I was a strong supporter for Barack Obama for President, and am still extremely hopeful that he will bring the change we need right now in America; however, today I am finding myself in more agreement with some of the Republicans on current issues. Specifically on the economy.
The issue of the day is a bailout for the auto industry.* Led by Carl Levin this bailout is being pushed by the Michigan congressional delegation who are being squeezed by the auto executives and their union allies. These are the same people who crated the mess by lobbying against increased fuel efficiency standards while they sold gas gusseling SUVs, pickups and Hummers. They are now also in partnership with Wall Street big wigs like Cerberus Capital Management who have gambled billions and are likely to loose their investment unless the taxpayers bail them out. Like the war on Iraq, like the three-page $700 billion financially system bail out, the auto crisis is now being portrayed as an immediate and impending disaster that requires a bushel full of money without any debate. We have seen this movie before. What about the taxpayer? Why should the taxpayer bear the brunt of their mismanagement and incompetence? Why not utilize the existing market mechanisms to bring about the changes we need? Specifically, why not bankruptcy?
The framing of the argument used by Levin and his cohorts (remember Carl Levin was also a leader on the Senate Armed Services Committee when they pushed the authorization to use force that got us into the mess in Iraq so he knows how to make the argument) is that if the US automakers fail, then there will be a loss of three million jobs. This is a false argument. It is not an either/or choice. The choice is not to give them a loan or watch them go out of business. There is another choice and that is a bankruptcy reorganization under Chapter 11. Levin paints the possibility of a bankruptcy reorganization as if it means that they will shut down these companies. Not true! Lots of companies have been through bankruptcy and come out of it as stronger, leaner and more competitive operations. A bankruptcy reorganization would likely remove the existing management, restructure the financing by removing the current owners, and yes, perhaps closing some inefficient parts of their organizations.
So why not get rid of the existing management? They have already failed. They put these jobs in jeopardy with poor management decisions supported by overreaching union leadership that focused more on getting unrealistic benefit packages than the viability of the enterprises. They failed to engineer new fuel efficient vehicles while their competitors did so. They failed to modernize their plants while their competitors built new ones here in America. They chose to diversify into non-auto related businesses that squandered their resources into mortgage banking, computers, and data management. They don't have a restructuring plan now and all they can do is threaten disaster if they don't get a loan. I can just about guarantee you that they will be back for more because they don't intend to make any fundamental changes in their operations. This situation cries out for a new management team that will be willing to make changes in their organizational cultures, products and manufacturing practices. This needs to happen before they get a dime of taxpayer money.
Why not restructure the finances of these companies? In the past few years, the auto makers have attempted to deal with some of their financial woes by selling investors from the private equity market to gamble on them. Big shots with deep pockets decided to take a gamble. Cerberus bought 50% of GMAC which at the time was the crown jewel of GM because it made money and subsidized the inefficiencies of the parent GM auto company. Cerberus also bought 100% of Chrysler after the German auto maker, Daimler-Benz decided they they could not make this company work. Other large well know investors have been in and out of these stocks over the last few years trying to make a fast buck by playing the market. These gambles have not paid off. It is now time for these investors to pay the piper. A bankruptcy reorganization will essentially wipe out the current stockholders, and replace the ownership of the company with the creditors. This will lower the debt service for the companies while streamlining the capital structure, and eliminating the outside influence of a hedge fund that is not obligated to report its financial performance to the public.
Will bankruptcy result in some job losses. Absolutely. There are many inefficiencies in these organizations from the top to the bottom: product development, manufacturing and retail distribution. Will some manufacturing facilities need to be closed? Yes. Will some white collar jobs need to be eliminated? Yes. Will the unions need to make concessions? Perhaps. Will some dealers shut down? Perhaps that too. But you can't get leaner and meaner if you don't make some of these changes. Remember the definition of insanity: doing the same thing you are doing and expecting different results. Putting taxpayer dollars at risk without making changes is insane.
