So how's that "Cash for Clunkers" working out for you?

Was this really a well-conceived incentive?

http://www.nytimes.com/2009/08/14/business/14ford.html

“Ford said on Thursday that it would add 10,000 vehicles to its production schedule in the third quarter and significantly increase its fourth-quarter output as well. The company now plans to make 570,000 vehicles in its North American plants during the last three months of the year.”

People are buying cars now; what will that do to demand for vehicles after the incentive is gone? American automakers ramped up production and paid out overtime to keep up with demand, but this demand is completely artificial. Potentially these people could be out of work now that the program is finished. What happens when we have excess inventory sitting on the lots for the next several years because people bought cars now?

http://money.cnn.com/2009/08/13/news/economy/retail_sales_July/

“Retail sales fell in July after two straight months of gains, the government reported Thursday, a drop that surprised economists. Without car sales from the “Cash for Clunkers,” the numbers would have been even worse.”

Retail sales have fallen since this program was enacted. So people that would have probably spent their money otherwise funneled it into the car industry instead of buying other goods/services.  To boot, these people now have $500/month car payments for the next five years.

http://www.cbsnews.com/blogs/2009/08/05/business/econwatch/entry5217824.shtml

“Sadly, the cash-for-clunkers program requires that vehicles traded in have their engines destroyed. This will raise the costs of used vehicles for poorer Americans. It will also raise the cost of used U.S. vehicles around the world: Cambodians are less likely to upgrade to newer, safer, less polluting, and more fuel-efficient used Corollas.

Perhaps the need to bail out a struggling U.S. automobile industry is enough to justify renewing the program, even though four out of the five top sellers are Japanese. But it’s a bit silly for politicians to claim that cash-for-clunkers can be justified by environmental or economic concerns, and even sillier for Americans to pretend to believe them.”

What will this do for the auto mechanics? Certainly this will take away a lot of business as there will not be as many older cars on the road in need of servicing. What about the poor? According to government statistics, they've just taken 665,000 cars off of the road, many of them in perfectly good working order. This will dramatically affect the used car market.

http://www.reuters.com/article/newsOne/idUSTRE57F12O20090816

“Volunteers of America and other charities that receive tens of thousands of cars each year said such donations have quickly fallen up to 12 percent — and fear a 25 percent drop eventually, or over $100 million — as owners rush to trade gas guzzlers for new fuel-efficient models while federal rebates last.”

http://www.ehow.com/how_2325207_donate-car-salvation-army.html

“Keep in mind that the process is a simple one that only takes a few minutes to activate.”

Many of these cars could've been donated to the needy.  Donating to the Salvation Army is not as difficult as you’d think.

http://www.baltimoresun.com/business/bal-clunkers-0728,0,3093927.story

“Not all auto recyclers are relishing the government’s new cash for clunkers program, which requires car dealers to destroy the gas-guzzlers they get as trade-ins from new car buyers.

Used engines and drivetrains are a big part of recyclers’ income from each scrapped car, and under the federal program those engines must be destroyed. The idea is to promote fuel efficiency and help automakers, but it comes at a time when more than a dozen U.S. auto parts suppliers have filed for bankruptcy this year.”

What will this do to the used parts market?

What I’ve discussed is just the tip of the iceberg. This was a completely ill-conceived and poorly thought out plan. But that’s the government’s m.o., right? They helped their buddies in the auto unions out short-term and the dealers and the rest of us (i.e. taxpayers that funded this) are going to be left holding the bag. Not to mention that tons of people bought new cars that they probably didn’t need and took on loans that they might not be able to afford. Unnecessary debt is what got us into this whole mess in the first place.

The government is not omnipotent and does not and cannot predict the fallout from their intervention in the market place. A few billion dollars of taxpayer money was dumped into a program that by any objective standard has been a failure. This money could’ve been better spent by the people that earned it. Instead, we redistribute it around to those that are more politically favored.

What got us into this mess was too much borrowing and too much spending. You cannot fix a problem caused by too much borrowing and too much spending by doing more borrowing and more spending.

Ron Paul - The Free Market as Regulator

Since the bailouts last fall, lawmakers have been behaving as quasi-owners of the bailed-out banks and businesses, leading to calls for increased regulation of executive compensation and other wasteful expenditures. We have heard much about bonuses and executive pay packages that sound more like lottery winnings than an honest salary.

Many lawmakers voted in favor of these unconstitutional bailouts, believing that these corporations were too big to fail, and allowing them to go under would precipitate widespread economic disaster. This second wave of citizen outrage at the bailouts has left these lawmakers with a bit of egg on their face, and once again, they feel the need to "do something" to "fix" it. Shouldn't there be a regulatory structure in place governing executive compensation? Politically, it seems quite feasible. People are outraged that the system has once again gutted the many to make a few at the top fantastically wealthy. But they are incorrectly demonizing the free market.

What we need to realize is that there WAS a regulatory structure in place that was attempting to stop bad management, including overpaying executives. That regulatory structure is the free market, and when poor management brought these companies to the point of bankruptcy, Congress circumvented the wisdom of the free market, and inserted its own judgment at our expense. And now because of that intervention, we will burdened with massive new regulations. We can be certain this effort will fail.

