17. November 2008 by David A. Peterson.

Time to flip the coin. Heads and the automakers get funding to allow them to live for a while longer. Tails and the automakers don’t get funding and they will die a slow but certain death.

Where do you stand on the issue? My guess is that most fiscal conservatives will vote for tails, and moderate Republicans aren’t sure what to do. After all didn’t the Republicans just lose an election, didn’t slightly more than ½ of the population vote to do it a new way?

Notice in our coin toss that either way, heads or tails, the automakers are in deep trouble. If events keep moving in the same direction then no amount of Chevy Volts will save this industry.

Should we let them fail? We need to define what failure is… All three automakers will probably have to enter bankruptcy fairly soon. You can’t keep bleeding cash like these companies have done in the last few years.

So if failure means bankruptcy should we as a country let that happen? The answer is yes. Bankruptcy doesn’t mean that Ford is going away and its plants will be liquidated. This type of failure doesn’t mean that all 3 million jobs will be lost. It doesn’t mean that this vital industry will cease to exist.

What it does mean is that the three US automakers have to get their legacy costs in line. It is the cost of doing business that has these automakers in a bind. Bankruptcy is the only way to renegotiate those legacy contracts.

Who made this mess and created these absurd legacy contracts anyway? Lately all fingers have been pointing to the unions but in retrospect it was the unions and the managements of these companies signing the contracts every couple of years. If management didn’t think they could turn a profit with the deals they were signing then why, oh why did they sign them.

Were the Board of Directors for both the unions and the companies involved alive during these negotiations? Did the respective boards actually believe that the pension obligations could be overcome by selling “x” amount of units at an ever increasing costs?

At this moment in time the only losers in the US automakers fiasco is their respective shareholders. They are going to lose every nickel. However our government wants us all to share the pain of the shareholders so billions of our tax dollars will be invested. This really isn’t a flip of a coin. Regardless of what you think about the debate some rescue package is coming.

Conservatives cannot bury their heads in the sand. They do have a chair at the table and an obligation to legislate the best deal possible for the taxpayers. The role for the Republicans during this crisis is to ensure that any tax dollars allotted towards these programs has some form of return.

In other words if you plan on using my tax dollars I want at least these three things:

•  A competitive cost structure for US automakers vs. foreign makers producing in the US. (I believe a bankruptcy judge will take care of this one.)
• An automobile power plant standard that will replace the internal combustion engine in phases. (I’m tired of hearing about this one – we all know we need a comprehensive energy program.)
•  A distribution of preferred shares purchased at the strike price of the pre-bankruptcy loan. (I’m mentioned this one before, if I’m lending you money then I would like the cash back with interest.)

This coin has already been flipped and it came up “heads” and “tails.”  We will end up bailing out these automakers and we will let them fail and go into bankruptcy. What will emerge is a more competitive automobile industry.

I wonder if one day Toyota will have so much market share and so many US plants that we will end up bailing them out – I bet we will get the same outcome on that coin toss as well?

Posted in Economics | No Comments »

14. November 2008 by David A. Peterson.

Here I am again ranting about the conservative message, while Georgia is headed for a runoff in the US Senate race. Saxby Chambliss is the incumbent, and he is well liked in the state. Given any other election cycle this race would not have been close.

Senator Chambliss and Jim Martin both ran extremely negative campaigns in the month of October. Both candidates were blasting each other every 30 seconds. It got comical. Nothing of value to a potential voter was presented during this election cycle. We just watched one dumb television ad after another.

But here we are in the state of Georgia where you have to win 50% of the votes to avoid a runoff. Senator Chambliss just missed with 49.8%. On December 2^nd we will all (I will use “all” loosely here) head back to the polls to elect a Senator.

Incumbents usually win these things. Jim Martin knows that, Saxby Chambliss knows that as well. So what are the two of them doing now in terms of their message?

Senator Chambliss has brought out the big guns. Senator McCain was here yesterday, Governor Huckabee is on his way. There will be no shortage of big name Republicans in the state over the next few days to help stop the liberal juggernaut.

The Atlanta Journal – Constitution reported that Senator Chambliss “warned that a Democratic supermajority would unleash a rash of liberal initiatives.” The advertisements that Senator Chambliss is running on TV support that theme. Some RNC / 529 group (I don’t know which one) is rerunning the bash Jim Martin ads – over and over again. The Republicans are hitting fast and hard.

Jim Martin on the other hand is running some very soft TV advertisements. He is offering to help the Obama presidency stop the current “gridlock.” He talks about getting things done to “give the middle class” the help they need now.

Notice the messages. Senator Chambliss will continue on his basic Republican path and work to derail the liberal juggernaut, while Jim Martin will help the middle class. Read between the lines: Saxby is talking to the base that will vote for him regardless of the circumstances; Jim is talking to absolutely everybody else.

A couple of weeks ago I thought Senator Chambliss would win big in Georgia. This is still a very conservative state. Now I’m not so sure. He’s got my vote, but conservatives need to realize that the middle class in Georgia is suffering through this recession. If you are going to spew the standard conservative lines you better in the next breath explain how that policy is going to help the middle class get out of this mess – only do this if you plan on getting their vote.

Now if it is the Republican Party’s plan is just trying to make a point instead of winning an election then I recommend that they just stay the course. I’m sure in a couple of years their immediate conservative base will still be intact but I’m not sure if that base can carry a national or even a state election without a little help from a few million other folks.

Posted in Message | No Comments »