Category Archives: Business

Business, Economics, History

The Last GM Dealership

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…in the birthplace of General Motors:

We remain the only GM dealership in the city limits of Flint. Isn’t it ironic that the birthplace of General Motors has only one dealership? The employees of the dealership for the most part felt confident that our performance and Mr. Applegate’s integrity and straight forward way of doing business would sustain the storm and survive the cut.

Some felt that our location would be a hindrance to our longevity….perhaps it worked in our favor…who really knows…it’s impossible to second guess or try to predict GM’s thinking. Remaining in business is not only a victory for Mr. Applegate and his employees but also a victory for Flint. I feel that is the untold story. How strange would it be for Flint not to have a GM dealership?

It would be surreal, like the empty field that I saw a couple weeks ago when I drove past where the old AC Spark Plug plant, near which I grew up, and where my father and brother worked for decades, used to be.

Business, History, Political Commentary

How The Mighty Fall

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What are the signs of incipient failure or collapse?

Great enterprises can become insulated by success; accumulated momentum can carry an enterprise forward for a while, even if its leaders make poor decisions or lose discipline. Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place. When the rhetoric of success (“We’re successful because we do these specific things”) replaces penetrating understanding and insight (“We’re successful because we understand why we do these specific things and under what conditions they would no longer work”), decline will very likely follow. Luck and chance play a role in many successful outcomes, and those who fail to acknowledge the role luck may have played in their success—and thereby overestimate their own merit and capabilities—have succumbed to hubris.

Might not be bad reading for the president.

Business, Economics, Political Commentary

“Revenue Neutral”

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Sorry, there’s no such thing as a “revenue neutral carbon tax.” Or if there is, you’d stumble on it by pure luck:

The most important point is that revenue neutrality is most likely a mirage. We would have to maintain the carbon tax for decades in order to generate the consumption reductions that advocates argue will occur, but FICA rates aren’t static over decades. In 1950 the FICA rate was 1.5%; by 1970 it was 4.8%; by 1990 it had risen to its current rate of 7.65%. It has been stable for about two decades, but meanwhile the programs that it (in theory) funds are in crisis.

Over the next few decades, we should expect to be in bitter political fights over changing retirement ages, benefit levels, access to publicly-funded medical care, tax rates, and other measures designed to make these programs financially stable. The FICA rate will not be insulated from this process. Who could possibly say that when it has increased in irregular and unpredictable steps to, say, 15.3 percent between now and 2028 in response to various political crises, that, but for the carbon tax, it would otherwise have been 16.5 percent?

I’ve previously discussed this conceit of politicians that they can predict the economic effects of their nostrums:

When a politician says that he’s going to either cut or increase your taxes, he is engaging, wittingly or not, in a conceit and a deceit. He says it as though he has the power to do any such thing, when in fact he does not. He has no power except to reduce or increase the rate at which you pay taxes, whether on property, income, or whatever.

Think of it as the difference between a joystick and a mouse. With a computer mouse, you can point directly to the place that you want to be on a screen. With a joystick, you can only control the rate at which you move toward it, and in so doing, the target may move, and it may move faster or in a different direction than you can keep up with using your rate control. Politicians talk about tax cuts as though they have a computer mouse that allows them to pass a law and a specified amount of revenue will roll in, but the reality is that they have a slow joystick, with a nebulous relationship to the eventual goal.

As Manzi says, TANSTAAFL. I think that dropping both sides of the payroll tax until the economy recovered would have been a hell of an instant stimulus, but eventually, that money’s got to be put back into the system.

Business, Economics, Media Criticism, Political Commentary, Technology and Society

College Is For Suckers

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In many cases, it is. I’m glad I made it through without any student loans, though I was paid fairly well upon graduation as an engineer in the early eighties. But it’s really crazy to spend as much money as a degree costs when the degree has no marketable value.

I think that overrated higher education is the next government-financed bubble to pop.

[Update mid afternoon]

Derb has some more reader emails:

I made the same mistake myself: a BS in Geography is worth nothing on the job market. If I had it to do over again, I’d have taken shop classes in high school (assuming that they existed) and gotten a 2-year blue-collar technical degree. Other than engineering and business degrees, most college BSs and BAs are worthless.

and this:

Higher education is the biggest scam going. I don’t think that’s news to you (or Charles Murray). What’s really disheartening is that the business world plays along — demanding four-year degrees for positions that shouldn’t require them. It’s just a lazy way for them to make their “first cut.”

That is the problem. As Derb says, an aptitude test would do a better job, but it might not provide enough “diversity,” so the degree has become a poor surrogate. And it reminds me of NASA’s astronaut selection policy. It likes to select PhDs, or at least grad degrees, not because they are necessary for the job, but because they have so many more applicants than positions, it makes a handy filter.

