The beauty of a free market (oh, how I wish we had one!) is that companies that act responsibly and perform well (create quality products or services, create jobs, etc.) will thrive and the ones that act irresponsibly (create subpar products or services, take on risky debt, etc) will fail. It’s Darwinism as its finest. If governments intervene and “prop up” failing businesses, they’re doing nothing more than condoning and legitimizing the poor business practices that caused the businesses to fail in the first place.
In my opinion, GM and Ford have long been really poor companies. I don’t have any firsthand knowledge of their balance sheet, but their products are shoddy at best. If a company puts out junk for a product, why would we want to subsidize it? Today’s article at the Ludwig von Mises Institute comments on the impending bailout of GM:
General Motors has once again approached the federal government with its hand out. It should not be forgotten that in September of 2008, Congress gave the “big three” automakers a loan totaling $25 billion. Now they are back. This time they say that with a mere $50 billion they can turn things around and become profitable in the future. The management of GM and Ford as well as the UAW have been meeting with Nancy Pelosi to arrange a deal. GM claims that if the government does not give them the money they demand it will spell doom for the company and thus the entire US economy.
Let’s consider the impact of GM ceasing to exist — highly unlikely even if they declare bankruptcy. Hypothetically, GM would close its doors and all 266,000 workers would be unemployed, never to find work again, or so GM would have the public believe. GM maintains that it is really in the best interest of the country and economy to continue to support their failing business model. After all, in what kind of a world would the government allow a company that employs 266,000 workers to fail?
The more I listen to politicians running for office pandering to the masses about “fixing” the economy and “creating” jobs, the more I think we ought to make it mandatory that all candidates have at least a rudimentary understanding of basic economic principles. Considering that no third-party candidate has any chance of winning, we’re going to get stuck with either McCain or Obama. But both seem to be completely economically illiterate.
Barack Obama is campaigning for president under the slogan “Change We Need.” Unfortunately, many of his economic policy proposals would move us in exactly the wrong direction. As of this writing it appears that Senator Obama will be the next president of the United States. We can move forward by looking at the implications of some of his economic policy proposals.
Consider first the issue of trade. One of the fundamental principles of economics is that there are gains from exchange. During the third presidential debate, Senator Obama said that he believes in free trade but then proposed a slate of caveats and provisos that would undermine the principles of free trade. On the surface, environmental protection and labor standards sound noble, but they actually harm the desperately poor by artificially raising the cost of employing them and effectively legislating them out of the international marketplace. Restrictions on trade provide a short-run windfall for unionized American workers—a powerful Obama constituency—but this windfall comes at the expense of other Americans who have to pay higher prices and at the expense of poor people around the world who are then barred from the market.
Carden then goes on to discuss Obama’s ideas regarding NAFTA, the idea of “creating jobs”, unions, and the minimum wage.
Ron Paul had some choice words yesterday on Fox News for Barack Obama (and John McCain) when he spoke to Neil Cavuto again. Paul again rails against the government’s attempts to manage the economy and strikes a chord for true free market capitalism. Here are some choice quotes from the interview.
“[Obama] offers nothing.”
“Raising taxes would be a disaster.”
“We need to get back to the basics.”
“People in government aren’t smart enough [to control the economy].”
“We’ve been living way beyond our means.”
“The system that was set up in 1971 is going to end.”
Ron Paul is doing his best Paul Revere impression galloping around on the media horse yelling “Socialism is coming! Socialism is coming!” Is anyone listening or are his words echoing around in the cavernous minds of the “oh woe is me, it’s the government’s responsibility” crowd?
I’m reminded of a story I first heard in church during my Catholic school tutelage. Here I will recap that story as I remember it.
A devout Christian man and his family find out that a hurricane is coming to their area. A bus drives up to his house and he is asked to evacuate, but he replies, “No, God will save us” and he keeps his family in his house. The hurricane comes and the flood waters start to rise. He takes his family up to the roof of his house to escape the rising water. A rescue team on a boat float by and tell the man and his family to hop in. The man replies, “No, God will save us”. Now the water is rising above the roof of the house. A rescue helicopter flies overhead and a rope is dropped for the man and his family. The man waves the helicopter away yelling, “No thank you, God will save us”. The water rises above his entire family and they drown. The man angrily confronts God and asks, “Why didn’t you save us?” God answers, “I tried to save you three times. I sent you a bus, a boat, and a helicopter.”
