Tag Archives: recession

Auto Sales Up: Dealers Should Thank the U.S. Government (But They Won’t)

The New York Times reported this week that “October was the best month for new-vehicle sales in more than two years, outside of the brief period in 2009 helped by government rebates.”

Sales for the auto industry were up 13.4 percent over all from a year ago.  Sales for General Motors rose 4.2 percent, sales for Ford Motor Company were up 19.3 percent, and sales for Chrysler jumped 37 percent.

General Motors’ vice president for sales, Don Johnson, was confident that the American Auto industry has recovered from the economic crisis that left them on the brink of total collapse less than two years ago; “Signs are there that the recovery continues and that it will be sustained,” said Johnson. “We don’t see a big risk at all of a double dip.”

It looks like federal intervention saved the U.S. Auto industry.  You would think that American auto dealers would be grateful — out of patriotism or self-interest or both.

Think again.

Those U.S. flags they like to wave at auto dealerships don’t mean “thank you.”

Instead of thanking the federal government, auto dealers continue to be  some of the largest contributors to far-right, anti-government Republicans, who rail against the very programs that pulled them from the brink of collapse.

This right-wing, anti-government hypocrisy on the part of auto dealers is especially true here in Orange County, where auto dealerships — like Irvine Auto Center — have often served as staging locations for Tea Party rallies, and where our local  car-salesman-in-chief, auto dealer and Congressman John Campbell, continues to blast the federal government for providing the money that kept his family auto dealership alive.

Democrats Should Be Joining the Tea Parties

obama-taxes1

Democrats are responding to the growing nationwide phenomena of anti-tax “tea parties” protests by mocking them and by pointing out that they are prompted and run by right-wing organizations.

Neither response is a winning political strategy.

It is pure political stupidity — and bad economic policy — for Democrats to treat the tax protests with derision or contempt.

Rather than mocking the aims of the tea parties, Democrats should follow the lead of presidential candidate Barack Obama, who promised to “provide a tax cut for working families” and “restore fairness to the tax code and provide 95 percent of working Americans the tax relief they need.”

Obama also promised to provide tax relief for small businesses and startups by  eliminating “all capital gains taxes on startup and small businesses to encourage innovation and job creation.”

What Obama recognized – and Democrats already seem to have forgotten – is that working families are in fact being over-taxed while the super rich have gotten a free ride – and that voters will cast their ballots for the party and the candidates who they believe will create a fairer tax code and reduce their tax burden.

And while it is certainly legitimate to point out that the anti-tax tea parties are being manipulated and guided by right-wing groups and talk-show hosts whose agendas are not the same as working and middle class voters, this point is devoid of political impact unless it is accompanied by a commitment to do a better job than these groups of protecting working class and middle class economic interests.

For too long, Democrats – especially in California – have allowed Republicans to dominate and set the terms of the tax debate.

As a result, Democrats have allowed Republicans to paint them as the party of higher taxes – and have allowed the super rich to pretend to defend the economic interests of working families and the middle class while in fact shifting the costs of government to those who are least able to afford it.

Instead of responding to the tax protests with mockery and contempt, Democrats need to insist on talking about the kinds of taxes that the government imposes and who pays them.

We should insist that all taxes be progressive and focused on overturning the Republican’s outrageous favoritism of the super rich.

Especially in the midst of the current recession, we should oppose any increases whatsoever in regressive taxes – such as the sales tax, the automobile tax, and the gasoline tax – that disproportionately hit working and middle class families, unless and until the state and federal tax code is revised to require that the super rich pay their fair share.

Of course these tax protest “tea parties” are a Republican sham — the Republican anti-tax activists not interested in reducing the tax burden on the middle class and working families, but in keeping the Bush tax breaks for the rich — but that does not mean that the underlying middle class protest — even rage — at their tax burden should be ridiculed. On the contrary, it means that the Democrats should insist on seizing the debate and turning it against the Republicans — as Obama did.

Democrats can win the tax debate – if they take the tax protest “tea parties” seriously.

Related posts:

Why I Love Conservative Talk Radio’s John and Ken Show

The Charge of the Democrat Light Brigade: California Democrats Caught in Republican Tax Trap

Why the Republican Anti-Tax Movement Doesn’t Care About the Taxes that YOU Pay

But Baby, Obama Wants Me to Drive a Fiat X1/9

Of all the cars that I’ve owned, my favorite was a yellow and black 1975 Fiat X1/9.

fiat21Designed by Nuccio Bertone, the X1/9 was a two-seater, hardtop convertible with a mid 1489 cc. engine and a five-speed transmission.

It was beautifully styled and it handled like a dream.

It was tremendous fun driving this sleek little skateboard on the freeway.

The only real problem was the carburetor, which kept failing when it idled.

