need to be repaid - one way or the other. If the property is never sold, the funds will still need to be repaid to the revolving loan fund at some point in time.

* he said that tearing down the buildings will help surrounding properties in the area and lead to their growth and expansion. Morning show host Fred Lefebvre then asked him to name one company at or near Southwyck that expanded or grew as a result of tearing down the Southwyck Mall. After saying that was a really good question, he couldn't name a single one - and admitted so. This proves that his claim was bogus. Apparently, he was willing to make a claim he knew not to be true, never expecting to be called on it.

Basically, he made a bunch of bogus claims as justification for the city to take this course of action. His interview alone is reason enough for city council members to 'just say no!'

Campaigning on financial - not auto - bailout makes more sense

U.S. Representative Marcy Kaptur (OH-9) is in Toledo today with President Barack Obama celebrating the 'success' of the auto bailout by touring the local Chrysler Group Llc plant.

First, repaying one loan with the proceeds of another one isn't really that much of an accomplishment, though some might say that being able to obtain private loans to pay back the public - taxpayer-sponsored - ones might be a step in the right direction.

In fact, Chrysler CEO Sergio Marchionne called the trip 'tacky':

"It's incredibly tacky stuff. I'm being brash. You pay them back and you shouldn't be celebrating. Cut them a check and send them home. And say thank you."

And the sentiment at General Motors is similar:

“No one at GM is happy” that it is “going to be used as one of President Obama’s success stories,” a source familiar with the internal dynamics of GM’s business told The Daily Caller, adding that the car company is not exactly on the same page as the White House in terms of declaring victory.

GM’s “not hanging a ‘Mission Accomplished’ banner and they shouldn’t either,” the source told TheDC, citing current economic and industry woes.

“GM is not in a position to declare victory,” the source added.

And they have a valid point. By the President's own admission, the auto bailout is going to cost taxpayers $14 billion. The spin, though, is that since this is less than expected, it's a good thing.

Think about it - the government decided to bailout two companies expecting to lose more than $14 billion in the process. There's a reason no private investors wanted a part of that!

Instead of touting the bailout, why aren't Obama and Kaptur touting the success of Ford which didn't need a bailout and in April reported their largest first quarter profit since 1998??? Perhaps because there is no political gain to celebrating the success of a company that isn't dependent upon government largess? But I digress....

If the 'success' of the auto bailout is worth campaigning on, will Kaptur and Obama campaign on the actual success of the bank bailouts?

According to this article in The Atlantic,

In fact, taxpayers fared far better through their "investment" in the banking industry than they did in the auto industry. As of the Treasury's March bailout program update, the auto bailout is expected to cost taxpayers $15 billion. Meanwhile, the non-housing-related financial industry bailout is expected to provide the government with a net gain of $157 billion. Obviously, the taxpayers were far better off rescuing the banks than they were rescuing out the auto companies.

Wow! The bailout of the financial industry is going to result in taxpayers having a PROFIT of $157 billion. From both a jobs and company profits standpoint, the financial industry has performed much better since its bailout than the two auto companies.

Isn't that something to celebrate? Isn't that a 'success'? Isn't that worthy of bragging and use on the campaign trail? Especially since the President's number 1 concern is jobs?

Apparently not.

You see, these two auto companies failed because of "flawed business and strategy decisions that had built up over decades" - but they employ union workers - a key constituency of Democrats.

Compare that to the image of 'fat-cat' bankers, as Kaptur and the Dems so demonize, and it's no wonder the average American might react better to the ploy of claiming success on the auto, rather than the bank, bailouts. But as The Atlantic article points out:

If the U.S. suffered the collapse of its financial infrastructure, the economic damage would have been far more catastrophic than if a few large auto manufacturing firms had failed. Moreover, it wasn't just the Wall Street high rollers who were rescued: hundreds of thousands of employees working at small banks and at big bank regional branches across Main Street America were spared.

The article says the proper response to the campaign claim of success in the bailout is to ask how success is defined:

The fact is, you can save just about any company if you throw enough money at it. In the case of most banks, this money really just served to provide funding until the panic subsided, after which time many banks promptly repaid the government, with interest. Ultimately, the bank bailout will turn a profit for taxpayers. If there is any sort of bailout that could be called a success, it's that sort.

Meanwhile, the auto bailout is expected to cost taxpayers $15 billion. The auto companies were not on the verge of collapse due to anything having to do with the financial panic or the housing bubble. Instead, they failed due to flawed business and strategy decisions that had built up over decades. So the government threw a huge wad of cash at some companies with fundamental problems. They recovered after revamping their operations and using that cash to plug some holes. Is that really so impressive?

