Monday, November 17, 2008

Really, I was only kidding ...

An astute reader sent me a couple of links from articles mentioning a bailout for the newspaper industry. Here ["A Bailout Plan For U.S. Newspapers"] and here: ["Enough with those bailout lines"].
Of course, as Vennochi writes, it would - and should - never happen. The threat of potential control of the message of "news," by government, would defeat the entire purpose of having a free press. But, at the same time, it seems to work in Britain just fine, doesn't it? I mean, we currently get better news from the BBC than we do our own outlets, in some cases. Although, we already fund radio and television via our tax dollars with the Corporation for Public Broadcasting, which is similar to the BBC. The flip of this is that, at least on the radio side, NPR and many of its affiliates are tightly controlled. In many ways, public broadcasting is completely out of touch with the average American.
I have always joked that the newspaper industry, especially the dailies, are getting what they deserve since virtually all of them backed the horrific "free trade" economic policies that put decent-waged low skill labor [you know, the folks who used to read the newspaper ...] in direct competition with pennies-on-the-dollar-waged low skill foreign labor. The truly smart people know how that all worked out. Look around you. It is amazing that so many will still support such a failed economic policy even though the evidence of failure is right in front of our eyes ...

No bailout for the big three
Speaking of bailouts, there has been a lot said about a proposed bailout of the big three "American" automobile manufacturers. I was struck by this piece in the WSJ on Saturday: ["Just Say No to Detroit"].
While David Yermack, a professor of finance at New York University's Stern School of Business, gets the premise of Michael Moore's film wrong [it was more about the destruction of community than any one individual], he has some interesting things to say here ... especially when looking at the capital the big three have blown through. As he says in the subhead, "Given the abysmal performance by Detroit's Big Three, it would be better to send each employee a check than to waste it on a bailout." Or, how about one better: Similar to the hybrid tax credit, which seems to be going by the wayside, which is one of the reasons I didn't buy one last year, the answer might be to give millions of Americans a tax credit for buying a 30-plus mpg vehicle. If you use the $25 billion figure and gave folks a one-time $2,500 tax credit [or $500 over five years], that would be 10 million people or, potentially, 10 million new cars sold. Of course, there is no way you could just award it to big three purchases. And what do you do for folks who bought cars in the last year or two and are paying for them but might need the tax credit?
While it is terrible to think that 250,000 jobs could be lost if the big three go under - along with potentially tens of thousands more connected to those jobs - they made their own bed. They made horrific corporate decisions which have affected all Americans. They shouldn't get a bailout. It really is that simple. They have wasted so much money ... so much ... I mean, on advertising alone.
It's the same reason the original bank bailout should not have been supported. And now, as we read, we're seeing some serious graft and corruption with that program now. As well, looking back at the media example, we have already sustained tens of thousands of lost jobs. According to a piece Eric Alterman wrote for the New Yorker earlier this year, since 1990, a quarter of all American newspaper jobs have disappeared [I don't know where he got this figure and I don't particularly like Alterman since I saw his over the top comments about Ralph Nader. However, let's pretend he can be trusted on this figure]. This doesn't account for radio, television, magazines, or book publishing layoffs either. Sure, they weren't lopped off all at once but this is as serious as the auto industry. These jobs are already gone but there was no bailout talk for those folks.

[Update: I found another figure from the "Reflections of a Newosaur" blog stating that 102,120 jobs have been eliminated in the newspaper industry since 1990. About half of those jobs were lost in the last three years. If this is fact, it is worse than we thought. Where's the newspaper bailout again?]

A broader discussion about the causes of the crisis
It has been interesting to watch, on many different Internet outlets, the us vs. them mentality when discussing what has become the global financial crisis. One side says, it's all Wall Street's fault; the other side says, Democrats' housing policies [i.e. giving housing loans to people who could never pay them] is to blame for everything ... As if gluttonous greed, scurrilous speculation, billions in unearned bonuses, outright scams, rumors and innuendo about the solvency of companies like BearStearns [which created the initial run], and complete deregulation and lack of oversight of the industry, had absolutely nothing to do with it at all? Right.
But, in fact, it seems to be the perfect storm of many different factors colliding all at once ... The problem is no longer national - it's global in nature and it is about globalism itself. So, you can't say that a few million people not being able to make balloon payments on their overpriced housing caused the world's problems. That's a very small piece but it really is beyond that now.
To start, the main culprits seem to be a combination of the worst elements of unchecked free market economics AND certain political interests on both sides of the aisle pushing large lenders to throw loans at anyone and everyone to make sure the housing continued buzzing along. In addition, the federal reserve bank, which brought on the entire calamity by jacking up interest rates from 1 percent in the middle of 2004 to 5.25 percent in the middle of 2006. This action alone brought on huge spikes in ARMs which sent people who were otherwise having no problems at all paying their mortgages into bankruptcy.
Then the oil speculation happened and that was the nail in the coffin - those folks who saw their car gas bill double had to make choices: mortgage, food, fill the tank? Yikes.
Very few people in the media said word one about all of this, unfortunately, with most people concentrating on the Iraq situation during this time period [Remember the 2006 midterm elections? The Democratically-controlled Congress still hasn't enacted any of its solutions to solve these problems]. But literally a five-fold increase in the cost of getting money created a crunch. It's kinda funny and sad now. If you went back to the time period and listened to any of the big conservative talk radio shows, they had no problem at all that this was going on. In fact, most were talking about how great the Bush Administration was for getting so many Americans into their own homes. They too were caught up in the buzz, assuming everything their friends and financial advisors were telling them was the truth. It turned out to be a total lie and now we're all trillions poorer than we were before.
This is just the American side of things. Attach globalization onto this problem and we can see how it became massive. The simple fact is that you can't raise wages in one part of the world without lowering wages in another part of the world. It just doesn't work that way. As wages in one part of the world are lowered, those citizens acquire more work and more debt to sustain the living standards [or the standards that they perceive they should have, via manipulative advertising. Can anyone say consumer debt?]. Remember the old Clinton line: I created 20 million jobs. Average citizen responded: Yeah, I have three of them.
Monetary policy in the world is a zero-sum game. That is, there is only so much money and wealth floating around. As wages have risen in places like India and China, the standard of living has been lowered in the United States and European Union. The only salvation to this is the creation of more wealth via manufacturing, mining, etc. You can take resources from the ground and turn it into a product which didn't exist before. But if there is no one interested in buying the product, you don't make any money. Places like Canada seemed to be sustaining themselves well - mostly due to being the United States' largest exporter of oil as well as having a national health care system where everyone is covered [of course, they also have value-added taxes or VATs to pay for their health care system]. Some of the more socialist countries in the EU seem to be holding these together well too. By saying that, I'm not advocating that position. I'm just noting that they seem to be doing OK because they have a large safety net for the consequences of globalization.
It wasn't that long ago that those forces arguing against socialism used to hold up examples of European countries with 50 percent tax rates stating, we don't want that in America. Has anyone looked at their tax bill lately? I mean, all of your taxes and fees - property taxes and sales taxes and gas taxes and phone taxes and income taxes and SSI/Medicare taxes. If folks did, they would realize that we are paying 50 percent our income in taxes but we aren't receiving all the benefits that European countries do.

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