And you couldn’t get parts, except by scavenging the junkyards.

And the mechanics here in Southern California would just laugh if you asked them to fix it.

I learned to keep it going (most of the time) using a combination of toothpicks and rubber bands.

(Really).

Then my son was born.

My wife said:

The Fiat X1/9 is not a car for a parent.

There’s no room for a baby seat.

There’s no room for anything.

A sleek yellow skateboard racing down the freeway isn’t a very safe place for a child.

There are no air bags.

There isn’t much of anything between the driver and the road.

And Fiat’s reputation for unreliability doesn’t inspire the confidence that parents require.

You need a car that doesn’t require a toolkit of rubber bands and toothpicks.

So my Fiat X1/9 was abandoned for a safer, more sensible car, one that was appropriate for a “Baby On Board” sign.

My current car is a Chrysler PT Cruiser Turbo convertible.  All in all, a reliable but fun car with plenty of room for the kid, the dog, and the scout troop equipment.

But it isn’t half as much fun as the Fiat X1/9.

Over time, giving up the X1/9 came to symbolize my belated transition into adulthood and responsibility.

But now President Obama insists that my Chrysler must become a Fiat.

fiat52My son no longer needs to sit in a rear seat.

Is it time to talk to the wife about getting an X1/9 again?

Not just for me, of course.

But as a show of support for our president.

As Economy Crashes, We’re Killing Our Pets

As Americans are being forced to choose between buying food for their children or keeping their pets, or between paying for pet food or for their utilities bills, the economic crisis means death for thousands — perhaps millions — of abandoned dogs and cats.

And as the foreclosure crisis spreads and homeowners are being forced to become renters, millions of pets are being left behind to fend for themselves.

saddog

Most of them will die.

USA Today has reported that across the country, areas with high foreclosures are seeing increased rates of pet abandonment, and shelters are worried that even more could be coming as unemployment rates rise.

The Humane Society of the United States, which has initiated a program called the Foreclosure Pets Fund to help families keep their pets even in the event of financial hardship, points out that “Pets have been among the voiceless victims of the current economic downturn. Animals have been left behind in foreclosed homes, and shelters are reporting that families are struggling to keep and feed pets… Abandoned pets face a grim future. Many pets trapped inside abandoned homes aren’t found until they’re on the brink of starvation. Those lucky enough to reach a shelter have about a 50 percent chance of being adopted.”

A recent poll found that one in seven owners nationwide reported reduced spending on their pets and of those cutting back, more than a quarter said they considered giving up their pet.

The average annual cost of owning a dog is about $1,400, while the average annual cost of a cat is about $1,000, according to a survey conducted by the American Pet Products Association. The survey suggests there are some 231 million pets — excluding fish — in more than 71 million homes in America.

Here in Orange County, California, the number of abandoned dogs and cats euthanized at the county animal shelter hit a five-year high in 2008. There were 31,492 dogs and cats taken in by the shelter last year – a 13 percent jump from 2007.  Of those, nearly half – 15,265 – were killed, a 31 percent increase.

These lethal numbers are going to increase dramatically in 2009.

The Orange County Register also reports that “The grim picture is not Orange County’s alone. ‘We believe that the increases we’re seeing are a result of the economic crisis, and many shelters across the nation are facing many of the same issues,’ said Ryan Drabek, spokesman for Orange County Animal Care Services. ‘It would be a very easy cop out for us to say it’s the economy if it didn’t seem to be effecting anyone else, but everyone in the animal care world is being affected by this.’”

The New York Times has reported that at New York City’s main animal shelter, for example, monthly calls to the volunteers who can help people keep their pets through tough financial times doubled between January and September 2008.

The Times also quotes the animal control officer in Bridgeport, Connecticut, saying “People are coming out and saying that they’re losing their homes and can’t keep the pet. It’s such a big problem now, they seem to feel able to tell you the exact reason, beyond a simple ‘I’m moving.’ ”

At the Henry County Animal Care and Control in McDonough, Georgia, the number of abandoned pets was up 71 percent for the first four months of 2008 compared with the same period in 2007.

Wayne Pacelle, president and chief executive of the Humane Society, told the Times that “In terms of relinquishment, I’d say this is the most serious circumstance that I can recall.  And as more pets are being turned in, he noted, cash donations to animal rescue groups have declined and fewer people are adopting pets. It’s a bit of a triple whammy.”

According to the Associated Press, “The population growth at animal shelters in Connecticut, Nebraska, Texas, Utah and other states shows how the weak economy is also shrinking the pool of potential adopters. And it coincides with a drop-off in government funding and charitable donations. The effect has been cramped quarters for dogs and cats, a faster rate of shelters euthanizing animals and some shelters turning away people looking to surrender pets, according to interviews with several shelters and animal advocates.”

