As you know, this Blog is dedicated to critical thinking. Here is the latest attack by the media and our elected officials on our abilities to exercise this skill set. The standard bearer of this attack has become former President Jimmy Carter who said on NBC Nightly News:
I think an overwhelming portion of the intensely demonstrated animosity toward President Barack Obama is based on the fact that he is a black man, that he's African-American.
Now, let's see this quote from the stand point of critical thinking. President Obama entered the oval office with an approval rating over 80%. Today, according to Rasmussen, 48% of voters say they at least somewhat approve of the President's performance. Fifty-one percent (51%) now disapprove. If this shift in the President's approval rating is tied to racism, when, after obtaining the oval office, did the President change his race?
Now that's the hoop they want us to jump thru! If, as I suppose, the President has not changed his race since taking office, perhaps, it is more the policies that President Obama embraces and champions that has affected his approval rating over any concern of his ethnic background.
Friday, September 18, 2009
Monday, August 10, 2009
Cash for Clunkers Repeats Mistakes
We have all witnessed the government's attempts to stimulate car sales through it's Cash for Clunkers program. The stated purpose of this program is to stimulate the economy and create more jobs. The intended purpose for this program is to reduce carbon emissions by replacing low efficiency older cars with modern cars which are certified to achieve a very high efficiency as measured in miles per gallon.
In reality, this program continues to contribute to the very factors that led to the economic melt-down last fall. Remember that the move to provide more and more credit to consumers did not really create new demand but simply moved demand forward in time. When the use of credit had maxed out, demand fell precipitously. How does this apply to the Cash for Clunkers program?
The current efforts to incentivize consumers into purchasing a new car is shifting demand in time. The cars that are being sold now would have been purchased in the future - you know that time when the automotive companies, emerging from bankruptcy have the hot new product lines for sale. What will happen to these corporations when the demand for the new cars has already been filled by the participants of the Cash for Clunkers program?
But consider the program from a completely different vantage. How would the program differ if it had been run from a free enterprise viewpoint as opposed to a government give-away? To start with, the free enterprise version would not target the new car sales, only. The current program requires buyers to either have the cash to make a purchase now, or to borrow the cash needed to take advantage of the incentive. These new cars are not cheap and will lose a significant percentage of their value the moment they are driven off the lot. The increased debt load on the buyers will effect their long-term security as well. The cars (clunkers) traded in must be processed so that the engine and drive train can not be reused.
In a free enterprise environment, the incentives placed on the new cars, would also generate an increase of used cars for resale. Increased inventory provides more choice and usually lowers prices. Citizens who could not afford a new car, or who chose to not take on additional debt at this time, could perhaps upgrade from even older (and even less efficient) cars by buying someone else's better clunker to replace their own clunker.
These used car purchases would provide an additional demand for jobs in sales, in maintenance and repair. The clunkers which were not re-sellable would be sent to junk yards with working parts (instead of having the engine and drive trains destroyed) which could be used to keep cars going during this recession at a reduced cost for all of those families whose finances are being challenged. Again, these maintenance jobs would continue to sustain employment. The benefits of the program would flow throughout all levels of our society and economy.
Another interesting aspect of the current cash for clunkers policy is the impact it could have on the dealerships' cash flow. I heard a radio interview with the owner of a Ford Dealership who was talking about the inability to get questions answered regarding the program. The phone numbers he was given was always busy or never answered. This dealership had almost $250,000 of their own money tied up in new cars on the road, waiting for government reimbursement. What would be the implications if someone decided to reimburse the GM and Chrysler dealers first and the stretch out the time to pay the other dealerships. This cash flow crisis could wipe out car dealerships that currently compete with the government owned automotive companies. Is the program being administered this way? I don't know if there is sufficient evidence either way. Could the program be administered this way, in a minute it could. This is the obvious problem of governmental ownership of businesses in the free market system!
So, once again we are taught the lesson that government can not incent the economy effectively. Instead, government always picks winners and losers. In the process, government adds layers of inefficiency and adds cost without benefit. And the taxpayers always lose!
In reality, this program continues to contribute to the very factors that led to the economic melt-down last fall. Remember that the move to provide more and more credit to consumers did not really create new demand but simply moved demand forward in time. When the use of credit had maxed out, demand fell precipitously. How does this apply to the Cash for Clunkers program?
The current efforts to incentivize consumers into purchasing a new car is shifting demand in time. The cars that are being sold now would have been purchased in the future - you know that time when the automotive companies, emerging from bankruptcy have the hot new product lines for sale. What will happen to these corporations when the demand for the new cars has already been filled by the participants of the Cash for Clunkers program?