Is the auto industry a key factor in the economy? Absolutely. Should Congress and the public be concerned about the future of these companies? For sure. Should we try to save as many jobs as possible while making appropriate changes? Definitely. But making these changes is the only thing that makes sense before we taxpayers invest in these enterprises. And when we do, we should get preferred stock, just like we have done with the banks. Taxpayers should get paid back first when these companies recover.
For a campaign that was run on "change," it is time for the incoming administration to force the changes that are needed to turn these companies around. It may still not work, but not making any changes will just get us deeper into the hole. This will require a lot of courage, because the unions and the elected democratic officials from the Midwest supported Obama and are now calling in their chips. I hope the new administration will put America First and force the changes we need before we resort to business as usual and support the special interests. This is our first big chance to put America First!
*Also, by way of full disclsoure, I worked for a subsidary of GMAC for about 9 years up until a little over a year ago.
Sunday, November 16, 2008
Thursday, November 6, 2008
Strategy First
Now that the euphoria of the election is begining to subside, and the stock market is retreating again, it is time to consider the best way forward. With the weak economy, the new President-elect and the Congress are talking about another stimulus package. The automakers already have their hand out for another package on top of the 24 Billion they got when Congress passed the 700 Billion dollar fund just before the election. Congress will likely not wait for the new President to take office. They will do something during the lame duck session; however, if they don't have a better plan that is part of an overall strategy, they would simply be putting us further in the hole without having a positive impact on the economy. As a short term measure, they could simply extend unemployment benefits to tide over those who are actively looking for employment.
Giving the automakers another handout is a lot more questionable. GM is already suspending product development work on new vehicles for lack of cash, and GM alone has lost over 50 Billion dollars over the last three years. For one thing, they might not survive even with the handout. For another, both GM and Chryler are either owned by or closely aligned with the private equity group Cerberus. Investing in the banking system and regulated entities to keep capital flowing is one thing, but investing in companies owned by private equity groups who represent wealthy investors and play by their own rules is quite another. As a taxpayer, I am not excited about using federal funds to prop up investments that are owned by or feed the interests of a private equity firm. Knowing that Nancy Pelosi is meeting with the automaker executives today is a scary thought. People should also know that Cerberus is a very politically connected firm with people like former Secretary Treasury Snow and Vice-President Quayle among their high profile executives. They know how to work the system to their benefit which may not align with the rest of our national priorities.
What needs to happen right now is for the President-elect to define his strategic vision for the country. Many of these problems like energy, infrastructure, and the health of the economy are interrelated and also impact national security. The old Congressional approach of simply throwing some money at the problem of the day to those who speak loudest will not work anymore. We need Mr. Obama's leadership to set the priorities of our investments in the future in a more strategic way. Only by investing in accordance with a strategic vision will we be able to fix the problems and wisely use our limited resources. He has already outlined some priorities during the campaign: Energy, Health Care, Infrastructure Investment, and his tax plan for the middle class. He needs to be clear about where he wants to focus first so that Congress doesn't squander the available investment pool on pet projects or lobbied interests. This is the problem we are attempting to fix with the new Administration. So, lets not let Congress be stupid before the inauguration. We voted for change, so don't let them go back to doing business as usual. If we do that, then we will have lost our chance to put America First.
Giving the automakers another handout is a lot more questionable. GM is already suspending product development work on new vehicles for lack of cash, and GM alone has lost over 50 Billion dollars over the last three years. For one thing, they might not survive even with the handout. For another, both GM and Chryler are either owned by or closely aligned with the private equity group Cerberus. Investing in the banking system and regulated entities to keep capital flowing is one thing, but investing in companies owned by private equity groups who represent wealthy investors and play by their own rules is quite another. As a taxpayer, I am not excited about using federal funds to prop up investments that are owned by or feed the interests of a private equity firm. Knowing that Nancy Pelosi is meeting with the automaker executives today is a scary thought. People should also know that Cerberus is a very politically connected firm with people like former Secretary Treasury Snow and Vice-President Quayle among their high profile executives. They know how to work the system to their benefit which may not align with the rest of our national priorities.