It's not. But since Rep. Kaptur has made a point over the past several years of painting banks and Wall Street as the enemy, she certainly can't let facts get in her way.

And we cannot expect the local daily newspaper to question her on this. Can you imagine Blade Politics Writer Tom Troy asking Marcy to explain why a program that lost $14 billion of taxpayer dollars is good while a program that made taxpayers a profit of $157 billion - and saved more jobs - is bad? I didn't think so.

But at least Kaptur's position is consistent in her hypocrisy. She - correctly, in my opinion - voted against the bailout of the financial industry. Yet she - incorrectly and inconsistently - voted in favor of the auto bailout. As far as I can tell, she's never been asked by any main stream media outlet to explain her contradiction in principle.

So I suppose her celebration of her special interest today should come as no surprise - while I expect she will continue to smear, malign and insult the industry that is actually making money on behalf of all Americans.

She is NOT representing us. A true 'representative' would share with us the cost consequences of the bailouts and stand firm, based upon the evidence, that one (financial) was clearly better for the nation than the other (auto). But Kaptur is acting contrary to what the facts of the issues are and only acting on behalf of the minority of her constituency who benefit from her types of decisions. That's what gets her elected.

It's a shame that it's come to this - our founding fathers would be appalled.

***Side Note: Also today, they'll be celebrating the fact that Fiat, an Italian company, is purchasing the government's share of stock in the company. From politicians and a political party that routinely focus on American companies and how foreign companies are stealing all our jobs - doesn't that strike you as more than 'a bit' hypocritical as well?

Think the media will ask them to reconcile this particular aspect with their previous positions? Or will they go along with the spin about how this is really good for America - and Obama, Kaptur and the Democrats in particular?

And what in the world will all those union members do with their "Out of a job yet? Keep buying foreign" bumper stickers???

ICYMI - another government takeover

In Case You Missed It....

The Wall Street Journal had a very interesting article on the 12th about a government takeover few are noticing. The headline:

The Quietest Trillion
Congratulations. You're about to own $100 billion a year in student loans.

The details:

The Obama plan calls for the U.S. Department of Education to move from its current 20% share of the student-loan origination market to 80% on July 1, 2010, when private lenders will be barred from making government-guaranteed loans. The remaining 20% of the market that is now completely private will likely shrink further as lenders try to comply with regulations Congress created last year. Starting next summer, taxpayers will have to put up roughly $100 billion per year to lend to students.

Why, exactly, would private lenders be barred from making such loans? What is the purpose of eliminating the private market from the equation? Isn't this the same type of 'public option' being promoted in the health care bill? And where, exactly, will the government get $100 billion a year to cover this plan?

According to the article, the Congressional Budget Office (CBO) has reviewed the numbers and says that the programs will cost a fortune for the government to run and that the savings projected from the takeover are not anywhere near the official budget estimate, also called the 'score.' Despite the CBO assertions that the accounting is bogus, the accounting remains the official 'score' under the budget rules, "even though the official scorekeeper says it is wrong."

So when our representatives talk to us about the impact of this takeover, which numbers do you think they'll use????

The conclusion:

All of this is certain to pass the House, and the only chance for stopping it is in the Senate. If it passes, parents will soon have no choice beyond a Washington bureaucracy to borrow money for their college-bound children, and taxpayers will pay a fortune for the privilege.

I hope you'll read the entire article and then call your representatives and see if they can identify where they'd get the money to cover this additional cost - and you can also ask them how they can support a plan whose Enron-style accounting would land the private sector in jail.

Credit card 'protections' versus bank bailouts

Maybe it's just me, but the federal government has done 'stress tests' of banks to see what kind of assets they need to have to remain viable. They've also bailed out many banks who were deemed 'too big to fail.'

Almost all banks offer credit cards on which they make a profit (if they didn't make a profit, they wouldn't be offering them). That profit comes from interest and fees that they impose, charging higher fees/interest to those with riskier credit - a common practice everywhere.

The federal government (because it's such an expert at living within its budget and ensuring enough income to cover its debt) tells banks they need to have more resources, assets and income.

But they also tell the banks that they're charging too much in fees and interests on their credit cards and that they need to change/reduce those charges. This will reduce and, in some cases, eliminate certain profits that the banks rely upon for profitability.

These two actions are in direct contradiction.