But consider the program from a completely different vantage. How would the program differ if it had been run from a free enterprise viewpoint as opposed to a government give-away? To start with, the free enterprise version would not target the new car sales, only. The current program requires buyers to either have the cash to make a purchase now, or to borrow the cash needed to take advantage of the incentive. These new cars are not cheap and will lose a significant percentage of their value the moment they are driven off the lot. The increased debt load on the buyers will effect their long-term security as well. The cars (clunkers) traded in must be processed so that the engine and drive train can not be reused.
In a free enterprise environment, the incentives placed on the new cars, would also generate an increase of used cars for resale. Increased inventory provides more choice and usually lowers prices. Citizens who could not afford a new car, or who chose to not take on additional debt at this time, could perhaps upgrade from even older (and even less efficient) cars by buying someone else's better clunker to replace their own clunker.
These used car purchases would provide an additional demand for jobs in sales, in maintenance and repair. The clunkers which were not re-sellable would be sent to junk yards with working parts (instead of having the engine and drive trains destroyed) which could be used to keep cars going during this recession at a reduced cost for all of those families whose finances are being challenged. Again, these maintenance jobs would continue to sustain employment. The benefits of the program would flow throughout all levels of our society and economy.
Another interesting aspect of the current cash for clunkers policy is the impact it could have on the dealerships' cash flow. I heard a radio interview with the owner of a Ford Dealership who was talking about the inability to get questions answered regarding the program. The phone numbers he was given was always busy or never answered. This dealership had almost $250,000 of their own money tied up in new cars on the road, waiting for government reimbursement. What would be the implications if someone decided to reimburse the GM and Chrysler dealers first and the stretch out the time to pay the other dealerships. This cash flow crisis could wipe out car dealerships that currently compete with the government owned automotive companies. Is the program being administered this way? I don't know if there is sufficient evidence either way. Could the program be administered this way, in a minute it could. This is the obvious problem of governmental ownership of businesses in the free market system!
So, once again we are taught the lesson that government can not incent the economy effectively. Instead, government always picks winners and losers. In the process, government adds layers of inefficiency and adds cost without benefit. And the taxpayers always lose!
Tuesday, May 12, 2009
Government Spending is Unstainable
Well, the reports are out today that our government's estimates of spending were off ... by $89 Billion dollars too low. That is $89,000,000,000! The result is that in the current year, our government will collect in revenue only $ .54 for each $1.00 it spends. Think about it ... the government will collect only half of what it spends this year. What are the implications of this fact?
Think about your business or your own family budget. If you spend twice as much as you earn, it has to be paid back at some future point, with interest. You can not go forever spending more than you make. In fact, despite all that others have said, the real root of our current economic collapse is that we Americans spent more on credit than we could afford ... and it finally caught up with us.
Is the same situation catching up to our government? China, who has been the leader in buying US debt has put us on notice that it is not interested in buying more. Who is going to fund our government's runaway spending? There are only 110,000,000 taxpayers in this country. President Obama promised to reduce taxes on 95% of them. In light of these facts, who is jumping thru hoops now? There is no way to reduce taxes on 95% of the taxpayers and at the same time increase deficit spending at the rate we see it happening today. Any reduction will surely have to be followed by increases to pay just the interest on this deficit. Anyone with common sense can see that this plan will not work. The time to stop is now. We must curtail the deficit spending being carried out by our government. What are you going to do about this situation today?
Think about your business or your own family budget. If you spend twice as much as you earn, it has to be paid back at some future point, with interest. You can not go forever spending more than you make. In fact, despite all that others have said, the real root of our current economic collapse is that we Americans spent more on credit than we could afford ... and it finally caught up with us.
Is the same situation catching up to our government? China, who has been the leader in buying US debt has put us on notice that it is not interested in buying more. Who is going to fund our government's runaway spending? There are only 110,000,000 taxpayers in this country. President Obama promised to reduce taxes on 95% of them. In light of these facts, who is jumping thru hoops now? There is no way to reduce taxes on 95% of the taxpayers and at the same time increase deficit spending at the rate we see it happening today. Any reduction will surely have to be followed by increases to pay just the interest on this deficit. Anyone with common sense can see that this plan will not work. The time to stop is now. We must curtail the deficit spending being carried out by our government. What are you going to do about this situation today?
Subscribe to:
Posts (Atom)
