Archive for November, 2008

Rewarding Michigan’s Failures

Posted in Activism on November 24, 2008 by poyers

It is bad enough that some of our government leaders are trying hard to support companies that are poorly run and inefficient with tax payer money (Detroit’s auto makers).  We have been facing that battle as constituents since the beginning; i.e. politicians looking out for their own special interests and considerations at the expense of the masses. 

Consider being a representative of Mississippi or Alabama where your domestic auto makers are bringing in solid revenues, represent a well managed and thriving business, and have employees being well compensated for their efforts.  You might be a little disturbed that the failures of the Michigan companies are being discussed but your successes are being ignored.  This is the essence of the pain behind the “spread the wealth” comments of Obama.  Success is punished by being taxed and regulated whereas failure draws out discussion of victimhood and reparations.  Why are we not going out of our way as a country to support winners and do everything possible to help them continue to be successful?

Further adding to the frustration is that the “leaders” of some of these places are being rewarded with high level positions in the forthcoming Obama administration.  Consider the promotion of Jennifer Granholm to Michigan’s economic team.  Her state’s failures has led Michigan to be the put of many jokes and punchlines about American woes.  Now, Obama wants to bring that nonsense to the country at large in recognition of her…success and brilliance.  Excuse me!  She has been an abject failure and done nothing but raise taxes and enforce penalties on every industry that is successful in the state.  She throws money at the Detroit school system that is the worst in the country but one of the wealthiest and most expensive.  There are huge burdens on the state and city governments because of the enormous costs of the bureaucracy and public employees with nearly 50 cents on the dollar in tax revenue going to pay employees.  A long list indeed.  And how is she rewarded for her failures…a job promotion.  Are we to expect the future of the country to be that of Michigan?

Alas, now we know why Michigan Gov. Jennifer Granholm is on President-elect Barack Obama’s economic policy team. Judging by Obama’s Saturday economic address, he plans to address the nation’s ills with the same inept policies Granholm has championed for the last six years here in Michigan.

Granholm and Obama have much in common: They are both young Democratic party protégés, both are charismatic personalities, and both are left-wing, Harvard-educated lawyers with little experience running anything prior to assuming office. Like Granholm, Obama appears to have little grasp of market economics, but prefers showy public-works programs and utopian visions of bridging a carbon-addicted America to a new green economy that will employ millions.

The similarities between Obamanomics (as outlined in Saturday’s radio address (http://my.barackobama.com/page/community/post/stateupdates/gGxtlN) ) and Granholmnomics (as outlined in her January State of the State address (http://www.michigan.gov/gov/)) are striking.

Obama:

“(My stimulus plan) will be a two-year, nationwide effort to jumpstart job creation in America and lay the foundation for a strong and growing economy. We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels, fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.”

Granholm:

“I’m proposing a Michigan economic stimulus package — nearly a billion dollars for needed infrastructure and building improvements, creating upwards of 28,000 construction and other jobs over the next two years. A billion dollars in economic stimulus from new construction. But let me talk for a moment about one sector that has blockbuster potential for Michigan: alternative energy . . . . Because of the need to reduce global warming and end our dependence on expensive foreign oil, the renewable energy and energy efficiency industries will create millions of good paying jobs. I say we will win these jobs for Michigan and replace the lost manufacturing jobs with a whole new, growing sector.”

The echo is eerie.

And likely to get eerier still. How has Granholm gone about creating this new green economy? With mandates and targeted tax breaks — just as Obama will likely propose. Granholm spearheaded a state Renewable Power Standard that mandates 20 percent of Michigan’s energy come from wind power by 2020, and she has showered tax breaks on alternative energy companies. Watch for Obama to do both on the national level.

The result has been a Michigan economy that has drowned under Granholm’s watch, with unemployment tripling to a nation-leading 9.3 percent at the same time that Michigan’s debilitating economic fundamentals — high taxes and overgenerous concessions to organized labor — have gone unaddressed. Granholm, however, has missed few opportunities for photo ops touting the companies that have benefiited from her tax handouts or her road-construction spending.

And she has landed a key position in Obama’s transition team, where she and the president-elect apparently agree that Granholmnomics is America’s future.

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Mitt on the Auto-Bailout

Posted in Activism on November 19, 2008 by poyers

I was pretty low on MItt during the primaries as he led a horribly inept campaign and had so sense of story or message throughout.  That being said, I think that he is a very talented and capable man as an individual thinker and entreprenuer.

In today’s NY Times, he writes an awesome op-ed (http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=2&partner=rss&emc=rss).

Some highlights:

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

Instead of a bailout, Romney proposes a sizable increase in spending on research that would benefit the auto industry:


 

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.


He alludes to a “managed bankruptcy.” And perhaps this is something the federal government can, in fact, help with. But a blank check – which is what the industry is asking for now – would be a waste.

The auto industry is headed for a shakeout regardless of whether the government intervenes or not. It can happen to the betterment of the industry by making it leaner and stronger, or it can codify failure. Romney’s call is clearly not to subsidize the losers.