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It’s getting so bad for the president, the Washington Post is calling BS on his speeches. Glenn Kessler gives him three out of four Pinocchios for the auto speech.
With some of the economic indicators looking a bit dicey, President Obama traveled to Ohio last week to tout what the administration considers a good-news story: the rescue of the domestic automobile industry. In fact, he also made it the subject of his weekly radio address.
We take no view on whether the administration’s efforts on behalf of the automobile industry were a good or bad thing; that’s a matter for the editorial pages and eventually the historians. But we are interested in the facts the president cited to make his case.
What we found is one of the most misleading collections of assertions we have seen in a short presidential speech. Virtually every claim by the president regarding the auto industry needs an asterisk, just like the fine print in that too-good-to-be-true car loan. …
David Skeel, in the WSJ, has more on the auto bailouts.
…The claim that the bailouts were done at little cost is even more dubious. This side of the story rests on the observation that GM’s success in selling a significant amount of stock, reducing the government’s stake, and Chrysler’s repayment of its loans, show that the direct costs to taxpayers may be lower than many originally feared. But this doesn’t mean that taxpayers are off the hook. They are still likely to end up with a multibillion dollar bill—nearly $14 billion, according to current White House estimates.
But the $14 billion figure omits the cost of the previously accumulated tax losses GM can apply against future profits, thanks to a special post-bailout government gift. The ordinary rule is that these losses can only be preserved after bankruptcy if the company is restructured—not if it’s sold. By waiving this rule, the government saved GM at least $12 billion to $13 billion in future taxes, a large chunk of which (not all, because taxpayers also own GM stock) came straight out of taxpayers’ pockets.
The indirect costs may be the worst problem here. The car bailouts have sent the message that, if a politically important industry is in trouble, the government may step in, rearrange the existing creditors’ normal priorities, and dictate the result it wants. Lenders will be very hesitant to extend credit under these conditions.
This will make it much harder, and much more costly, for a company in a politically sensitive industry to borrow money when it is in trouble. As a result, the government will face even more pressure to step in with a bailout in the future. In effect, the government is crowding out the ordinary credit markets.
None of this suggests that we should be unhappy with the recent success of General Motors and Chrysler. Their revival is a very encouraging development. But to claim that the car companies would have collapsed if the government hadn’t intervened in the way it did, and to suggest that the intervention came at very little cost, is a dangerous misreading of our recent history.
John Tamny wan a brilliant explanation of how the present government hinders economic growth, in Real Clear Markets.
…If we then look back to the most substantial economic contraction of the 20th century in 1920-21, the fact that the gold standard was unshaken amid this unsettling decline in economic activity tells why the economy rebounded so quickly. With investors confident that their delayed consumption (meaning investment) wouldn’t be clipped by the monetary authorities, capital flowed to wealth enhancing activities and the economy roared.
The early ‘20s offer other lessons that tell us why the economy boomed 90 years ago, but sags at present.
Indeed, contrary to the Krugmanesque view that governments must spend uncontrollably when economic spirits are down, in the early 1920s our federal government greatly reduced its spending burden on the U.S. economy. Though it spent $6.4 billion in 1920, by 1923 total spending had declined to $3.3 billion.
…Entrepreneurs can’t be entrepreneurs without capital, so during periods of economic ill health it’s more than necessary for governments lacking resources other than those they tax or borrow from the private sector to sit on their hands. Better to leave always limited capital in the private sector where it can fund real productivity…
In the WSJ, William McGurn explains why the NAACP doesn’t want better schools for children.
There are two ways to look at our big city public schools. The first way is to see them as institutions that give our children the tools they need to make their way in society. When the education is good, it is a great equalizer for those boys and girls without the advantages of wealth or social standing.
The second way to look at our big city public schools is this: as a vast jobs program for teachers.
Those who assume the first view find it hard to understand why it is so difficult to fire bad teachers, pay the good ones more, or close down failing schools. In the same way, they cannot understand why one of the nation’s oldest and most venerable civil rights organizations—the National Association for the Advancement of Colored People—would be suing with the United Federation of Teachers to stop New York City from closing about two dozen of its worst schools and opening charters. Even the Washington Post, which ran a terrific editorial criticizing the NAACP, called it a “mystifying decision.” …
Michael Lomax and Michelle Rhee comment on the NAACP selling out the people who need help the most, in the NY Daily News.
…The lawsuit filed by the United Federation of Teachers and the NAACP…seeks to block the city from shutting down about two dozen traditional schools whose students are not learning what they need to know to succeed at the next level – and prevent 19 public charter schools from sharing facilities with existing traditional schools. Were the plaintiffs to succeed, these schools would either be unable to enroll new children or could face closure.