How does this make any sense?

What's wrong with this picture?

Several media outlets are reporting that the bank CEOs want to repay the monies given to them as part of the bailout/TARP program, but that President Obama does not want the money returned...

According to the various reports, it's because the President believes the money needs to be 'in the system' and available for use.

But if the banks do not NEED the money and want to repay the taxpayer funds, why would this be a bad thing? Despite reports, individuals are getting credit and at reasonable - some would say highly favorable - rates.

So why would the President be opposed to the repayment?

I believe it's because of control. If the money is repaid, then the government no longer has a hammer to mandate decisions and employment. I may be cynical and I could be wrong, but I cannot help but believe the motivation for keeping taxpayer dollars in these organizations is so that the government can dictate what they do, how they do it and other such issues as compensation and loan policies.

Why else would the President not want the taxpayers of the nation to be repaid?

And I'm happy to know I'm not the only one who thinks this.

What the bailouts cost you

Are you even remotely curious as to exactly how much the corporate bailouts have cost you? (Remember - they were signed and passed by Presidents Bush and Obama and the last and current Congress.)

It's a significant amount, especially in light of the tough economic times.

Over at Right.Org you can precisely calculate your 'donation' to the those who were irresponsible with the money they had. Let me warn you though, it’s not pretty.

The median household income (half make more and half make less) for Lucas County is $43,527 per Census.gov. According to the calculator, the total cost for each Lucas County household is $53,337.

Think 4 Chevy Aveos. Two college degrees. A Toledo police officer. Or this 2007 27-foot Sportcraft 272 Express fishing boat.

Currently the total the U.S. has committed to failed corporations is $8,439,120,000,000. That's nearly three times the size of Congress' total budget last year and nearly two-thirds of what the entire U.S. economy produced last year.

Scary, isn't it?

Quote of the Day

"Is there any reason why the American people should be taxed to guarantee the debts of banks, any more than they should be taxed to guarantee the debts of other institutions, including merchants, the industries, and the mills of the country?"

~ Carter Glass (1858-1946) Newspaper publisher, US Senator (D-VA), author of the Banking Act of 1933, U.S. Secretary of the Treasury under President Woodrow Wilson.

Full court press for the 'porkulus' bill

Knowing that the American Recovery and Reinvestment Bill is in trouble, various groups and individuals are urging citizens to support passage of the pork-laden spending plan.

Gov. Ted Strickland authored a plea for support to "community leaders" saying that without the stimulus bill, Ohio's budget is in danger, especially 'the children.'

I've been outspoken in my opposition to all the bailouts, so it should come as no surprise to readers of this blog that I oppose a bailout of the states as well - no matter what they call it in Columbus and Washington.

The Cato Institute has a great publication, "10 Reasons to Oppose a Stimulus Package for the States," that expresses much of my beliefs on the subject. It also emphasizes that accepting a bailout goes against the long-held belief by state residents that their state should live within its means and exercise fiscal restraint. As proof, there are some states who oppose the bailouts because they have done just that and don't want tax dollars from their citizens going to reward other states for their overspending.

In light of the full court press for the porkulus, call Senator George Voinovich and tell him no on the bill, no on any compromise, no on any negotiation, no on the long-term debt this will create.

Sunday morning humor: accountants seek bailout

My friend, Warner Todd Huston who writes at Publius' Forum, has a great satire you should read about accountants seeking a bailout.

Warner, a fellow blogger whom I met at Samsphere, has taken comments and positions we've heard from all the industries seeking tax dollars, mixed in some highly creative names and organizations, and written one of the funniest (ha-ha) and saddest (because it's so close to the truth) pieces I've read in a long time.

He cross-posted this to Red State, a blog run by another Samsphere alum, Erick Erickson. You must read the comments asking for the links to the made-up news. As one comment says, 'the sign of good satire is that someone takes it seriously.'

Of course, some might have taken it more seriously than they should. BusinessWeek.com included the story on their Business Exchange site under the category of credit crunch.

When I informed Warner of the link from Business Week, he responded (with further demonstration of his wit):

"OK, now that is just truly .... I have slipped into another dimension, a dimension not only of sight and sound but of mindlessness, the next stop, at the sign post up ahead... THE MEDIA ZONE.

I MUST be from another universe where satire would not get linked as a legitimate news story!

Either that or my evil intentions have finally born fruit.
...
I am just knocked out that my satire is being so ridiculously misunderstood, truthfully. It couldn't be more ridiculous if I had asked Paul Shanklin to record it and then have Chip Saltsman send it out to everyone in the GOP!

