Tag Archives: government

Almost Great Depression To Be Over This Week

Golfer President Obama

Exactly when this economic crisis began is arguable. Republicans often suggest that it was left from the Clinton years and point to evidence including excess growth, albeit benign, in 1994 and evidence of excess fluidity being addressed in December 2002. While there was occasional discussion by pundits on talk radio and the Sunday shows, the impending crisis didn’t begin to make the headlines until the Spring of 2008. Noticeably limping before the Masters and coinciding with the Bear Stearns collapse. By mid June 2008, it became obvious that things were not going to turn around any time soon and Tiger Woods announced after his heroic limping playoff victory at the US Open, that he would undergo more reconstructive surgery and would be out for ten months. Reaction on was immediate and has continued. Indymac Bank was nationalized. $300 billion subprime mortgage guarantee was put into law. The Fed nationalized Fannie Mae and Freddy Mac. Bank of America took over Merrill Lynch. Lehman Brothers collapsed. The Fed lent $85 billion to AIG. Paulson announced a financial rescue. WaMu was nationalized. Citigroup took over Wachovia. Congress passed the $700 billion TARP bailout bill. The crisis spread around the world. Obama was elected to stand in for our multi-racial and multi-cultural role model superstar icon. The markets continued to tank. Millions lost their jobs. Millions lost their health insurance. Wars continued. And so on.

It’s finally officially over. Tiger Woods is back on the PGA Tour this week at the Accenture Match Play Championship in Arizona (Sen. McCain, R). While experts believe it may be many more months before the recovery is complete, all the world awaits the markets’ reaction.

Help Darwin

Dino Car

Contrary to cable news opinion, the automakers don’t want a bailout. The want to make and sell cars. The problem, of course, is that their capacity to make cars grotesquely exceeds their ability to sell them. The economy is bad, so consumers have stopped buying (they will be back when their cars wear out). Their businesses got too big not to fail.

Whether it is their fault or not seems an almost silly debate. Was it the dinosaurs fault they became extinct? Sure, the were too big when the meteor hit that brought on the ice age and they couldn’t find enough food. Same thing is going on now. Big change, though, when Dino died, there weren’t people around to try to say they are cute, appreciate their diversity and save him. But based on the movies I’ve seen, I think we are pretty lucky that they didn’t all make it. But I digress.

The working plan in Detroit and in DC is for the industry to get very lean and mean. We, the government, make their current cash flow, while the industry cuts overhead, workers, benefits, suppliers, dealers, investors and lenders, such that their capacity is realigned with demand and they can sell the cars they produce at a profit. The problem, okay, the problems include the incredible cost to the taxpayer to provide this soft landing; the punishing pain to their stakeholders that only delays the inevitable demise; the lack of funding for re-tooling; and that once scale is reduced, the auto industry won’t make enough cars to make enough money to be globally competitive.

So just how do we help Detroit survive, re-tool to make innovative new vehicles that people actually want, have adequate capital to manufacture, inventory, sell and generate a profit? Send out an RFP. I propose that we send out a request for proposal for purchase of a new fleet of vehicles for use by federal, state and municipal government – a couple of hundred thousand a month (no one knows how many we buy at all levels, but if the total cost of the Detroit bailout is $130B, that would buy 200,000 $20,000 cars a month for almost three years). Not the $300 million golf carts the stimulus bill called for, but highly efficient cars that get 50 to 100 mpg and use alternative energy. High tech. Low maintenance. Small cars. Light trucks. And vans. Similar in concept to the joint strike force fighter program. Accept the contract that gives us the best ratio of price and efficiency (cost of vehicle divided by fuel and five-year maintenance cost works for me, but there may be a more complicated and better formula). Offer the incentive to pre-pay part of contract to help with tooling and provide working capital. Require that most of the jobs are here and weight the deal as fairly as possible so that our dinosaurs have a chance at competing with other worldwide dinosaurs. Watch the consumer markets to ensure that we are benefitting from innovation and lowest cost. Coordinate this RFP with our allies around the world, hoping that they will buy in and increase the scale and the worldwide effect. Let the companies answer it the way they think is best and let the best ideas and the fittest companies survive. What we’d have left are industries producing clean, modern transportation products that we need and should want.