…The charters in question include those operated by KIPP, Uncommon Schools and Harlem Children’s Zone, which have remarkable track records of success and primarily serve low-income kids of color. Two separate studies out of Stanford University have shown that charter schools in New York City in general outperform traditional schools. Parents and students understand this; that’s why they want their kids to enroll. This year, 50,000 New York students were declined admission to public charter schools due to a lack of seats.
…in this fight – the fight for children’s right not only to go to school but to get a good education – the NAACP seems to have switched sides. It’s fighting not for the right of kids of color to get a good education, but to keep failing public schools open and to limit kids’ ability to go to public schools that are working. …
More commentary on how the NAACP has lost its way, from Stanley Crouch, in the NY Daily News,
…Parents and visionary education reformers like Geoffrey Canada spoke out against the suit in a Harlem gathering. One parent asked, “Why is the NAACP trying to block access to a better education for my child?”
Exactly.
The suit is proof of how low a great civil rights organization has fallen since its days of advocating for racial equality in the face of tremendous hatred. …
In the National Review, Kevin Williamson discusses one man’s big plans for your money. It is about T. Boone Pickens and his plan to pick our pockets.
…Mr. Pickens is trying to sell Congress something called the Pickens Plan, a madcap, Rube Goldberg political contraption designed to appeal to the worst elements of American politics — corporate self-dealing, xenophobia, economic illiteracy — while directing billions of dollars of subsidies into businesses in which Mr. Pickens has a financial interest. The plan goes like this: T. Boone Pickens and associates build some enormous wind farms on the Great Plains, which will produce a great deal of electricity. Unfortunately, the Great Plains are sparsely populated, and the current infrastructure for transmitting electricity would not support the efficient transmission of power from Mr. Pickens’s wind farms to the country’s population centers. So, somebody has to build a new system, and somebody has to pay for it: Mr. Pickens is nominating the American taxpayer to play that role.
But wind power is just the beginning of it. Mr. Pickens wants to create that new wind power so that he can divert a great deal of the natural gas currently feeding the nation’s electric-power plants into the transportation market, specifically into the tractor-trailer rigs that haul food and freight and much else around the nation. Mr. Pickens is deeply invested in the natural-gas business and is the majority shareholder in the leading supplier of compressed natural gas (CNG) vehicle fuel. Unfortunately for him, the nation’s freight carriers have shown very little interest in converting their 18-wheelers into vehicles powered by compressed natural gas. The reason for this is that CNG conversion is expensive and inconvenient. And because there aren’t many trucks running on natural gas, there are not a lot of gas stations and such set up to fill up CNG vehicles. You can see how this would inconvenience Mr. Pickens and his colleagues.
Since the people who buy 18-wheelers haven’t shown much interest in buying CNG-powered versions, the Pickens Plan would help them to see the light, with a combination of mandates and bribery. (The original version of the NAT GAS Act, the Pickens Plan’s enabling legislation, contained a mandate that a certain proportion of new trucks be CNG-powered. That provision has been dropped, but an industry mandate, or the threat of such a mandate, remains as essential to the Pickens Plan as the individual mandate is to Obamacare.) Converting to CNG is expensive — the tax credits would run up to $64,000 per truck, with about 8 million or so trucks operating in the country, and $100,000 per filling station to retrofit. Mr. Pickens proposes to offset that pain by offering a bunch of subsidies for the people who would be obliged to endure it. Somebody has to pay for those, too, and Mr. Pickens again nominates the American taxpayer. …
Nile Gardiner comments on German Chancellor Angela Merkel’s visit to the US, in the Telegraph Blogs, UK.
The visit of German Chancellor Angela Merkel to Washington has attracted little attention in the US media, perhaps further proof that Berlin barely ranks as a world power these days, and consistently punches under its weight in international affairs. Compared to both David Cameron and Nicolas Sarkozy, Merkel is a remarkably low-key figure when it comes to global impact, despite the size of the German economy.
Judging by the content of today’s joint press conference in the White House East Room, which has to rank as among the most dull in recent memory, almost nothing of any real substance come out of the US-German discussions. Merkel gave no ground on Berlin’s refusal to join the NATO-led military operation in Libya, and bizarrely championed the cause of European integration while the EU economic project is going up in flames back home.
Obama declared that he wasn’t concerned about the prospect of a “double-dip recession”, while noting that “we’re experiencing some headwinds”, i.e. some catastrophic bad news on the economic front. He also gave Iran yet another half-hearted warning over its extremely well-advanced nuclear programme, threatening “additional steps, including potentially additional sanctions” – whatever that means. In the meantime, Germany remains a huge trading partner with Tehran, actually increasing its trade with the Islamist, terrorist-supporting regime in 2010. …