In case you're a bit in the dark about Saltsman, you can catch up here.

Rest assured, it is satire, and a good read for a lazy Sunday morning.

Bailouts - when will they end?

As most people knew and predicted, once one industry got a bailout (loan or direct grant of cash), it would be hard to tell all other industries 'no.'

The investment/banking industry was deemed 'too big to fail' and got their money ... well, OUR money, actually.

The auto industry was deemed by Congress and the President to be 'vital to our American economy' - so vital, in fact, that the normal bankruptcy reorganization laws that have proven good enough for the rest of us just wouldn't do. They got OUR money, as well.

Cities, counties and states have their collective hands out - and now it's developers, according to the Wall Street Journal (subscription may be required.) They've got massive debts coming due and no new credit available.

With a record amount of commercial real-estate debt coming due, some of the country's biggest property developers have become the latest to go hat-in-hand to the government for assistance.

They're warning policymakers that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies. The reason: according to research firm Foresight Analytics LCC, $530 billion of commercial mortgages will be coming due for refinancing in the next three years -- with about $160 billion maturing in the next year. Credit, meanwhile, is practically nonexistent and cash flows from commercial property are siphoning off.

Unlike home loans, which borrowers repay after a set period of time, commercial mortgages usually are underwritten for five, seven or 10 years with big payments due at the end. At that point, they typically need to be refinanced. A borrower's inability to refinance could force it to give up the property to the lender.

A recent letter sent to Treasury Secretary Henry Paulson, and signed by a dozen real-estate trade groups, painted a bleak scenario: "Right now, we believe there is insufficient systemic capacity to refinance expiring, performing commercial real-estate loans," said the letter. "For many borrowers, [credit] simply is not available," the letter noted.

To see the impact of this, you only have to look at General Growth Properties, Inc., the owner of the Shops at Fallen Timbers Mall in Maumee. They had hoped that this mall would be 80-85% full by this time, but it's only about 2/3 full, which they blame on the economy.

Additionally, their share price was recently as high as $53, but closed Friday at $1.75. In October they had $8.5 billion in debt and was considered highly leveraged with little ability to restructure its debt soon because of tight credit markets. Analysts were predicting they were ripe for a takeover or that they might be forced to sell some of their properties.

This is consistent with what major developers are saying in their request to be included in the new (yes, NEW) $200 billion loan program initially created by the government to salvage the market for car loans, student loans and credit-card debt.

The developers are saying that if commercial real estate is included, banks might have an incentive to make more loans to them since they'd be able to repackage and sell them more easily to investors with the assurance of government backing. They're even asking lawmakers to consider setting up a separate program just for lending to commercial real estate only.

Of course, they're also saying that the world will end without government help.

""We've been urging Washington to put this as one of the top priorities in dealing with the economy," says Steven Spinola, president of the Real Estate Board of New York, underscoring the need for the government to help spur commercial property lending either directly or indirectly.

The real-estate executives are warning that the approaching surge in commercial mortgages coming due poses another major threat to the global financial system, which already is on life support. With rent prices falling and vacancies rising due to the weakening economy, delinquencies on commercial mortgages already have begun to rise sharply."

And why shouldn't they say this? It's worked for everyone else, so far, why won't it work for them?

The problem is - it's not working and won't do anything, in the long term, to help the economy. Taking dollars from all of us (including our descendants) in order to temporarily shore up failing businesses just buys them some time. It doesn't address the failed business models which got them into trouble in the first place. It also means that the money being taken from each of us won't be used in the 'correct' way - which is the way we would spend the money in a free market if we'd had it. Instead, the free market is destroyed by rewarding failure and eliminating the consequences of bad decisions. This will encourage more risky actions and decisions in the future, because they suffer no negative reinforcement for having made them.

If left alone, the market will correct itself - and yes, it will be painful. But not nearly as painful as the catastrophic impact of government interference in trying to avoid any of the pain. FDR's 'answer' to a recession turned it into an depression and prolonged the bad economy. Markets have ups and downs and it's folly to expect we'll never bear the brunt of the 'downs.'

The lesson is there, it's plain to see and we should be able to learn from it. However, having failed to learn from it, Congress and the President are doomed to repeat it.

We should not be surprised when the proposed 'solution' doesn't work.

Automakers to get their bailout money

From the Wall Street Journal:

The White House on Friday unveiled a $17.4 billion rescue package for the troubled Detroit auto makers that avoids bankruptcy.