Ron Paul, in his Texas Straight Talk weekly column, rails against the ever-increasing federal debt, gimmicky bailouts, and the rise of socialism in our country:
It has been long understood that our federal government is going deeper into debt, consistently raising the debt ceiling and demonstrating no fiscal restraint.In recent years, debt ceiling increases have been placed in “must pass” legislation as a means to guarantee that Republicans as well as Democrats would vote for them when Congress was under Republican control.
We also know our nation’s “negative savings rate” reflects the habits of private citizens, showing those habits to be not tremendously different than the habits of the public sector. Yet, the signs of decline are becoming ever more apparent. So apparent, in fact, that it seems unlikely that bailouts or other gimmicks will have even short term success. More inflation, and creating moral hazard by bailing out egregious offenders, is a recipe for disaster. These activities can seem to provide some short term relief, but it seems we are now at a significant crisis point, where monetary policy gimmicks don’t provide the band-aids they did in the past.
Not only is our nation on the verge of bankruptcy, but so are its people and private institutions. We are now repeatedly hearing about businesses “needing to access the credit market to make payroll.” This is an unmistakable sign of more dire consequences ahead for the economy. If businesses must borrow just to make payroll, this is evidence of a severe undercapitalization that cannot be sustained, even for the short run.
Bill O’Reilly managed to somewhat improve the quality of his programming last night.Instead of focusing his efforts on vilifying Chevy Chase for not “believing in” the Great Sarah Palin, he instead decided to address the hypocrisy of the leaders in Washington, who always show up at the Bottom of the 9th Inning during a legitimate crisis, as opposed to proactively informing the public when red flags start to appear.
While I do agree with his statements that our leaders should bite the bullet and make the tough call of delivering bad news (as opposed to McCain, blowing smoke our way the other day, claiming that our current economy has a strong foundation) and also that “both parties are to blame” for this current economic and bailout crisis, I do, however, find it quite humorous that he asserts “there was no Paul Revere in public office to alert us”.Bill, perhaps there was no Paul Revere, but there was and is a Ron Paul in office to alert us.He has been warning the country for almost 2 decades of an impending crisis, such as the one we are currently facing.
The headlines of today are the former “alarmist” predictions of “that kook, fringe candidate, Ron Paul”.It’s unfortunate that O’Reilly, most of the Fox News Network, and the Mainstream Media, in general, have spent many years ignoring the warnings of an honest and economically literate public official.O’Reilly cries out for a leader with the spine to be a leader, yet, at the same time, O’Reilly does his best to ignore a Ron Paul and sweep him under the rug.Fortunately, shrewd journalists such as Glenn Beck and Neil Cavuto regularly march the Ron Pauls and the Peter Schiffs of the world onto their shows in an attempt to inform the public of the very financial corruption thriving in D.C., as well as the dangers of government intervention.
It is now time to rate the vice presidential candidates on the Paul-O-Meter. We start with John McCain’s VP pick Sarah Palin. The perfect strategic pick for McCain, Palin has little history. She’s been Governor of Alaska for less than two years, but now that McCain’s handlers are pulling Palin’s puppet strings it is difficult to see a difference between the two.
Here we examine Palin on 20 issues to see how she stacks up to Ron Paul. Hopefully this will help some see the lips through the lipstick.
Neil Cavuto had a fantastic interview with Ron Paul today, in which they both discussed the election itself, as well as the policies and ideas of Ron Paul, and even the GOP’s utter shock when this “fringe” candidate ended up being a true force to contend with.
In at least two spots, Neil perfectly sums up the stance of Ron Paul and the Revolution, paraphrasing “Look, you guys [GOP, McCain, etc.] are the ones who abandoned the party, not me. I’m going back to what our roots are.”
Isaac M. Morehouse posted an article over at the Ludwig von Mises Institute discussing the fallacious argument that the government can “create jobs” with expensive programs, in the sense that these programs create wealth:
State projects may create jobs, but the proper question is, do they create wealth? The state could easily reduce Michigan’s unemployment to 0% by mandating that every unemployed citizen shovel dirt on some state project without pay. Employment alone is not a good indicator of economic success; overall wealth is. Even if state spending can “create jobs,” creating jobs alone does nothing for our state’s overall prosperity or standard of living.
The question then becomes, do state projects, as the ad claimed, “boost our economy”? The answer is no.
Liberty Maven
