Friday, October 5, 2012

My View

Random ruminations from your resident curmudgeon...

Are you familiar with the WARN Act? The Worker Adjustment and Re-training Notification Act is a law passed by Congress in 1988 that requires companies that have more than 100 employees to give those employees at least 60 days notice if the company is planning to conduct layoffs. This is to give the affected employees time to adjust financially and begin the process of looking for other employment. Why mention this? Several large U.S. manufacturers, lead by Lockheed Corporation, were preparing to send out WARN notifications to their employees because Congress has failed to act on renewing the current tax rates or coming to an agreement on a new tax structure. Failing to do so would mean that a significant portion of the Department of Defense budget would be sequestered and unavailable for spending beginning January 1, 2013, along with curtailment of social spending. And who is one of the largest defense contractors? You guessed it. Lockheed. CEO Bob Stevens was prepared to send out notices to 123,000 employees in compliance with the WARN Act, but the Obama administration urged the company not to do so. You and I both know why. Those notices would have gone out November 2nd, four days before the election. You know how that would look to voters. Oh yeah... not only has the Obama administration asked Lockheed to break the law, the White House has said that if the company was fined for breaking the law, the administration would pay those fines and the cost of employee terminations. Folks, that is you and me as taxpayers paying those fines and termination costs so that the negative impact will not affect the election chances of the incumbent. The audacity and outrageousness of this action is beyond words. Well, I can think of one: corrupt. I guess you can take the politician out of Chicago, but you can't Chicago out of the politician.

If my memory gets any worse, I am going to be able to plan my own surprise party.

Earlier this week, Government Motors announced that their electric car, the Chevrolet Volt, had  a record number of sales. I have written in previous blogs that there would be no sales of this vehicle if it was not heavily subsidized by you and me as the tax payer. Now the Congressional Budget Office (CBO) has weighed in and confirmed the fact that the cars would not sell if it was not for significant government subsidies. According to the CBO, in an audit of the Federal Financing Bank, a government entity that is providing loans to automakers for electric automobile development, "Given current prices for vehicles and fuel, in most cases the existing tax credits do not fully offset the higher lifetime costs of and electric vehicle compared with those of an equivalent conventional vehicle or traditional hybrid. The tax credits would still need to be about 50% higher than they are now to fully offset the higher lifetime costs of an electric vehicle." (emphasis mine). So the cars are not efficient to operate with gasoline prices at current levels, but smart people that you are, will say that if gas prices rises, then these cars make sense. And you are right. Where does the price of gas have to rise before the operating costs of an electric vehicle get to a break even point? Again, according to the CBO, at $10 per gallon. Why mention this at all? Electric vehicles are a consumer choice and you, Mr. The View, are all for choice, aren't you? Yep. As long as those choices are not supported or subsidized with our tax dollars. You see, those incentives and subsidized costs are paid by you and me, the taxpayer. And that is only going to increase, as the federal government is prepared to continue to provide subsidies for the purchase of these vehicles. And those subsidies will continue indefinitely. And that is your money and mine supporting a product that is inefficient and will not stand on its own merits.

Does it concern you that when scientists search for "intelligent life", they leave the earth?

As you can see from the item above, when government intervenes in the market place, there is a displacement of resources and a skewing of results. If Government Motors or any car company had to develop and sell an electric vehicle WITHOUT the government subsidizing the price, the product would either be developed and brought to market in a cost efficient manner or it would eventually be scrubbed. However, because the government has intervened, a costly and inefficient product is still being produced and sold. Think those resources that GM is using for the Volt could be better used elsewhere in the company? What happens in this specific situation is what happens when government intrudes into different sectors of the economy. Resources get mis-allocated and used inefficiently. Do you honestly think health care would cost as much as it does or be as burdensome as it is for all of us if we did not have such heavy government intervention? (I know there are arguments about safety nets and other complicated matters, but I am speaking of the general health care product/delivery system). The conceit of those in power is that they believe they can control best the levers of the economy. They cannot. And one of the choices we are making in this upcoming election is how much control we want to give those in Washington.

I get enough exercise pushing my luck.

And that, my friends, is my view.

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