What needs to happen right now is for the President-elect to define his strategic vision for the country. Many of these problems like energy, infrastructure, and the health of the economy are interrelated and also impact national security. The old Congressional approach of simply throwing some money at the problem of the day to those who speak loudest will not work anymore. We need Mr. Obama's leadership to set the priorities of our investments in the future in a more strategic way. Only by investing in accordance with a strategic vision will we be able to fix the problems and wisely use our limited resources. He has already outlined some priorities during the campaign: Energy, Health Care, Infrastructure Investment, and his tax plan for the middle class. He needs to be clear about where he wants to focus first so that Congress doesn't squander the available investment pool on pet projects or lobbied interests. This is the problem we are attempting to fix with the new Administration. So, lets not let Congress be stupid before the inauguration. We voted for change, so don't let them go back to doing business as usual. If we do that, then we will have lost our chance to put America First.
Wednesday, November 5, 2008
A New Day for America and the World
It is a new day for America and for the world! We will have change in Washington that will be reflected in new policies here at home and engagement with other nations abroad. As Barack himself said last night in a great speech after the election, it will not happen in a year or maybe even his first term, but change is coming. It will require a lot of work by lots of people, but we can be very hopeful for the future with Barack Obama's leadership.
In his first address to the nation and the world, President-elect Obama made the point to say that this is about you. He provided a compelling vision of the future like all great leaders do. However, we have a lot of work to do to help this new President. We all need to reach out to listen to those who have different views because it will also require help from all the people regardless of party affiliation. We need to understand where we have common ground and can work together. Help out where you can to make a difference in supporting solutions that work for all of us on energy independence, health care, and economic reform, because this is just the beginning - not the end. Hold your elected officials at all levels accountable to do what is in the best interest of our community, your state, and the nation.
What we witnessed last evening was a triumph for democracy. It was reflected with celebrations at home and around the world. The citizens of this country spoke loud and clear that they are tired of the politics of division and policies that don't put America First. The problems are too big and we don't have time to waste.
So enjoy this day and appreciate the historic significance represented by Barcak Obama's election. However, let's all be prepared to help take advantage of the opportunity that his presidency represents. Yes we can, finally put America First!
In his first address to the nation and the world, President-elect Obama made the point to say that this is about you. He provided a compelling vision of the future like all great leaders do. However, we have a lot of work to do to help this new President. We all need to reach out to listen to those who have different views because it will also require help from all the people regardless of party affiliation. We need to understand where we have common ground and can work together. Help out where you can to make a difference in supporting solutions that work for all of us on energy independence, health care, and economic reform, because this is just the beginning - not the end. Hold your elected officials at all levels accountable to do what is in the best interest of our community, your state, and the nation.
What we witnessed last evening was a triumph for democracy. It was reflected with celebrations at home and around the world. The citizens of this country spoke loud and clear that they are tired of the politics of division and policies that don't put America First. The problems are too big and we don't have time to waste.
So enjoy this day and appreciate the historic significance represented by Barcak Obama's election. However, let's all be prepared to help take advantage of the opportunity that his presidency represents. Yes we can, finally put America First!
Tuesday, November 4, 2008
VOTE FOR CHANGE!
If you have not voted yet, go now! GO VOTE FOR CHANGE.
If you are not better off today than you were eight years ago, go to the polls now! GO VOTE FOR CHANGE!
If you are thinking about America First, GO VOTE FOR CHANGE.
If you have already voted, thanks for voting.
Editor, America First.
If you are not better off today than you were eight years ago, go to the polls now! GO VOTE FOR CHANGE!
If you are thinking about America First, GO VOTE FOR CHANGE.
If you have already voted, thanks for voting.
Editor, America First.