"Allowing the auto companies to collapse is not a responsible course of action," President George W. Bush said.

Speaking from the White House, he said that a bankruptcy was unlikely to work for the auto industry at this time and would deal "an unacceptably painful blow to hard-working Americans" across the economy.

The deal would extend $13.4 billion in loans to General Motors Corp. and Chrysler LLC in December and January, with another $4 billion likely available in February. The deal is contingent on the companies' showing that they are financially viable by March.

Maybe I've missed it, but all I've heard is claims that a Chapter 11 bankruptcy won't work for the auto companies - and no one has explained why that statement is true.

Bankruptcy reorganization has worked for other companies - why are the automakers different? And if all Bush is going to do is require them to reorganize, why not let a judge oversee that instead of administration or treasury officials who obviously haven't got a clue?

Here's the $64,000 question - what happens if they're not "financially viable by March"??? Do they get MORE money or will they be forced into bankruptcy after having squandered our tax dollars?

Of course, this also means Treasury needs the second half of the $700 billion released. Also from the Wall Street Journal:

"Treasury Secretary Henry Paulson said he wants Congress to release the second half of the $700 billion financial rescue package, setting up what is expected to be a bruising dialogue with lawmakers from both parties who have expressed frustration with the way he has navigated the financial crisis.

Mr. Paulson said the $17.4 billion the Treasury committed to provide General Motors and Chrysler means that the government has "effectively" allocated the first $350 billion that Congress authorized in early October for the Troubled Asset Relief Program to stabilize the financial markets. Mr. Paulson said he has "confidence" that "we have the necessary resources to address a significant financial market event.""

Did Voinovich misrepresent Hensarling's position on the auto bailout?

Today I received the following email from Sen. George Voinovich's office:

According to this Bloomberg story, the head of the Republican Study Group in the House, a staunch conservative, Rep. Jeb Hensarling, has endorsed using sec. 136 money to provide a bridge loan to the American auto industry – essentially the Voinovich-Levin-Bond bill:

Representative Jeb Hensarling, a Texas Republican, said he is “more than happy” to allow the automakers to use the energy-bill funds to avoid bankruptcy. “If this is such a dire emergency,” he said, the Democrats could waive or delay requirements in the 2007 legislation that the money be used exclusively to develop more fuel-efficient vehicles.

This seemed completely out of character for Rep. Hensarling, so I called his office to clarify his position.

I spoke to Debbee Keller who explained that Rep. Hensarling is in favor of allowing the $25 Billion already passed by Congress to be used to help the Big 3 with their financial issues. The funds were supposed to be for certain purposes, and he agrees that Congress can re-purpose those funds to be used for their operational expenses.

He does not support allocating any of the $700 Billion to the automotive companies. According to Keller, Rep. Hensarling has not taken a position on the Voinovich-Levin-Bond bill.

So you tell me - is this a misrepresentation of Rep. Hensarling's position on the auto bailout?

Don't we have just two legs?

In what I'm sure he thought was an inspirational speech about supporting the bailout for the auto industry, Mayor Carty Finkbeiner yesterday again stuck his foot in his mouth.

You can listen to clips of his comments on the WSPD News Page, but the comment that caught my attention was not used by the News Department.

Carty said:

"We have to get up on our hind legs, labor and management together, and fight..."

So I have to ask - what hind legs? We only have two legs, so what is he talking about? Is he implying we have to act like animals in the way we address the issue of the bailout? Are we supposed to 'fight' like junkyard dogs?

Obviously, since he made the comment yesterday during the 'pep rally' to try to generate support for the bailout, he's had time to clarify his comment. Does his not even realize what he said? And did no one say anything to him about it? Probably not, considering his previous reactions to such criticisms.

Carty was way over the top, claiming that without the bailout, the auto industry in American will collapse. Most 'experts' say that even if one or two of the Big 3 have to declare bankruptcy, it will not mean the end of the American auto industry. As it is, Ford is saying only that they'd appreciate a line of credit - they don't actually need any money, at least, not yet. And a bankruptcy does not always mean a liquidation, but even if it did, other manufacturers would purchase and then use the assets that were being sold. It might mean the end of a particular company, but not the end of an industry.

Carty also claims that "the American automobile industry built the United States of America and where in the world would you let anybody who built a country fail on its backside?" Grammar aside, I guess I didn't realize we had cars in 1776.

