My Official Position on an Automotive Bailout

You Have Got to be Kidding Me.

 

Of course, they’re not kidding anyone.  They’re deadly serious, even as top officials at UAW insist Detroit was making money like gangbusters.  That’s the saddest part – they seriously think this isn’t their fault.  The “big 3” have been inching closer and closer to oblivion for decades.  It was common knowledge, at least until involved parties turned the spin machine up to 11.  We’ve always been at war with Eastasia.  Duh.

 

And this is why the other bailout was a bad idea.  You can’t arbitrarily fork over billions of taxpayer dollars to a relatively few institutions and not expect every single corporation in the country to find a good case for jumping on the gravy train.  ”Too big too fail” isn’t a slippery slope, it’s sheer cliff.  Newsflash:  Companies have to fail in the competitive marketplace.  Not just little ones.  When a company – or an industry – fails, it’s not just “the times.”  It’s also, without exception, a combination of a bad idea and bad management.  If you prop up failing companies, they continue to fail.  They just do it at our expense.

 

Let us suppose, for a moment, the United States guarantees the success of any company in this “too big to fail” category.  What exactly do you think the executives of those companies would do?  Magically become self-motivated to wean themselves off the public breast, find new revenue streams, and prove to everyone they’re financially stable?  Or perhaps they’ll discover they find the taste of free federal milk delicious?

My "Place"

An anecdote - I am in a fast-food restaurant this afternoon, getting dinner. There is only one group eating in the restaurant, a (by all appearances) family - one older woman with four children, ranging from maybe four up to teenagers. The four-year-old refuses to eat her sandwich ("It has the yucky cheese!") The (again presumably) mother replies, rather sweetly, "no honey, it's swiss, don't worry. I thought it was the yucky cheese too." Child expresses vocal disbelief, and continues to refuse to eat. Mother's next response? "Stop being such a a*%#$@% and eat your g$#&@#$ sandwich!" A distinct lack of eating continues. "Eat your sandwich, d#$%@! I didn't buy that for you to stare at!" ... "G#$*@$@# you little s#$@ if you don't eat your f#$@@$ sandwich I am going to smack the s#%@ out of you!" Presumably, at this point child begins eating, because the profanity ceases to be sandwich-related. Teenage girl: "Why are you always such an a#$@@%#?" (Unkown who this is directed at.) Mother: "Shut your snippy f#@#&$ mouth you little b#$#@, who the f#$@ do you think you're talking to?"

So, what to do? Answer in the World According to Cory: nothing. This provides an excellent analogy of my take on government intervention. I can feel reasonably confident these children do not live in what I would term a healthy family environment. I believe the damage being caused to them is probably nothing short of tragic. But I also don't believe I have any right to take away the agency of the mother in raising her children. If the aformentioned threat had been carried out in my presence, I may have called the police. But I wouldn't call CPS, because I'm not reporting bad parenting, I'm reporting assault. Just so, the fact that I oppose a kind of behavior does not mean I support using the government to prevent it. My vote of "yes" on 102 was decided almost entirely by the counsel of the Prophet, whose counsel I have agreed to heed. And even then, it was a close decision. (At some point, I may focus a post on all the arguments for and against 102 that I considered, but not today.) Do I think drugs are bad? Yes. Do I think alcohol destroys families and inidivual lives, and that tobacco is at best noxious and at worst lethal? Yes. Do I think the government should be telling people you can't do drugs, alcohol, or tobacco? Absolutely not. Just like getting my nose in that family's business, it wouldn't actually stop the behavior, like as not, and *would* make me obnoxious, and *would*, eventually, infringe on the rights of someone who wasn't doing something wrong, because nothing is black and white.

Thank you, that is all. /soapbox.

"Required" Service, Tax Credits, and Captured Surplus

Thoroughly addicted polijunkies like myself no doubt saw Obama's new change.gov site is now outlining his intent to require 50 hours of community service in middle and high school, and 100 hours per year in college. Before Godwin's Law strikes (too late!) Let us take a rational look at this:

First, he can't "require" college students to do a thing. Since universities are universally not federal institutions, he would have to "lean" on them in some fashion to implement his plan. How could he go about doing that?