Monday, November 3, 2008
Closing Arguments
On the eve of the most important federal election in a generation, we now are provided with the closing arguments from both campaigns:
Senator Barack Obama offers an uplifting message of hope for the future. He has the advantage of a huge war chest of donations from small donors and has run a magnificent campaign. Several days ago, his campaign paid for a thirty minute "infomercial" to make its final closing arguments. It featured several middle class families who were dealing with the personal challenges, of jobs, health care, and a modest retirement that are all being eroded by the current economic challenges. He offered solutions not only to these economic challenges, but to rebuilding infrastructure, expanding educational opportunities, ending an endless and mindless war, and real energy independence based on investment in alternatives that would get us off foreign oil. If you were able to watch this, you would likely agree that this was a most positive and inspirational vision for the future. This is the starting point for all great leaders: A compelling vision of the future.
John McCain offers the failed policies of the Republican right wing crowd, even though he opposed many of these same policies during his 25-year tenure as a senator. The McCain campaign does not have the financial resources like Obama because John McCain chose to elect federal funding for his campaign (remember he represents the party of choice and personal responsibility). Nevertheless, he has been strongly supported by the Republican National Committee and some private "527" groups funded by wealthy individuals who benefit from these Republican policies - policies that have been in effect not just over the last eight years, but arguably since Ronald Reagan came to office in 1980. Change comes hard to these folks since they have been the primary beneficiaries. Since these policies have not worked for the benefit of all the American people, they can not make a good case to stay with them. So instead, they are flooding the airwaves today with negative commercials and a drumbeat of false accusations, misleading messages, and divisive rhetoric. This is anything but a positive message for the future and forebodes another difficult four years if McCain and Palin should get elected.
The nation cannot afford another four years of disastrous policies that serve only the few and not the general good. It is not simply suffering through another four years, but the lost time that will be so tragic. The lost opportunity to solve these problems now will compound the issues facing America and the world. The problems grow geometrically larger each passing day. The choice for the country is clear. Make sure you get out to vote for Senator Barack Obama and his running mate Joe Biden. We don't have any time to waste if we want to truly put America First!
Senator Barack Obama offers an uplifting message of hope for the future. He has the advantage of a huge war chest of donations from small donors and has run a magnificent campaign. Several days ago, his campaign paid for a thirty minute "infomercial" to make its final closing arguments. It featured several middle class families who were dealing with the personal challenges, of jobs, health care, and a modest retirement that are all being eroded by the current economic challenges. He offered solutions not only to these economic challenges, but to rebuilding infrastructure, expanding educational opportunities, ending an endless and mindless war, and real energy independence based on investment in alternatives that would get us off foreign oil. If you were able to watch this, you would likely agree that this was a most positive and inspirational vision for the future. This is the starting point for all great leaders: A compelling vision of the future.
John McCain offers the failed policies of the Republican right wing crowd, even though he opposed many of these same policies during his 25-year tenure as a senator. The McCain campaign does not have the financial resources like Obama because John McCain chose to elect federal funding for his campaign (remember he represents the party of choice and personal responsibility). Nevertheless, he has been strongly supported by the Republican National Committee and some private "527" groups funded by wealthy individuals who benefit from these Republican policies - policies that have been in effect not just over the last eight years, but arguably since Ronald Reagan came to office in 1980. Change comes hard to these folks since they have been the primary beneficiaries. Since these policies have not worked for the benefit of all the American people, they can not make a good case to stay with them. So instead, they are flooding the airwaves today with negative commercials and a drumbeat of false accusations, misleading messages, and divisive rhetoric. This is anything but a positive message for the future and forebodes another difficult four years if McCain and Palin should get elected.
The nation cannot afford another four years of disastrous policies that serve only the few and not the general good. It is not simply suffering through another four years, but the lost time that will be so tragic. The lost opportunity to solve these problems now will compound the issues facing America and the world. The problems grow geometrically larger each passing day. The choice for the country is clear. Make sure you get out to vote for Senator Barack Obama and his running mate Joe Biden. We don't have any time to waste if we want to truly put America First!
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