Of the estimated 6 million to 8 million dogs and cats sent to animal shelters in the United States every year, half are now euthanized.

That number will increase drastically as the economic crisis forces more and more families to choose between feeding themselves and their children or feeding their pets.

Don’t Blame Bush

The blame is already being dished as John McCain’s presidential campaign sputters toward a crushing election defeat and the Democrats are poised to take control of the White House and both houses of Congress.

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Most of the pointing fingers are aimed at the universally loathed George W. Bush, who has become the public face of both economic catastrophe and battlefield disaster.

Other leading candidates for the role of principal victim in the Republican blame game are John McCain – he didn’t run a tough enough campaign or didn’t appeal enough to the party’s evangelical or populist base – and Sarah Palin – she wasn’t ready to be president or didn’t broaden her appeal beyond the party’s evangelical or populist base.

But George W. Bush is not the cause of the Republican Party’s looming election debacle, and neither John McCain nor Sarah Palin is the reason for their party’s 2008 collapse. 

Americans like to personalize politics, preferring to embrace or repudiate personalities rather than policies.  When we evaluate our politicians, we talk about their personal qualities – such as leadership, competence, integrity, consistency, and authenticity.  We like to say that we vote for the candidate not the party.

For this reason, our public debate on the causes of the Republican has focused on questions of Bush’s incompetence, McCain’s temperament, and Palin’s ignorance.

But blaming any or all of them for the coming massive Republican defeat misses the real culprit and lets too many others off the hook.

The cause of the Republican’s imminent electoral disaster is not the personal qualities of their elected officials and candidates, but the fundamental beliefs and policy assumptions of the Republican Party. 

It is these fundamental beliefs and policy assumptions that have caused the nation’s economic meltdown, which has in turned caused the meltdown of the Republican Party.

And every single Republican office holder, from the president to the lowest down-ticket county official, regardless of their personal qualities, shares in the blame.

The modern Republican Party, and every Republican, has embraced these two basic beliefs:

  • No to government regulation of markets and the economy.  A fundamental belief of every Republican is that the economy works best – that is, it is more productive and creates more wealth – when unconstrained by regulation.
  •  No to taxes.  Every Republican believes that taxes, especially on the wealthiest Americans, should be always lower and eliminated whenever possible.  Under no circumstances should there be a tax increase, even in order to fund necessary government program. 

These two fundamental tenets of Republican policy have created the economic crisis the nation is now suffering, and nearly every other crisis that the nation is now facing can be traced to Republican adherence to these principles – including our soaring national debt, our crumbling infrastructure, our failing schools, our ecological vandalism, our oil dependency, our exploding prison population, our shameful veterans hospitals, and our inequitable and dysfunctional heath care system.

Every other Republican talking point – from abortion to immigration to support for continuing the war in Iraq – is contingent and conditional.  There are Republicans who disagree with the party leadership on these issues.

But there are no Republicans who have not sworn eternal hostility to taxes and economic regulation.  One simply cannot be a Republican without embracing these two fundamental policies that have brought near catastrophe to the world economy, to the operations of federal, state and local government, and, finally, and deservedly, to the Republican Party itself.

What has brought America to the brink of disaster and the Republican Party to the brink of an election defeat of historic proportions?

It’s not just Bush.

It’s not just McCain and Palin.

It’s Republicans.

Each and every one of them.

Don’t let Rush Limbaugh, Newt Gingrich, Tom DeLay, Chris Shays, or your local Republican senator or schoolboard member put the blame on someone else.

As another famous Republican once said, they’re all bad.

Money, Morals and the Bailout

puritanWe’ve heard lots of moralism about the economy recently from both ends of the political spectrum.  Wall Street is guilty of greed and homeowners in trouble are guilty of irresponsibility. Instead of offering a cogent systemic analysis of how we got into this financial mess, and the best way to change our economic and financial system in order to fix it, both parties seem to prefer preaching about the wages of sin.

But while wagging a self-righteous finger as you invoke the Seven Deadly Sins (Greed, Envy, Sloth, and Pride in particular, but we could also make a case for Gluttony and Lust) might be good politics, it is a terrible way to approach the current crisis.

We should not expect capitalists not to be greedy.  And we should not expect consumers to want fewer or less expensive goods, including fewer and less expensive homes and cars.

The desire for more, for bigger, and for better is not the enemy of capitalism.

Unregulated capitalism is the enemy of capitalism.

What we should expect, and what we need, is for the economic and financial system to be structured by law and regulation to channel the desires of both capitalists and consumers for more, for bigger, and for better into productive, sustainable economic growth.

Moralism won’t get us there, and will distract us from seeing the problem for what it is: a matter of systemic, not moral or individual, failure.

