Tag: socialism

Should You Vote on Keeping Your Local Car Dealership?

There are lots of reasons Washington should not bail out the automakers.  Whatever the justification for saving financial institutions – the “lifeblood” of the economy, etc., etc. – saving selected industrial enterprises is lemon socialism at its worst.  The idea that the federal government will be able to engineer an economic turnaround is, well, the sort of economic fantasy that unfortunately dominates Capitol Hill these days.

One obvious problem is that legislators now have a great excuse to micromanage the automakers.  And they have already started.  After all, if the taxpayers are providing subsidies, don’t they deserve to have dealerships, lots of dealerships, just down the street?  That’s what our Congresscritters seem to think.

Observes Stephen Chapman of the Chicago Tribune:

The Edsel was one of the biggest flops in the history of car making. Introduced with great fanfare by Ford in 1958, it had terrible sales and was junked after only three years. But if Congress had been running Ford, the Edsel would still be on the market.

That became clear last week, when Democrats as well as Republicans expressed horror at the notion that bankrupt companies with plummeting sales would need fewer retail sales outlets. At a Senate Commerce Committee hearing, Chairman Jay Rockefeller, D-W.Va., led the way, asserting, “I honestly don’t believe that companies should be allowed to take taxpayer funds for a bailout and then leave it to local dealers and their customers to fend for themselves.”

Supporters of free markets can be grateful to Rockefeller for showing one more reason government shouldn’t rescue unsuccessful companies. As it happens, taxpayers are less likely to get their money back if the automakers are barred from paring dealerships. Protecting those dealers merely means putting someone else at risk, and that someone has been sleeping in your bed.

The Constitution guarantees West Virginia two senators, and Rockefeller seems to think it also guarantees the state a fixed supply of car sellers. “Chrysler is eliminating 40 percent of its dealerships in my state,” he fumed, “and I have heard that GM will eliminate more than 30 percent.” This development raises the ghastly prospect that “some consumers in West Virginia will have to travel much farther distances to get their cars serviced under warranty.”

Dealers were on hand to join the chorus. “To be arbitrarily closed with no compensation is wasteful and devastating,” said Russell Whatley, owner of a Chrysler outlet in Mineral Wells, Texas.

Lemon socialism mixed with pork barrel politics!  Could it get any worse?  Don’t ask: after all, this is Washington, D.C.

“Gangster Government” at Work

With the Obama administration preferring to rely on politics rather than the law to “fix” the auto industry, bondholders have discovered that the new politics of this administration is quite a bit more brutal than the old politics practiced by the Bush administration.

Henry Payne and Richard Burr write of “gangster government” using not just demagogic public attacks on greedy bondholders but apparent threats of regulatory sanction to get its way in bankruptcy court.  They explain:

The holdout debtholders sought the refuge of the courts, where decades of bankruptcy law promised that secured lenders would receive just compensation for their investment. But then Obama called in his fixers.

In his April 30 news conference, Obama singled out Chrysler’s self-described “non TARP lenders” as “speculators” who sought to imperil Chrysler’s future for their own benefit. “I do not stand with them,” Obama thundered. “I stand with Chrysler’s employees and their families and communities… . (not) those who held out when everybody else is making sacrifices.” Michigan Democratic allies like Sen. Debbie Stabenow and Rep. John Dingell piled on, calling the lenders “vultures.”

Then, on Detroit radio host Frank Beckmann’s show May 1, a lawyer for the lenders, Tom Lauria, chillingly revealed how “one of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight.”

Lauria later confirmed the threats came from Rattner and that the target was Perella Weinberg, which had suddenly withdrawn its opposition after the president’s April 30 press conference.

The White House denied the threats, but Business Insider subsequently reported that “sources familiar with the matter say that other firms felt they were threatened as well. None of the sources would agree to speak except on the condition of anonymity, citing fear of political repercussions.”

“The sources, who represent creditors to Chrysler,” continued the Insider story, “say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking ‘end justifies the means’ group they have ever encountered… . Both were voters for Obama in the last election.”

The idea of the White House–with the IRS and SEC at its disposal–threatening investment firms should have sent off alarm bells in America’s newsrooms. Inexcusably, the media establishment largely ignored the hardball tactics. This is the same media that has doggedly reported on President Bush’s U.S. attorney firings and the post-9/11 interrogations of terrorist suspects.

I have no opinion on who should get what as part of Chrysler’s bankruptcy – other than that the taxpayers shouldn’t be paying for America’s version of lemon socialism so common around the world.  But crude political interference by the political authorities in Washington in a bankruptcy case erode the rule of law and administration of justice.  If Obama and company believe that the end justifies the end when it comes to handing the auto companies over to favored interests, who among us is safe from similar action by this or another administration in the future?