But if I were a businessman, and I was just looking for a degree as evidence that the holder at least had the stick-to-it-iveness to get a degree, I’d be just as happy, and perhaps happier, with a technical associates degree than a bachelor’s in French Lit. Or even English.

Business, Economics, Media Criticism, Political Commentary

Medicare Is Going To Bankrupt Us

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…therefore, we need universal care. Megan McArdle, on the insanity of that “argument”:

I hear this argument quite often, and it’s gibberish in a prom dress. Any cost savings you want to wring out of Medicare can be wrung out of Medicare right now: the program is large and powerful enough, and costly enough, that they are worth doing without adding a single new person to the mix. Conversely, if there is some political or institutional barrier which is preventing you from controlling Medicare cost inflation, than that barrier probably is not going away merely because the program covers more people. Indeed, to the extent that seniors themselves are the people blocking change (as they often are), adding more users makes it harder, not easier, to get things done.

It’s not an argument. It’s sophistry in the service of socialism.

Business, Economics, Media Criticism, Political Commentary

Choking Off Recovery

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One of the disengenuous tactics of the Democrats in support of Porkulus was to imply that conservative economists agreed with it, and in fact they actually lie about this. For instance, the other day, I heard Governor Rendell defending Arlen Spector’s vote on it by saying that. But what conservative economists agreed on was that some sort of stimulus was needed, not that legislative atrocity. One of the economists slandered thus was Martin Feldstein, who has a piece in the Journal today on the potentially disastrous effects of upcoming tax cutsincreases on the economy.

The current outlook for an economic recovery remains precarious. Although the stimulus package will give a temporary boost to growth in the current quarter, it will not be enough to offset the combined effect of lower consumer spending, the decline in residential construction, the weakness of exports, the limited availability of bank credit and the downward spiral of house prices. A sustained economic upturn is far from a sure thing. This is no time for tax increases that will reduce spending by households and businesses.

As Tigerhawk notes, “You cannot spread wealth that hasn’t bee created in the first place.” But so-called liberals think that wealth is something that just happens, and that all that need be done is to properly distribute it.

Business, Economics, Media Criticism, Political Commentary

Keep Bleeding The Patient

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The Democrats want to return to the days of bad loans and too-easy credit:

Am I missing something here, or have our elites already erased from their consciousness the fact that easy credit and the lack of responsible budgeting by consumers contributed mightily to our current economic mess? In the fourth quarter of 2008, 13.9% of consumers’ disposable income went to servicing credit-card debt, reports the Wall Street Journal. No shortage of credit there.

Apparently the self-righteous glow that comes from forcing capitalists to make bad bets on preferred victim groups is too strong a legislative addiction to be reined in by the prospect of further economic collapse.

The problem was that it was never in their consciousness to begin with. They find it politically convenient to lie to us and themselves (as they did throughout the campaign) that the problem was caused by “deregulation” and “tax cuts.”

Business, Economics, Media Criticism, Political Commentary

A Budget…

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…with no shortage of lies:

A truly serious president would not be fiddling around while our future burns. He would be addressing entitlements (mainly, Social Security, Medicare and Medicaid), which have tens of trillions in unfunded liabilities and constitute 60 percent of the budget. The day of reckoning on this government-generated mess is not all that far off, and when it comes, the economic crisis of the moment will seem small potatoes.

It’s a shame that we don’t have a serious president. It’s amazing that people report on this thing with a straight face. It’s like the coverage of Saddam Hussein’s “election” in which he got 99.9% of the vote.

Business, Economics, Media Criticism, Political Commentary

Chickens Already Coming Home To Roost

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Megan McArdle says that we may already be having a problem with sovereign debt risk:

Obama’s spending plans are extraordinarily ambitious. His projected deficits for the rest of his possibly presidency are higher than the “runaway” deficits that plagued most of the Bush administration–and after the first few years, that’s not stimulus, that’s ordinary spending outstripping revenue. For a while now, I’ve been asking people at conferences, on and off the record, what America’s sovereign debt risk is? That is, how long until people stop treating treasuries as the “risk free” securities, and start demanding a premium for the risk that we might default.

The answer from the right has been a nervous (perhaps hopeful) 2-3 years. The answer from the left, and professional Democratic wonks, is some unspecified time in the future. Probably, there will be a Republican in charge. Markets hate Republicans.

But last Thursday, the Treasury auction was . . . well, descriptions vary from “weak” to “horrible”. This raises the unpleasant possibility that markets are, as my business school professors insisted, “forward looking”. Voters may believe that getting a bunch of special interests to agree in principal that costs should be cut is the same thing as actually cutting costs. Bond markets don’t…

…Obama can assure voters that he inherited these deficits. But bond markets pay closer attention to the fact that Obama has already increased the projected deficit he inherited by 50%.

Let’s hope that the voters figure it out soon, and before Treasury has to start paying high interest on T-bills.