Friday, December 19, 2008

Numbers for Detroit

Every once in a while I get a kick out of getting out the calculator and figuring out how much decisions made by those inside the Beltway cost the rest of us.

Congress refused to pass a bailout for the Big Three auto companies. So the executive branch decided to fill the void. The cost of this first bailout will be $17.4 billion with a "b". (Actually, it will be more than that bc. since we are deficit spending, part of this money will actually have to be borrowed. Let's forget all that and just say that it's 100% money we actually have.)

There are several way s of looking at this. One, there are about 320 million Americans. $17.4 billion with a "b" divided by 320 million people means we are spending $54.37 per person to bail them out. Seen that way, the the Potomac Schicks will be paying $271.85.

We can also look at this not as individual citizens but as tax filers. That is, many people don't pay taxes so that $17.4 billion with a "b" might better be divided by the number of tax filers (generally that means the number of families). I hate spending too much time Googling these things so I'll just use the figures from the first thing I found--2006 stats from The Tax Foundation. They say in '06 there were expected to be 136 million tax returns filed. If that's the same number as '09, when we divide it out, we see that each family will have to pay $128 for the bailout.

Oops, hold your horses there, mi amigo, turns out that 32% of those who filed in '06 paid no income tax. (I've heard it said that that figure has gone to 40% but I'm too lazy to verify that.) Take the $17.4 billion with a "b" bailout and divide it by 93 million filers who actually pay income tax and we now find that everyone who files and actually pays income taxes is responsible for $187 of the bailout.

$54 per person, $272 for my fam., or $187 as a particular tax payer. There are several ways to look at it.

The bottom line is this: if we let 'em get away with this, this is only the beginning. Let me rephrase that: this was only the beginning. This is not a bail out. It is a stop gap until Barry and his crew get in there and give away more.

Ike talked about the military/industrial complex. Well, friends, we're about to witness the power of the Big Labor/Big Government complex. This bailout and what will follow is nothing more than a jobs program. Every one of the rascals who's been endorsing this thing has said that the priority is protecting these jobs. If we don't help the Big Three then millions of jobs will be lost. I guess one way to look at it is to say we either pay workers through a bailout or we pay them with unemployment.

But guess what, the very subtle change that is being baked into this thing is that the "job" of GM, Chrysler, and Ford is no longer to sell cars--it's not to make a profit for shareholders. It's to protect jobs. And the "job" of government, evidently, nay, obviously is not to hold back and let the market work. Government's "job" is now to step in and artificially prop up these companies to preserve the jobs. That's always been the job of the unions. Now what we're seeing is that labor, car companies, and Congress have come together to do whatever it takes to protect these jobs.

That's fine. I guess. It certainly makes everyone feel good. But it's economically unsustainable. Jobs doing what??? Car sales have dropped on an annual basis from 17 million to 10 million. With demand like that, someone has to lose a job! Are these folks going to build cars to use as reefs to increase the oyster population in the Chesapeake? Are they just going to park them in a field like they did with the FEMA Katrina trailers? There is no demand for this product.

It makes no sense. They're going to be out of a job eventually. At the very least, they are not going to have the same job at the same pay that they have now.

Unless, of course, you tax us each $187 more to put them all on the government payroll.

Monday, December 15, 2008

Sat. Nite Fights--@ Chuck E. Cheese!

Seems that Chuck E. Cheese's is gaining a reputation amongst the po-lice nationally as the in place to brawl with other parents. Why fight at the little league game when you can do it at your kid's birthday party?

The melee in Flint spilled out into the back parking lot. Hilarious.

The chart comes from the Dec. 9 Wall Street Journal. Thanks, Geo.

Friday, December 12, 2008

Follow the RRs Example, Detroit

This is a link to a blurb from CNBC last week that's worth the four minute and 44 second length. [I hate to put anything up with a NYT ad in it, but what can you do?]

Matthew Rose, CEO of Burlington Northern Santa Fe Corp. and Lambda Chi Alpha brother, talks about the railroad industry 25 years after deregulation. There are a third fewer miles of track and the number of railroad employees fell from 500,000 to 200,000, but the trains carry 60% more freight now than they did pre-deregulation. RR restructuring targeted pricing and technology. Thirty-seven class one RR companies have consolidated into just seven today. Layoffs occurred mostly through attrition. Capital fled the industry in the face of this drastic reform but profitability has returned.

This is what the Detroit auto makers need. The American taxpayer does not need to be subsidizing a system that is no longer sustainable. The system needs to be replaced. Replaced by something beyond the imagination of the Those Now In Charge.

Someone the other day said that annual cars sales have dropped from 17 million to 10 million. I don't know if that's accurate, don't have the drive to look it up to confirm. But if it's true, all this talk about helping the Big Three out in order to "protect jobs" is a bunch of hooey. Jobs doing what--building cars that no one's buying?! If your sales are down 40%, your production lines and employee roles need to be cut by 40%. [Unless of course you are the government.]

If there are no buyers (bc. buyers no longer have lines of credit on their homes, or they can't get loans, or potential buyers don't have jobs any more), then factories very simply need to be closed. Stop building cars! Nobody--not Detroit executives, not government bailout plans--can continue to pay people to build cars if no one is buying them! This is the end of an era, just as it was the end of an era for the caboose in the early nineties.

Can it be any more simple?

Thursday, December 4, 2008

Will it be a bath tub?

Interesting interview on Squawk this morn with Bill Zollars, the CEO of YRC Worldwide (that's Yellow Trucking for those of you who are not Squawk fans).

YRC is in a spot. Business is down double digits year over year. It's "significant. . . . It's very hard to find a metric that's headed in the right direction." He was on a year ago and presciently predicted this was coming. Sure enough he was right. He agrees that it may not end up being a V- or U-, but rather a bathtub-shaped bottom. Yikes.

Due to pension commitments Yellow has been forced to shift money from salaries over to pension benefits. They have more recently negotiated with the Teamsters union to reduce benefits to such an extent that the union pay and benefits package will soon be no better than the package for non-union members.

Unfortunately for so many, there may be a whole lot more of this in the coming months as American benefits adjust downward in order to be competitive in this World Economy.

Wednesday, December 3, 2008

THe Highwaymen

One of my favorite songs, tho, it doesn't qualify as a masterpiece.

What I would give to have been at that concert.

"I am still around, always be around, and around, and around, and around. . . "