He ends with: "...this is what America is about and the day we lose it is the day we lose our strength and our vigor and our heart and soul as a nation." And our Congresswoman Marcy Kaptur said 'it's a fight for America and our children and grandchildren,' adding the obligatory 'it's for the children' tug on the heartstrings.

I'm concerned that an elected mayor thinks the heart and soul of our nation is dependent upon any one industry, rather than upon the freedom and liberty of its citizens. I'm also concerned that our representative who voted against the $700 Billion bailout now thinks a bailout is somehow okay because it benefits members of a union.

I only wish they were this passionate about cutting my taxes, reducing the size of government and increasing my liberty.

Sidenote: Carty called the $34 Billion being sought a 'modest' amount. Gee - can I have a 'modest' raise?

Mayor pleads for the bailout

Toledo Mayor Carty Finkbeiner sent out a press release yesterday saying he was going to Washington, DC to help lobby for the automotive bailout.

First, Toledo is facing a $10 million deficit to balance out 2008 - so where is he getting the money to travel to DC?

Second, Toledo has to cut, according to the mayor, $23 million from the 2009 budget - so do we really think that Congress is going to take his advice about what an industry needs to be 'successful'? He can't run a city without going into debt, so do we really think that he knows what the auto makers need to get out of debt?

But he got his name in the news again and he can try to look like he's doing something to 'help.'

Style over substance - which is indicative of his entire term in office.

*** Does anything think he'll also put in a plea to help Toledo, as well? After all, if everyone else is in line for a handout....

A better use for the $700 Billion bailout

A letter requesting the $700 Billion for a better use than bailing out various industries:

November 17, 2008

Mr. Neel Kashkari
Interim Assistant Secretary for Financial Stability
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Secretary Kashkari:

I write today to formally request $700 billion from the TARP Capital Purchase Program. Since unionized auto companies, state and local governments, and certain credit card companies are applying, I thought I should, as well. Attached you will find the two-page application which I downloaded from www.treas.gov.

I am fully aware that some $125 billion has already been allocated as of October 29, 2008. However, given that the federal government has the full weight of the army, the FBI, etc. behind it, I am confident that you can re-appropriate this money from the likes of Wells Fargo (or their successor companies, if the current over-regulatory and over-taxing economic climate has caused them to go under).

I have a plan for this $700 billion which should be just what’s needed to get the American economy going. Since the money came from the taxpayers in the first place, I propose giving it back to them. With $700 billion in TARP funding, ATR would facilitate the following tax cuts:

· Cut the corporate income tax rate from 35% to 15%, giving us one of the lowest corporate income tax rates in the developed world. We currently have the second-highest rate in the world (behind only Japan). This new 15% rate would give us the third-lowest rate in the world (ahead of only Ireland and Iceland). It would put us well below the Euro-zone average rate of 25%. Companies would be dying to set up shop in the United States. Estimated JCT cost: $170 billion[1]

· Eliminate the capital gains and dividends tax. These rates are currently 15%, but actually represent a double-tax on corporate profits. When combined with the new, lower 15% rate on corporate income, capital costs would be at their lowest levels in nearly a century. Tax something less, and get more of it. This would also be an improvement over a suggested change we have made to the Treasury for years—allow taxpayers to index the cost basis of their capital assets to inflation (something which Treasury has the unilateral authority to do and which would be the equivalent of a 50% cut in the capital gains tax rate). Estimated JCT cost: $35 billion[2]

· Cut the top personal income tax rate from 35% to a flat 15%. This would give the U.S. the lowest personal income tax rate in the developed world. Estimated JCT score: $235 billion[3]

· Kill the death tax. Almost nothing is more capital-killing for small businesses and family farms than the estate, gift, and generation-skipping transfer taxes. Estimated JCT score: $24 billion[4]

· Allow companies to fully-expense capital assets purchased the first year. Under current law, businesses and other taxpayers must usually “depreciate,” or slowly-deduct, capital asset purchases the first year. This capital-boosting proposal would allow taxpayers to deduct 100% of the purchase price from their taxes in year one. Estimated JCT score: $240 billion [5]

Put all that together, and you arrive at almost exactly $700 billion. It’s safe to say that allocating $700 billion this year toward these tax reduction goals would do much for economic growth. But there’s more that can be done that doesn’t require any more resources:

· Ensure that there is full transparency in the TARP program by putting every TARP transaction and contract online for everyone to see. Disclose potential conflicts of interest with TARP-oversight staff.

· Allow companies to repatriate foreign profits to the U.S. without having to pay a double tax. The last time Congress allowed this in 2005, over $300 billion was repatriated, boosting GDP 2%.

