The Results Are In

GM and Chrysler showed up today, tin cup extended, begging for more federal money to stay afloat. All this after they received a Christmas gift in December. Companies that have been the bedrock of American capitalism are now feeding at the trough of the American taxpayer.

In December, GM received $13.4 BILLION. Now they want an extra $16 BILLION by 2011. I hope they are still in business by then. From CNN.com:

“The two firms also detailed plans to cut 50,000 jobs worldwide by the end of the year. In addition, GM plans to close five more plants in the next few years and confirmed it will drop some of its weaker brands.”

I hate that GM is being forced to lay off workers, but slimming down is product is something that has been a long time coming. Does GM really need to produce more than 15 Pontiac lines every year?

Plans are in the works for the Saturn and Hummer lines to go by the wayside. Chrysler will be eliminating the PT Cruiser and the Aspen. Frankly, I’m glad the Cruiser is going away. It’s an ugly car. It’s supposed to look like the street muscle cars from the 60’s and 70’s. This new version has a 4 cylinder engine. Some muscle car. I’m a little sad about Saturn. I’ve never driven one, but that line has been very dependable, and Saturn totally revolutionized the car buying experience. As for Hummer, I’m not sure what to think. I do think it’s a little odd for Citizen Joe to be driving around in something designed for military transport.

I know we don’t want people to be laid off, but it is bound to happen in a sour economy. I would love to see the UAW make some concessions to make sure these companies are able to stay afloat. I doubt that will happen.

A lot of people are complaining that the Obama administration is going to result in socialism and nationalization of industries. But when these industries go hat in hand to the government asking for money to stay in business, we shouldn’t complain that the government is going to take over these businesses. After all, they’re basically being asked to do it.

Pakistani government caves to Taliban in provincial territories.

Not even a month into the Obama presidency, one of our allies in the ongoing war on terror, Pakistan, has recognized the Taliban rule in the northwest frontier area known as Swat Valley.

Apparently, the new government in Pakistan is tired of fighting the extremists, and did this in the hopes that the Taliban will bring peace to the region.

From CNN.com:

“But now that the Pakistani government has recognized Taliban rule in the region in exchange for a temporary cease-fire.”

Obama’s and Secretary of State Hillary Clinton’s first test is not going to be appeasing and patching relationships in Europe and Asia. Dealing with the appeasing of the Taliban by new government in Pakistan is going to be their first test.

Under President Bush, the US was operating covertly in those areas of Pakistan. The Pakistanis didn’t like it too much, so we scaled back our operations. And now the Taliban has a new base of operations.

Stocks sink as Obama spends

President Barak Obama is all giddy about signing his Generational Theft Act today in Denver. Usually, when presidents or governments enact legislation that will boost the economy and help businesses, the markets respond favorably. Today is not that day.

The headline on CNNMoney.com at 11:55 AM is “Stocks sink to 3-month lows.” That is not a headline that screams confidence. The DOW is sinking, down 270 points for the day.

As Obama readies his big spending bill, he really should take a step back and look how the business center of this country is reacting to his first big piece of legislation.

From CNNMoney.com

“Stocks tumbled Tuesday morning as investors worried that the $787 billion economic stimulus plan won't go far enough to slow the pace of the economic downturn.

The Dow Jones industrial average (INDU) fell 230 points, or about 3% roughly 90 minutes into the session.

The Standard & Poor's 500 (SPX) index lost 30 points, or about 3.6%. The Nasdaq composite (COMP) lost 50 points, or about 3.2%.”

The Stock Market has not seen any favorable gains since Obama took office. So far, his term has been defined by partisan politics over the $800 billion dollar stimulus package and the mess some of his nominees have made of his Cabinet. Since the stimulus package picked up steam last week, the DOW started to decline from 8,400 to below 8,000.

With GM and Chrysler expected to release their own bail-out plans today, more doom and gloom may be on the way. Of course, it might not hurt if our national leaders stopped using doom and gloom phrases when discussing the economy. After all, consumer spending was up 1% in January, without the help of a stimulus.

The Obama Free Money Giveaway

I noticed this little paragraph in a Foxnews.com write-up about the stimulus plan.

The $1,000 child tax credit would be extended to more low-income families that don't make enough money to pay income taxes, and poor families with three or more children will get an expanded Earned Income Tax Credit.

That’s great.

And according to this, middle-class America gets to pick the tab up on that, too.

Millions of workers can expect to see about $13 extra in their weekly paychecks, starting around June, from a new $400 tax credit to be doled out through the rest of the year. Couples would get up to $800. In 2010, the credit would be about $7.70 a week, if it is spread over the entire year.