The free market is a naturally occurring phenomenon that can't be eliminated by governments, not even totalitarian ones like the former Soviet Union. It can be regulated, over-taxed and manipulated until it is driven underground. Lately it has been wrongly accused of doing so many things it just doesn't do, that are really the fault of crony corporatism and convoluted government policies that brought on the crisis. Too many people equate the free market with big business doing whatever it wants, but that is not the free market. Unconstitutional taxpayer funded bailouts are what allow giant corporations to run roughshod over the economy. The free market is what puts them out of business when they misbehave.

The free market is you and your neighbors working hard to produce what you produce, and exchanging goods and services voluntarily, in mutually agreeable arrangements. The free market is about respecting property rights and contracts. It is not about building up oligarchs and monopolies and confiscatory tax theft - these are creatures of government.

We must watch out when government comes up with interventionist solutions to interventionist problems. The root of our problems lie in interventionism. Trusting the free market is the solution.


Posted by Ron Paul (08-18-2009, 01:43 PM) filed under Monetary Policy

Texas Straight Talk
A weekly column
www.house.gov/paul

Seniors and Health Care Reform

Seniors are getting pretty agitated over Obama's proposed health care reform. They're hearing rumors of "death panels" and cuts to their Medicare benefits. Recently at a New Hampshire town hall meeting, President Obama stated that his plan had the backing of AARP. AARP, or the Association for the Advancement of Retired Persons, is the largest lobbying power in Washington. AARP members, and seniors in general, routinely manufacture the largest turnout of any group of eligible voters. AARP offered a very public denial of the President's claim when they issued a statement clarifying that they in fact have not endorsed the President's plan. Robert Gibbs, the White House Press Secretary, is again claiming that the President misspoke.

The President, at this New Hampshire town hall, also tried to ease Medicare recipient's concerns that their benefits would be cut. However, not even a month ago President Obama was talking about how $313 billion in cuts, including $110 billion in cuts from reducing scheduled increases in Medicare payments to doctors, would help to pay for his plan. Would these cuts not necessarily impact seniors' Medicare benefits, via less doctors agreeing to take Medicare patients as well as increased costs associated with their supplemental insurance policies?

The White House is claiming that there is a lot of "disinformation" being disseminated regarding health care reform; what they're not telling you is that they are arguably the biggest culprits.

In what universe is the $787 billion stimulus working?

By any objective standard, President Obama's $787 billion stimulus has been a colossal failure. Since the stimulus bill was signed into law, 2 million Americans have lost their jobs. Unemployment is charging toward 10%. A record number of Americans, about 1 in 9 or nearly 35 million people, are receiving food stamps. The credit markets are still locked up and banks are not lending. And now some of the President's top advisors are saying that a tax increase for the middle class is on the table to fund his vision for health care reform.

Let's suspend disbelief for a moment and accept that the stimulus is in fact working. So far approximately 10% of the money allocated in the stimulus bill has actually been spent. If this thing really is working, then why did we need to put $787 billion worth of spending in the bill if it was only going to take under $8 billion to get the job done?

The truth is, although the President initially described his stimulus as a "jolt" to the economy (he's since backed off and stated that it was never intended to be as such), the spending in the bill is heavily back-end loaded for 2011-2012. Conveniently, the President is up for re-election around that time. Coincidence?

Council of Economic Advisers chair Christina Romer insists that the stimulus is working. "Sometime after you get the prescription, and maybe even after you take the first pill, your fever spikes. Do you decide that the medicine was useless? Do you conclude the antibiotic caused the infection to get worse? Surely not," she said. "You probably conclude that the illness was more serious than you and the doctor thought, and are very glad you saw the doctor and started taking the medicine when you did."

What if what you're experiencing is an allergic reaction to the "prescription?" You just may want to stop taking it and try something else; it could save your life.

What's in the Obamacare bill? They're going to teach us how to parent too. Awesome!

Creating a program to have a government bureaucrat come into our homes to teach us how to be parents...where do I sign up?

HR 3200 Sec. 440

SEC. 440. HOME VISITATION PROGRAMS FOR FAMILIES WITH YOUNG CHILDREN AND FAMILIES EXPECTING CHILDREN.

`(a) Purpose- The purpose of this section is to improve the well-being, health, and development of children by enabling the establishment and expansion of high quality programs providing voluntary home visitation for families with young children and families expecting children.

it goes on...

(v) provide parents with--
`(I) knowledge of age-appropriate child development in cognitive, language, social, emotional, and motor domains (including knowledge of second language acquisition, in the case of English language learners);
`(II) knowledge of realistic expectations of age-appropriate child behaviors;
`(III) knowledge of health and wellness issues for children and parents;
`(IV) modeling, consulting, and coaching on parenting practices;
`(V) skills to interact with their child to enhance age-appropriate development;
`(VI) skills to recognize and seek help for issues related to health, developmental delays, and social, emotional, and behavioral skills; and
`(VII) activities designed to help parents become full partners in the education of their children;

and...