-He can't pull a Commerce Clause magic trick and compel universities to adhere, since a very large chunk of college education comes from private universities and colleges.

-He can't revoke a university's accreditation, the accreditation associations are private entities with no government strings. (Go, free market, go!)

So all that's left (irony of ironies,) is a "market" solution. Like so many other things the federal government "mandates," what they actually do is threaten to withhold already existing funds for noncompliance. There are two angles he could take:

-Withhold federal funding to the university itself. This would be accomplished with something similar to the Solomon Amendment, which gives the Secretary of Defense discretion to withhold federal funding to schools that refuse to participate in the ROTC program. Private schools, at least, have already signaled their willingness to forgo the federal gravy train in defense of their principles. Public schools would likely cave, but it would nonetheless generate real animosity towards Obama in academic circles, which I don't think he'd want.

-Withhold federal funding from the students. The far more likely solution - it would look a whole lot like universal service without that "mandatory" thing hanging over it, never mind the government will be imposing a requirement upon you in order to obtain that which it had previously promised unconditionally. The real intent would likely be further muddled by implementing his other big change to higher education at the same time - a $4,000/year refundable tax credit (read: grant) to all full-time students. By tying the two together, it will look like he's giving students the opportunity to "earn" $40.00/hour doing some community service (again, hoping you ignore the fact that you would lose Stafford Loans and Pell Grants too if you opted out.)

So operating on that assumption, let's dust off that section of your long-term memory that's desperately trying to cling to your Econ professor's lectures. Given that there are no statutory restrictions on the price of college tuition, the price of tuition is primarily determined by market forces. (WARNING! Dry reading alert! Scroll down to the bolded sentence to get the bottom line up front.)

Suppose every citizen of the country is given $4,000 each year on the condition they attend college full-time. As the demand curve shifts rightward, the quantity supplied/demanded increases, and the price paid also increases. Since suppliers are not mindless automatons, however, they will set their price at the point where they can capture the greatest amount of real profit from the surplus. Translated, that means the colleges will balance the prospect of new students who couldn't/wouldn't attend college previously against raising the tuition by $4,000 on all students, and keeping the number of students the same. I think it's fair to say that anyone who *wants* to go to college, and is *qualified* to go to college, *will* go to college, unless they cannot/will not fit school in around their current work schedule. Since $4,000/year isn't even a double-digit percentage of the median American salary, we can safely assume nobody will be quitting their jobs to go to school full-time thanks to Obama's plan. As a result, the number of people who are actually willing to start going to school that would otherwise not have done so is very small. This is a classic example of inelastic demand - the quantity demanded will be roughly the same regardless of price. Adding the money will shift the demand curve rightward, but since it is inelastic, the quantity demanded shifts only slightly while the price increases dramatically. End result? The average full-time tuition goes up by just under $4,000, and the number of new college students as a result of this policy is a fraction of a percentage point of current enrollment.

And the students this is supposed to help? Let's say Joe American-Dream is a junior at a state university. Joe is from a low-income family. He's the first member of the American-Dream clan to see the inside of a college lecture hall. Ever. Joe gets about 90% of his money for school from Pell Grants, Subsidized Stafford Loans, and a few scholarships for disadvantaged students. Obama's plan goes into effect. Joe gets a $4,000 check from the government every year, but Joe's tuition goes up by $3,750 that same year. After these two events cancel out, Joe's left with $250 - about enough to buy two used textbooks. In exchange for that $250, Joe had to work 100 hours with no other compensation. Effectively, we've consigned Joe to working for his "community" at $2.50/hour. Furthermore, Joe can't say "take this job and stuff it," because if he *doesn't* take it, he loses almost all of the income he's using to pay for his education. He's "fined" by the government for noncompliance.

For viscous irony, let's contrast that to the case of Lance Fratboy. The Fratboy family may not be "filthy stinking rich," but they certainly exceed DoE's means test cutoff by a fair margin. Lance's Expected Family Contribution is exactly equal to the value his school tells the DoE is the expected cost of attendance. Lance has the option to take out about $2,000 in Subsidized Stafford Loans, which he does, because his parents refuse to buy his beer, pizza, and XBox 360 games. When Obama's plan goes into effect, Lance gets the same options: $2.50/hour job for a few weeks, or you lose your federal loans. The difference is Lance's family can afford to take the $6,000/year hit. They have the option to decide that Lance's schoolwork can't handle 100 hours of interruption. The Fratboys get "fined", too, but their penalty is a fraction of Joe's.