This makes absolutely no sense. Obama wants to start his pet “middle class task force,” but can only give us a big enough tax cut for less than $10 a week. I’m not even going to see that. But if I wanted to go to work at McDonald’s part-time, I would at least get an extra grand. Maybe more since I have two kids.

If the middle class is the backbone of the economy, doesn’t it make more sense to give us a bigger tax cut than the poor? According to the article, the $1,000 tax cut is going to people who don’t even qualify to pay taxes in the first place. Basically, they are getting another government handout.

I can’t even apologize for sounding mad this time. To give someone who is making about $12,000 a year and extra grand is not going to stimulate anything. They aren’t going to qualify for a car, or a mortgage.

Obama Sets Hard Salary Cap, Players Union to File Grievance

President Obama signed an executive order on February 4th placing a cap on CEO pay to those financial firms that will be receiving federal bail out money. The cap is $500,000. While I consider that a lot of money, it may not be to someone that has been making a few mill every year.

While the policy is great for public support, there is zero chance this will work.

Before Leon Panetta was tapped for Chief Spy, he made over $700,000 in speaking and consulting fees. Now he makes a lot less. Poor guy.

My point with that is if Panetta can make that kind of money in consulting fees, imagine what a real Wall Street CEO who just quit his high-profile gig because of the salary cap is going to make in consulting fees.

Patrick McWallstreet is so unhappy with his new found un-glory that he quits his CEO position with Bank De America. He’ll be OK. There is another bank that has an opening for a CEO. ACME Bank hires McWallstreet, but not as CEO. They hire him as a consultant at $1 mill per, plus performance incentives. The leave the CEO position open but have a Consultant-in-Charge in McWallstreet.

The only true effect the salary cap is going to have is lots of restructuring and renaming of job positions.

By meddling with free market economics, the only thing Obama has done is change someones job title from CEO to consultant.

Barak Motors, Inc.

Barak Obama recently announced he is dismissing his plan to have a “car czar” in charge of retooling American’s automakers, specifically GM and Chrysler. While I admit that the companies definitely need to rethink how they do business, I don’t think the government is the best place to learn how to do that. Fortunately for us, Obama has seen the light. Instead of having one person in charge, he is going to set up a panel, led by none other than Timothy H. Geithner.

Groan.

From the NY Times…

“The official also said that Ron Bloom, a restructuring expert who has advised the labor unions in the troubled steel and airline industries, would be named a senior adviser to Treasury on the auto crisis.”

That’s just great. We’re going to fix a troubled industry by hiring someone with union ties to consult with the panel. Unions handicap business by demanding wages and benefits above what the market demand is. Someone working at a GM plant gets paid about $18/hour to install a CD player, while someone doing the same thing at Best Buy gets paid about $12 with fewer benefits if they get any at all.

Part of a free market economy that we all enjoy is that supply and demand set prices for products as well as wages.

This news comes out today as we all wait with baited breath to see what kind of plan the automakers will have tomorrow as they are expected to issue reports about their restructuring as part of loan agreement with Washington.

“The companies’ plans are required to show progress in cutting long-term costs as a condition for keeping their loans.”

Unfortunately for the auto companies, the best way to reduce long-term costs was to not enter into costly legacy deals with the UAW. When the companies are responsible for ongoing benefits, including health care, to retired union workers there are going to be huge long-term costs. Even worse, the companies are stuck with the deal. The UAW will never let the companies out of those agreements even if that means the union has to sacrifice today’s jobs.

While the auto industry may be its greatest enemy, it doesn’t need government intervention to help itself. If CEO’s had the balls to do it, they would even decline government money to make themselves leaner.

Before the election, many people were concerned about the Democrats increased leanings towards socialism. Looks like the auto industry may be first on the docket.

Democracy fading in Venezuela

Venezuelans voted on Sunday to abolish term limits for elected officials. With 94% of the results counted, 55% were in favor of the constitutional amendment to do away with term limits. Hugo Chavez, Venezuela’s sitting president, was thrilled with the victory.

From CNN.com

"Victory, victory, popular victory," Chavez told a jubilant crowd of thousands gathered in front of the Miraflores presidential palace. "This is a clear victory for the people. A clear victory for the revolution."

That quote was attributed to Chavez, but sounds eerily similar to remarks made by Fidel Castro many years ago as he ascended to power in Cuba. Chavez has already gone out of his way to make friends with Cuba and even Russia.

How long will it be before the U.S. takes action against Chavez? I’m not calling for all-out regime change like the Bay of Pigs fiasco or an invasion of Iraq. Clearly, some sort of political or economic pressure will need to be applied. Of course, that didn’t work in Cuba as poverty only increased.

If it wasn’t for Venezuela’s major export, this probably wouldn’t even be an issue. Their major export is oil. Time will tell.