Disaster Capitalists Staking Out U.S. Banks

Disaster capitalists are staking out the U.S. banking industry. 

capitalismPrivate equity firms have long wanted to move into banking.  And given the financial crisis that many banks are now facing, isn’t this a good time to allow private equity firms, with their billions of dollars of available resources, to come riding to the rescue?

According to an editorial in the New York Times, “for the past month, some private equity firms have been promoting what they claim would be a relatively pain-free fix of the nation’s banks . . . Private equity firms say they are ready to invest huge amounts in ailing banks — provided the Fed eases up on the regulations that would otherwise apply to such large investments. The firms’ desire to jump in makes perfect sense. Bank shares are cheap now, but for the most part, are likely to rebound when the economy improves.”

What the private equity firms want in return for playing the role of savior are significant changes in banking regulations.  

“Under current rules,” the Times explains, “if an investment firm owns 25 percent or more of a bank, it is considered, properly, a bank holding company, subject to the same federal requirements and responsibilities as a fully regulated bank. If a firm owns between 10 percent and 25 percent of a bank, it is typically barred from controlling the bank’s management. To place a director on a bank’s board, an investor’s ownership stake must be less than 10 percent. The rules exist to prevent conflicts of interest and concentration of economic power. They protect consumers and businesses who rely on well-regulated banks, as well as taxpayers, who stand behind the government’s various subsidies and guarantees to banks.  To maximize their profits, private equity firms want to own more than 9.9 percent of the banks they have their eye on and they want more managerial control — and they want it all without regulation. They argue that because they tend to be shorter-term investors, problems that the rules address are unlikely to occur on their watch.”

The private equity firms’ grab for the gold is an example of what Canadian writer Naomi Klein calls the “shock doctrine” of “disaster capitalism.”

shockdoctrineThe basic idea of the shock doctrine is that corporations are able to remove regulations and operate without governmental oversight when citizens are in a state of shock from a traumatic event, such as a natural disaster, a war, a coup, or an economic crisis and are desperate for a solution and unable to mobilize effective opposition.  When these crises occur, corporations exploit them by promising a solution — the catch is that in return for their solution, the corporations demand the drastic reduction or elimination of regulation and public oversight.

In her book The Shock Doctrine: The Rise of Disaster Capitalism, Naomi Klein identifies University of Chicago economist and Nobel Prize winner Milton Friedman as the ideological father of the Shock Doctrine: “In one of his most influential essays, Friedman articulated contemporary capitalism’s core tactical nostrum, what I have come to understand as ‘the shock doctrine’. He observed that ‘only a crisis – actual or perceived – produces real change’.  When that crisis occurs, the actions taken depend on the ideas that are lying around. Some people stockpile canned goods and water in preparation for major disasters; Friedmanites stockpile free-market ideas. And once a crisis has struck, the University of Chicago professor was convinced that it was crucial to act swiftly, to impose rapid and irreversible change before the crisis-racked society slipped back into the ‘tyranny of the status quo’. A variation on Machiavelli’s advice that ‘injuries’ should be inflicted ‘all at once’, this is one of Friedman’s most lasting legacies.”

shock-and-awe-usa1Examples of the application of the shock doctrine offered by Klein are the government-corporate responses to Hurricane Katrina, the 9/11 attack, the war in Iraq, the oil crisis, and the global food crisis.  In each instance, Klein argues, corporations systematically exploited, and are still exploiting, the state of fear and disorientation that accompanied the shock and crisis to remove regulations and government oversight of their activities.

That’s exactly what’s behind the private equity firms’ solution to the banking crisis.  As the Times points out, “the private equity firms are exploiting the desperation of banks and regulators. They know that banks are desperate to raise capital and that doing so is a painful process bankers would rather avoid. They also know that regulators and other government officials, many of whom where asleep on the job as the financial crisis developed, want to avoid the political fallout and economic pain of bank weakness and failure.”

Giving in to the private equity firms’ offer to save the banks in return for fundamental regulatory concessions would be a serious mistake. 

As the Times explains, “Now, when there is great uncertainty about which institutions are too big or too interconnected to fail, is exactly the wrong time to allow less transparency and less regulation. And with confidence in the financial system badly shaken, it would be a mistake to signal to global markets and American citizens that the government is willing to put expediency above long-term stability.”

In fact, the responsible response to the current crisis is not less regulation, but more effective and focused oversight.  As economist Austan Goolsbee (also of the University of Chicago) said in a Dow Jones interview, “If you can borrow money from the U.S. taxpayer at a moment of crisis, that is a very sacred insurance policy underwritten by the U.S. taxpayer.  We have the right to oversee anyone who is accessing that insurance policy.”

It remains to be seen whether Congress will capitulate to the private equity firms’ demands. 

Most likely, this will be one of the issues that are decided by the November elections.