Free The Memes Archive
December 2008
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1:41pm Thursday December 11, 2008 (link)
When it comes to bailing out the auto industry, Congress should stick to its area of expertise, which is (being charitable) regulation. They should be scouring the law for regulations they can change that would give the industry a lift.For example, I read recently that the CAFE laws prevent companies from counting foreign production sold in the U.S. So even though Ford and GM both have high mileage diesel small cars they could sell here, it makes no sense for them to import them from Europe. Each car sold would just displace a domestic sale and make their CAFE mileage limit harder to meet. (I don't have a source for this, so I could be wrong.)
Also, I've read that something about the emissions or safety regulations also prevent them from importing both Japanese and European cars. This is supposedly why the Smart cars took so long to get here, and why some diesel versions of the Mini are not available here.
Lifting these regulations (synchronizing regulations with Europe?) would help both the domestic and transplant factories, but it would still help. Congress won't do it because they are worried about job loss, but it would make sense if they are trying to help these companies financially. They could almost immediately have high mileage cars when gas prices rise again. It should also satisfy the greens. A recent Top Gear TV episode in England had them trying to drive 750 miles on a single tank of gas. A 3 cylinder VW did it easily, getting nearly 60mpg. Much better than a Toyota Prius.
If Congress is going to bail the companies out, they should be looking for a one-time measure, rather than assuming any kind of control of the companies. For example, they could transfer the retiree pension and health insurance programs to the federal government. You could rationalize this by saying that if the company goes bankrupt, the PBGC will end up with these liabilities anyway.
While I'm dreaming, I would also like to see the Democratic party sit the unions down and tell them that the parasite is killing the host (or some more polite version of that.) They need to back off on work rules, plant closing and outsourcing rules. On the other hand, they don't need to cut much more on salaries and benefits. From that NY Times article on compensation here, it's mostly the retiree costs that are out of line with the transplants.
Anyway, the current plan is an obvious stopgap measure with ridiculous restrictions on the car companies. It will only get worse if Congress thinks they can pass something even more paternalistic under Obama. The companies are sure to need more money and Congress will be under continual pressure to bail them out or micromanage them even more. They will also be setting a precedent for every other industry that gets in trouble in the future. After all, when will it be politically possible to let Detroit fail? This idea that they are going to reform themselves and become "viable" (in a recession, with worldwide overcapacity) is a fantasy.
As much as I think bankruptcy will be a disaster for Detroit and probably the entire economy, this current plan definitely seems to be another step in the wrong direction. Of course, I think all the bailout money spent so far is just treating the symptoms rather than getting at causes. I expect it has mostly been wasted, and most of the "loans" will turn out to be unrecoverable. I suppose we can still afford to borrow a trillion dollars and piss it away though.
What I'm not sure we can afford is another Great Depression-inspired period
of government management of the economy. They already have health and energy and global warming
on their wish list, and are actively running housing, banking and now autos.
What's going to be left of the market?
9:54pm Sunday December 7, 2008 (link)
The Obama Plan was partially unveiled this weekend. I can't say I'm impressed.
I think if you are going to borrow a lot of money, you should invest
it in ways that give a return. Investing it in consumption just leaves
you with nothing afterwards except more debt. Going down the list of
items given in the paper, this all looks like consumption to me.
- Energy efficient federal buildings
Fine, but probably will cost more than it's worth. Construction busywork.
I also have a bit of an issue with CFL bulbs. In cold climates, the waste heat from regular bulbs is going to warm your building. Replacing those with CFLs is just going to increase your heating bill. It's still a savings if your heat is cheaper than electric heat (and there's less air conditioning in the summer), but it's not the savings people make out. If you are in an apartment with electric heat, like me, and don't use air during the summer, it's just more expensive.
- Investment in roads and bridges
Fixing potholes isn't an investment, it just brings construction spending forwards. More busywork, and an actual waste if they are repairing roads that don't get much use (should never have been built.) On the other hand, I've read that deferring maintenance on things like bridges just makes it even more expensive later. To the extent that this has happened already, more spending now would be a savings.
Adding roads and bridges, etc. might be an investment, but it's hard to be sure. I expect some of that money will find its way into overpriced transit projects, like the California high speed rail thing. A friend in the "smart highway" business says that metered ramps make more of a difference than a new lane anyway. And building new stuff that isn't needed just adds to your maintenance bill later. This strikes me as more busywork, very similar to what Japan did.
Some blogs have pointed out that there just aren't enough construction projects ready to go to absorb a huge injection of money. I'd expect this all to go to state coffers and have no effect for years. I'd also be a bit surprised if the people who have lost jobs building houses or office buildings have the skills needed to switch to road or bridge construction.
- Upgrading school buildings
More construction projects. Unless the school building is actively preventing learning (leaky roof, no heat), you won't get any return on this. The schools will just look nicer. As for adding broadband to schools, it will depend on how the net is used in the classroom. If primary education is the way it was when I was in school, they don't even teach kids to use a library effectively. This will just be some net slide shows/movies on various topics (replacing the slide projector and short films we sat through) and students looking up things in Wikipedia instead of the library. Probably also a waste.
- Increased broadband internet availability
This would be nice if you don't have it and want it. I can't see it creating a lot of jobs, giving jobs to people who have lost jobs, or creating much economic activity. There's this idea that the internet, like highways before it, will provide a base for a new economy. That might be true, but as usual, the new jobs will be different from the old jobs. If you are looking for a quick shot in the arm, I don't see this as working. People who get high-speed internet will probably use it for computer gaming and downloading of movies and video.
If they do use it for business purposes, it might be for online shopping, telecommuting or starting businesses from the home. This may make the economy more efficient (less driving, less retail/office space built), but in the short term, it means fewer retail jobs, and more pressure on commercial real estate.
- Electronic medical records
This could save some money and avoid medical errors, but I really find it hard to believe that the cost of replacing all those printed records with laptops really makes financial sense. It's frequently more time consuming to type notes in than to just write them down. Especially if you can't type! I expect many doctors can't. As for medical errors, if doctors would clearly print the names of drugs instead of writing them out in cursive, you would get all the benefits at no cost. Doctors are just sloppy, because no one calls them on it.
Anyway, if this is the plan, I'm both disappointed and reassured. Disappointed because it's all pretty much waste. Reassured because it's so timid and unimaginative. Perhaps Obama and Co. don't plan to redesign the entire economy after all...
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