So whose policies, exactly, are going to help the "working class" again?

New Blog Post! With photos! (Well, not yet...)

So, after doing my duty as a citizen, I felt compelled to blog the experience. I'm back!

Showed up at my polling location about 5 after 5pm. My polling precinct, Hereford, extends to the border, and so centrally-located means the Palominas Fire Station, about 10 minutes South of home. For all you folks who might feel compelled to complain about parking at your suburban/urban polling place, consider this: *your* long walk wasn't along a 55-mph state highway. (Photos coming as soon as I find my transfer cable for the Blackberry.) Line was entirely outside, which was actually kinda chilly at this point of the year, but that's what jackets are for. I was more irked that the wind was hampering my reading.

I had to vote a provisional ballot, since apparently 4 full months isn't enough time to get me on the rolls. This is the third election in a row when I've moved the summer of the election year, and I've had to vote provisional ballot. This year, I'm going to try to get some information about how this can be happening.

In the post-election venue, I like to state my reasoning for my votes, and so here it goes:

President: McCain. I was originally going to vote Barr, as a "vote of confidence" in a multiparty system, but the most recent polls suggested Obama could theoretically win Arizona, and while I strongly dislike McCain's likely policies, I *loathe* Obama's. I see no good, from a fiscal conservatism perspective, coming from a Democratic sweep of federal government, and Obama is a party man, through and through.

Representative: Paul Davis (Libertarian). Giffords tries to be everything to everyone, and so she votes for all kinds of social program increases and votes against raising taxes, which just doesn't add up. But she hasn't been a truly unbearable representative; she's pro-border-enforcement, anti-amnesty, supports small business incentives, and opposes the cut-and-run mentality that would truly disasterous for us in the long run. I don't know enough about Tim Bee, the Republican, to know whether or not he's the kind of Republican that's driven me out of the party. So, I get to feel good about casting my "vote of confidence" here. (Side note: as of this post, Giffords and Bee are about 300 votes apart, but I still don't feel bad about not voting for either. UPDATE: Giffords just pulled ahead *hard*. Bisbee or a big part of Tucson must have just come in.)

Local elections: I didn't vote for any local offices; I didn't spend nearly enough time looking into candidates to feel confident casting an informed vote. In the past, I would vote Republican in any contest I hadn't researched well enough, but like I said, I can't go party lines anymore. My only excuse is I wasn't prepared for the amount of research needed to do that. Won't happen again.

Propositions:

101 (Ban real estate "sales tax" or "transfer tax") - Yes. My father's a real estate agent, and I'm inclined to trust his assessment how how disastrous a local real estate "transfer tax" would be to homeowners in that area.

102 (Marraige amendment) - Yes. I heed the counsel of the Prophet, and when he says this could have disastrous consequences, I'm inclined to trust that he's a little more experienced than I. Left to my own devices, I would probably vote No for a variety of reasons.

105 ("Majority Rule") - No. Does anyone seriously think requiring a majority of registered voters, not just voting voters, to vote yes is a good system for anything at all?

200, 201,202 - I'm not even going to break these down. All three of these were specifically drafted and marketed to sound like they would do the exact opposite of what they actually do. No on all 3. And I'm wondering what can be done to combat this kind of underhanded sliminess in our electoral process here.

300 (pay raise for state legislators.) - No. If you want more money, try passing a budget on time for once. End of story.

School District Unification - Background for people who don't live here - in the area, we have 3 unified (K-12) school districts around here - Sierra Vista, Bisbee, and Tombstone. Each has one high school. There's also one Elementary district, that doesn't have a corresponding High School district - Palominas. We live in the Palominas Elementary boundaries. Right now, families in the PESD area can elect which of the three high schools to attend. Unification would parse up PESD into the other 3 districts. I voted yes - right now, the hodgepodge system is costing as a lot of unecessary money.

UPDATE: In the time it took me to write this, every major network has called it for Obama. We live in interesting times.