I look forward to receiving the money. Please consult my staff for any ACH transfer information your people may need.

Sincerely,

Grover Norquist

GGN:rle

Now THAT's an idea!

Quote of the day & the perversion of economic development

From the Foundation for Economic Education:

"The sun would still rise in a world without General Motors."

The Perversion of Economic Development
By Lawrence W. Reed

Lawrence W. Reed, economist and author, is President of The Mackinac Center for Public Policy, a free market research and educational organization headquartered in Midland, Michigan.

In a country known for having forged the world's highest living standard from what was wilderness scarcely 200 years ago, one would think that “economic development” is a well-understood concept. Unfortunately, it isn't.

In recent decades, economic development has come to mean something other than the spontaneous, entrepreneurial phenomenon that built America. It is often thought of as a kind of activist, public-policy responsibility of state and local governments. It rarely is defined as a “fair field and no favor” approach in which governments keep themselves unobtrusive and inexpensive so as to give wide berth to free markets. Instead, economic development conjures up notions of bureaucracies and commissions directing resources, subsidizing specific firms, granting special tax breaks to some and not to others, and erecting a vast network of regulatory incentives and disincentives to affect behavior in the economy.

In short, economic development has come to mean what many statists and central-planning types are fond of calling “industrial policy.” They think the marketplace lacks direction and needs the assistance of officialdom. With tax dollars in hand to bestow upon the favored few, bureaucrats claim new prophetical powers of distinguishing the winners from the losers in the marketplace.

more...

Denial is part of the problem

According to an interview in the Wall Street Journal, UAW President Ron Gettelfinger said neither unions nor management are to blame for the current condition of the Big 3 automakers.

"This industry is in a crisis situation not of its own making," he said.

Really?

So I supposed that every employee being paid to NOT work (job bank) is not a drain on resources? And huge compensation packages for management don't contribute to the losses? And wages higher than your competitors don't escalate the price of the vehicles beyond what people want to pay? No...those things are irrelevant when you're in denial about your own culpability.

As I've previously reported, General Motors has lost $57 billion since 2005. Ford has lost $24.5 billion since 2006. Despite Gettelfinger's claims, high gas prices and the Wall Street meltdown don't account for losses that go back that far.

So what's going one here? Well, when faced with possible bankruptcy of one of the auto companies, the UAW "is joining forces with the companies in a blitzkrieg public campaign to plead for a federal bail out. Although Mr. Gettelfinger rarely talks to the media aside from local radio stations in Detroit, he has reached out over the weekend to make the union's viewpoint clear."

Of course! We'll join together with our hands out to beg for tax dollars to save us from our mistakes. And we'll deny that we've made any mistakes, blaming everyone but ourselves in order to make it easier for Congress to give us someone else's money.

And what will the union do to help their employers avoid the potential dire consequences? Nothing.

"The union will not make concessions in order to seal a deal for governmental aid, Mr. Gettelfinger said.
...
"It's unfair for people to single out auto workers," he said."

Don't expect us to do anything other than put pressure on Congress to give us money so we can continue doing all the things that brought us to this point in the first place.

Great thinking! And reason only to say NO to the bailout!!!

Automotive bailout does not represent the 'future'

I've struggled with the issue of the automotive bailout currently being debated.

On the principled side, I oppose the government action. On the compassion side, I have empathy for the individuals and families affected by the problems.

There is plenty of blame for the current situation from the individuals demanding unsustainable wages and benefits all the way up to the CEOs, who made the bad decisions over the last decade, and Congress, who is more interested in placating special interests than in protecting all the rest of us who foot the bills.

I think this column by Michael Barone makes some good points, so I wanted to share it with you.

Voinovich says he'll support auto bailout

I read an Associated Press article that claimed Sen. George Voinovich was the only Republican confirmed to support the proposed bailout of the automotive industry.

So I called his office to ask if it was true and the staff person who answered told me it was.

I, of course, expressed my opinion and urged him to vote NO on this - and any other bailouts.

But the only way he can be pushed to vote no is if he gets enough calls and emails instructing him to do so. He works for us, after all.

So, here is the contact information. Let him know what you think! (remember, be firm but polite...)