`(A) in supporting home visitation programs using funds provided under this section, the State shall identify and prioritize serving communities that are in high need of such services, especially communities with a high proportion of low-income families or a high incidence of child maltreatment;

here's the link, it's a swell read!

http://thomas.loc.gov/cgi-HR 3200:

Health Care Reform: What's wrong with a "public option," you ask?

On one of the Sunday morning news shows I heard economist Paul Krugman make the argument that a "public option" provided by the government is needed to reform health care. 73% of people in Iowa are covered by the same insurance provider. We need competition. We need a public option. 

He's half-right. A lack of competition is part of the problem; however, not in the way that he would lead you to believe. There are approximately 300 health care providers in the US. Adding one more will somehow magically create competition? The problem with this theory is that it neglects to consider the way that health care is administered. 

In a past life, I worked in Advanced Technology for a major dental company. During my tenure I came into contact with a man named Brian Hill. Brian is the former owner of a dental company, stage 3 oral cancer survivor, and founder of the Oral Cancer Foundation. When he was diagnosed, he wanted to get the best treatment possible. Although he was a California resident, he found that the premier facility for oral cancer treatment was located in Texas. His insurance company told him that treatment there would not be covered since it was out of network. He was insured by a major insurance provider, Blue Shield I believe. There's Blue Shield in Texas, so this shouldn't be a problem, right? WRONG. So he had to pay out-of-pocket. Fortunately he had the ability to do this; not everyone is so lucky. 

Ever wonder why health insurance is so much more expensive than car insurance or renter's insurance? One of the reasons is because you can shop around. If you live in California, you can get a policy for your car from a company in Texas. Health insurance doesn't really work that way. HMO's (a government creation) and PPO's have a government-enabled monopoly on health care and a huge lobbying influence in Washington; they wouldn't want something like a little competition to affect their bottom line.

But a public option will keep the insurance companies honest, you say? Health Secretary Kathleen Sebelius recently said “The president feels that having a public option side by side, same playing field, same rules, will give Americans choice and will help lower costs for everybody. And that’s a good thing.”

The problem is that a public option provided by the government would by definition not be playing by the same rules. Private companies are beholden to the bottom line; in the free market, if a company is not profitable it goes the way of the dinosaur. The government is not in the business of making a profit and has essentially unlimited resources (aka our tax dollars) so they do not have the same limitations. The government could charge a price far lower than the market would normally bear because of this. This would drive private insurance companies out of business, as the consumer will obviously opt for the lowest price, all things being equal. 

At this point I hope that you can see that a public option is merely an attempt to backdoor socialized healthcare. Maybe you are all for this. Understand though that socialized healthcare is not FREE healthcare. When you eliminate competition from the market place, you lose the ability to keep prices down and thus rationing care is the only option to keep down cost. It's economics 101...if you short the supply and demand remains the same, price will inevitably go up.

How are these banks posting "surprise" profits?

P Morgan Chase - $2.7 Billion
Goldman Sachs - $2.7 Billion
Citigroup - $4.3 Billion

These are the recently announced second quarter profits for three of the major recipients of bailout cash. Does anyone else find it astounding that while the rest of the economy is in shambles with hundreds of thousands of jobs being shed on a monthly basis that these banks are posting tremendous profits? Curious how this happened?

Thank the Federal Reserve. Pull a dollar bill out of your wallet. It says "Federal Reserve Note" across the top. The Federal Reserve is a private institution that Congress has chartered to manage our money supply in direct dereliction of their constitutionally mandated duties. The Federal Reserve has dished out $2 Trillion in loans in the past year and they refuse to disclose the recipients of this money. Guess what...by law, they don't have to tell us.

Does it shock you that in its 97 years of existence, the Federal Reserve has never been audited even once? Presently, we are prohibited from knowing about the Federal Reserve's operations by law. Ron Paul has proposed legislation HR 1207 "The Federal Reserve Transparency Act of 2009" that would require a complete audit of the Federal Reserve to be performed by the GAO (Government Accountability Office) by 2010. This is the division of government that provides audits for every other government agency. The companion bill in the Senate is S 604.

Senator Jim Demint of South Carolina recently attempted to get this bill inserted into the 2010 Spending Bill but was blocked from even getting it to a vote. Why? Because if we audit the Fed we will realize what a scam it is and our government will no longer be able to recklessly spend our money and inflate our currency behind closed doors. 

People blame "evil capitalism," but we have not practiced free market capitalism in this country for 100 years. What we practice is corporatism, where major corporations and the select few are the beneficiaries of government largesse. Cronyism at its finest. They get the benefit of easy money on the way up as well as a government bailout on the way down. Is it any wonder that Wall Street was the number one donor to Obama's campaign? They want to keep a good thing going! 

I urge you to write or call your Senators and Congressmen and tell them that you demand that they support this legislation. 

http://www.senate.gov/general/contact_information/senators_cfm.cfm
https://writerep.house.gov/writerep/welcome.shtml