Barack Obama “Fatally Conceited” on Education

The AP reports today that president Obama wants the nation’s school districts to close 5,000 failing schools and re-open them with new principals and teachers. Here is why this won’t work:

  • Typically, public schools only dismiss teachers when they are forced to reduce their workforce for budget reasons, but the president has just infused the system with $100 billion to prevent such dismissals. And when teachers are let go, it is done starting with those with the least seniority, not the lowest performance. So the hundreds of thousands of teachers displaced from failing schools will simply move to other schools rather than being replaced by better teachers. This has been going on for decades. It is called “the parade of the lemons.” Overall, it achieves nothing.
  • The new principals who take over the formerly failing schools have to come from somewhere. So for every school that gets one of the system’s “good” principals, there will be another school that loses one. Public schooling has no incentive structure to ensure that it can identify, hire, and retain competent administrators to strengthen its ranks.

What the president is trying to do in education – as in the auto industry – is to replace the web of market forces that close failing businesses in the private sector with his own personal diktat. This is Hayek’s Fatal Conceit.

The market solves the problem of failing schools by allowing consumers to chose the ones that serve them best, which simultaneously accomplishes two things: it drives failing schools to either improve or go out of business, and it provides incentives for the expansion of successful schools and the hiring of effective teachers and administrators.

As I wrote here, and in expanded and updated form in vol. 3, no. 1, of the Journal of School Choice, the international scientific evidence reveals the overwhelming superiority of market over monopoly schooling. President Obama’s educational dirigism will fail.

More Reasons Not to Nationalize Health Care

Advocates of a government takeover of the health care system routinely offer up horror stories of American medicine, and no system yet has found a way around the problem of human imperfection, especially when operating in a system with such distorted incentives–most from ill-considered government policies.  Yet the horror stories in nationalized health care systems are manifold and tend to be more intractable since they result from government policy.

For instance, consider the quality of care delivered by hospitals in one region in Great Britain (with a hat-tip to Philip Klein of the American Spectator for finding this story).  According to the Daily Telegraph:

Sir Ian Kennedy, chairman of the Healthcare Commission, said the report is a ‘shocking story’ and that there were failures at almost every stage of care of emergency patients. “There is no doubt that patients will have suffered and some of them will have died as a result,” he said.

The investigation of the trust now called the Mid-Staffordshire NHS Foundation Trust, found overstretched and poorly trained nurses who turned off equipment because they did not know how to work it, newly qualified doctors left to care for patients recovering from surgery at night, patients left for hours in soiled bedclothes, reception staff expected to judge how seriousness of patients arriving at A&E, patients left without food or drink, others who received the wrong medication or none at all, blood and faeces left on lavatories and floors, and doctors diverted away from seriously ill patients in order to treat minor ones who were in danger of breaching the four hour waiting time target.

When high mortality rates triggered questions, the trust board of directors ‘fobbed off’ investigators by saying the rates were a result of statistical errors but the Healthcare Commission found this was not that case.

The report said there was a ‘reluctance to acknowledge or even consider that the care of patients was poor’.

The trust was more concerned with hitting targets, gaining Foundation Trust status and marketing and had ‘lost sight’ of its responsibilities for patient care, the report said.

Sir Ian said: “The resulting report is a shocking story. Our report tells a story of appalling standards of care and chaotic systems for looking after patients.”

While Britain tends to be near the bottom in terms of health care system in industrialized states, there are plenty of horror stories elsewhere.  Socialism doesn’t work, whether in health care or elsewhere.  As Investor’s Business Daily reminds us:

The Swedish government system is no better. It also refuses to provide some expensive medication and, inhumanely, refuses to let patients buy the drugs themselves. Why? According to a Journal of American Physicians and Surgeons article, bureaucrats believe doing so “would set a bad precedent and lead to unequal access to medicine.”

Like Canadians, Swedes are subjected to long waits. They also have denial-of-care problems that sometimes lead to death.

A reasonable person would see the record of repeated failures in government-run medicine as evidence that such a system is not sustainable. Yet every central planner thinks he or she — or his or her immediate group — is smart enough to correct the flaws of socialist programs and therefore has the moral authority to force others to participate in his experiments. It is the same thinking that will move a person to say we are the ones we’ve been waiting for.

The Obama administration seems determined to waste a lot of money “stimulating” the economy.  We can replace money lost.  But if the administration succeeds in nationalizing the medical system directly or indirectly, the damage may prove irreversible–and deadly.

He Has a Point

Stung by accusations that he is a “socialist,” President Obama pointed out to two New York Times reporters that, “it wasn’t under me that we started buying a bunch of shares of banks. It wasn’t on my watch. And it wasn’t on my watch that we passed a massive new entitlement -– the prescription drug plan – without a source of funding.”

Not to defend Obama’s unprecedented increase on government spending or plans to involve the government in almost every area of our lives…but he does have a point. As I pointed out in Leviathan on the Right, the Bush administration’s brand of big-government conservatism was, at the very least, the greatest expansion of government from Lyndon Johnson to, well, Barack Obama.