Washington office: (202) 224-3353
Toledo office: Phone: (419) 259-3895 Fax: (419) 259-3899
Cleveland office: Phone: (216) 522-7095 Fax: (216) 522-7097
Cincinnati office: Phone: (513) 684-3265 Fax: (513) 684-3269
Columbus office: Phone: (614) 469-6697 Fax: (614) 469-7733
Southeast office: Phone: (740) 441-6410 Fax: (740) 753-3551

His contact form

Matt at Weapons of Mass Discussion has more on this.

Facts DO matter and double standards don't make good arguments

Today's Toledo Blade editorial says that a bailout for the auto industry is vital, critical, necessary to avoid extinction, blah, blah, blah... It's the same story coming from everyone who wants a handout of tax dollars to save them from the bad financial decisions they've made, whether it be financial companies, mortgage companies, homeowners or, now, automotive manufacturers.

America has lost automobile companies in the past, so the first question I would ask now is why shouldn't we expect that we will have a change in the automobile companies in the future? Just like global warming alarmists - they assume that the current conditions are the best, and any 'change' will be catastrophic. Perhaps we should remind all of them that their trust in President-elect Barack Obama was that 'change' would be for the good!

But the biggest problem in their editorial is the lack of FACTS - or, rather, the blatant disregard of them in order to support their premise.

"The American auto industry has doubtless made many mistakes in the past, but in recent years has done an admirable job getting its act together. General Motors' current cash flow woes come as a result of no fault of its own. America's once-proud corporation is a victim of the Wall Street panic and the crippling credit crunch, which means consumers cannot get loans to buy vehicles."

As I've previously reported, GM has lost $57 billion since 2005. Ford has lost $24.5 billion since 2006.

Note the dates? There was no credit crunch in 2005 or 2006 nor for most of 2007. So how can the current cash flow woes of GM be 'no fault of its own'? The Blade editorial does not explain this, presumably because addressing these facts would not allow them to place the blame on someone other than the auto companies themselves. And if their problems are not their fault, they don't have to do anything to solve them.

And then there is the double standard.

In 2006, The Blade went through its own financial struggles (though rumors persist that they are still in difficulties). Their solution was to insist on cuts in wages, benefits and even employees. They publicly stated at the time that companies, in order to survive, have to make a profit and that their employee costs have to be such that a profit is possible.

They were right. But while they made such decisions for their own operations, they don't seem to expect that other companies will make similar tough decisions - at least, not when the government can save them from the difficulty of doing so.

So why the double standard? Why is The Blade so keen on giving our tax dollars to the automobile industry instead of insisting that the automakers renegotiate their union contracts as The Blade did?

It's certainly puzzling - and I don't have the answer, but I can speculate.

I think it has to do with politics - imagine that!

The Blade 'loves' the President-elect, so if Obama thinks something must be done, they are highly likely to agree.

Obama and the Democrats are tied so closely to the unions, especially the UAW, that they are falling all over themselves to preserve both those jobs and the pensions. One of the options being considered is this:

"Help Detroit carmakers with health and pension obligations. Under the most controversial idea being floated, the firms would get $25 billion to help pay the rising costs associated with 780,000 retired autoworkers and their families. The United Auto Workers is pushing this idea. The generous health and pension provisions that the UAW won when Detroit was flush are now a big part of what makes them uncompetitive against foreign rivals who don't give their workers such expensive benefits."

So here are the facts:

* The auto makers have been suffering losses since 2005. While their existing financial situation may have been compounded by the credit crunch, it only hastened the inevitable.

* Generous health and pension provisions for their UAW members are a major component of their costs, which make them uncompetitive.

* While some are calling for less remuneration to executives, no one is calling for major revisions to their union contracts, which would have an immediate impact on their bottom line.

But The Blade seems to think that Obama will save us all.

"President Bush should take the lead of President-elect Barack Obama and speed immediate emergency legislation that will enable General Motors, and Ford and Chrysler as well, to survive, at least until a coherent strategy can be agreed upon for our nation's automotive future.

Waiting till the new administration takes over on Jan. 20 would be too late,..."

Um...since when was it anyone's responsibility - other than the car makers - to develop a 'coherent strategy' for their future? I don't seem to recall anywhere in the Constitution where 'saving specific companies' is listed as part of the duties of the federal government.

I could go through this editorial line by line and provide a comprehensive, logical and factual rebuttal, but when their entire premise - that this problem is not because of decisions made by the automakers, themselves - is wrong, their conclusions are also wrong.

That's why fact matter. If you ignore critical facts when facing an issue, you will inevitably end up with 'solutions' that don't actually solve the problem - and, in some cases, make things even worse.

So here's a question: what would be so bad about a 'Big 2'?