Quality (or lack thereof) of U.S. Automobiles

About two weeks ago Bluedog got his 2009 Consumer Reports "Buying Guide" and since the CEO's of the "Big Three" have been in Washington with their hats out to Congress I thought I'd check on the overall reliability of U.S. branded vehicles versus their Japanese competitors. Consumer Reports rates all products as follows: Much Better than Average, Better than Average, Average, Worse than Average, Much Worse than Average. Here's how the brands rated:

U.S. Vehicles (Ford, Cadillac, Chevy, Dodge, Chrysler, GMC, Hummer)

1. Much Better - 0
2. Better - 9 (15%)
3. Average - 26 (43%)
4. Worse - 12 (20%)
5. Much Worse - 9 (15%)

Japanese Vehicles (Honda, Toyota, Nissan, Mazda, Subaru)

1. Much Better - 11 (22%)
2. Better - 22 (43%)
3. Average - 9 (18%)
4. Worse - 2 (4%)
5. Much Worse - 5 (10%)

The best U.S. brand was Ford and the best Japanese brand was Honda (with Subaru close behind). European vehicles, surprisingly, were not as reliable as you'd think. Mercedes had 9 vehicles rated and 6 were Much Worse and 3 were Worse. Volkswagen wasn't much better.

Here's my point; 65% of Japanese brands fell into the Much Better or Better categories while U.S. brands had only 15% in that category. While average reliability was higher for U.S. brands 35% of U.S. brands were in the Worse or Much Worse category. Given these statistics why should tax dollars be invested in U.S. car companies? I think Ford should buy the Volt brand from General Motors and then GM, Dodge, Chrysler and the other should be allowed to die.

Supply Side Economics

Here's how Wikipedia defines supply side (or trickle down) economics:

"Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively created using incentives for people to produce (supply) goods and services, such as adjusting income tax and capital gains tax rates. Supply-side economics is often conflated with trickle-down economics, now a term given to right-leaning economists' views. The term supply-side economics was coined by journalist Jude Wanniski in 1975, and popularized the ideas of economists Robert Mundell and Arthur Laffer."

This is what George H. W. Bush called "voodoo economics" when he was running against Ronald Reagan in the Republican primaries leading up to the 1980 presidential election and it explains George W. Bush's tax cuts and John McCain's pledge to make those cuts permanent.

I'm not certain that it has been formalized but the other side of that theory would be demand side economics and this makes a little more sense to me. I just don't buy into the theory that a company, on the strength of a lower tax rate, would hire additional employees and increase production hoping that consumers would, in turn, start purchasing the newly produced items. What I do believe is that putting more cash in the hands of the consumer would, in all liklihood, result in increased demand which would lead to greater levels of production which would lead to increased employment which leads to even more purchasing, etc., etc.

What I don't necessarily agree with is the one-shot stimulus checks that were sent out this past spring and which are, again, being contemplated by congress. No business owner worth his (or her) salt will have any part of hiring more workers and increasing production simply to meet a short-term spike in demand that is created by such a stimulus. However, a stimulus that includes tax cuts for individual tax payers makes a lot of sense to me. If my wife and I had an extra $50 or $100 each month we'd be more likely to go out for lunch or buy more dance stuff for my fourteen-year-old.

Should the same breaks in tax rates be extended to businesses as well? A few weeks ago there was a "point of view" article in the Raleigh News & Observer that put forward the theory that higher tax rates on businesses would compel businesses to add payroll since additional payroll dollars were incrementally cheaper with a higher rate than with a lower rate. This article was resoundingly booed by letter writers and I can see why. It could happen in theory (I made it work messing with examples in Excel but my "company" had to pile on expenses that would not have been necessary) but no in practice. I suppose corporations should be given the same tax breaks but you've got to remember that corporations can take deductions that are not available to individuals and corporations are going to try to maximize sales and profits regardless of the tax rate.

Oil Platforms Off the Coast

Feds Move to Expand Oil Exploration

Saw in this morning's News & Observer that the Federal Government has started the process to begin oil exploration off of the Virginia and North Carolina coasts. The article stated that the Department of the Interior will accept public comment on this but when I went to the DOI's website there was no mention of this. I'll need to stay on top of this but, as I've indicated in other posts, I just don't see the point in spending either private or public dollars to explore and then develop oil reserves. The money spent for this project would be better spent on national infrastructure or on research into alternative fuels. I've added a link to the N&O article below.

http://www.newsobserver.com/politics/story/1294126.html

Who Obama Should Not Pick

Following is an interesting Slate article with recommendations of whom not to pick for an Obama cabinet. My initial reaction is to disagree with the recommendation to not retain Secretary Gates. Gates appears to be doing a pretty good job and the Army has just changed the CENTCOM commander and the commander of operations in Iraq; I don't think this is a good time to push the SECDEF out the door just because he is a Republican appointee. The argument about his connection to Iran-Contra is weak; if Gates was going to get in trouble over that old problem it would have happened already.

I agree with not appointing Robert Kennedy Attorney General. He's probably a sentimental favorite because his dad had the post but maybe he'd be best as head of EPA.
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The Uncabinet A guide to key appointments Obama should resist.
By Timothy Noah Posted Wednesday, Nov. 5, 2008, at 6:49 PM ET
With Barack Obama's presidential victory in the bag, speculation has begun about who he'll appoint to his Cabinet. Actually, it began some time ago. Russell Baker of the New York Times many years ago invented a spectral figure called the Great Mentioner to describe how the Washington cognoscenti come to view this or that public figure as a candidate for political advancement. Sometimes the Great Mentioner passes along names under consideration by the deciding person or body. Sometimes the GM passes along names that the cognoscenti merely feel warrant consideration. Because the deliberations are secret, it's hard to know the difference (and also a lot less fun).

It used to be that you needed a lunchtime reservation at Washington's dog wagon of the moment either to learn who's on the list or to add some names yourself. Today the GM's picks, like all other human knowledge, have migrated to the Internet, where they've been democratized to a fare-thee-well. A college kid elevated Sarah Palin to the GOP's potential veep choice merely by creating a Web site. You don't even have to be American! The world is flat, and nous sommes tous Washington insiders. No harm in that. Indeed, this digitization saves Washington journalists like me a lot of time. But like the names I'd likely hear whispered over chardonnay at Acadiana, the Googled mentionees—mostly those very same names—are a hodgepodge of good prospects and bad. Somebody's got to winnow.
Back in October 1987, Paul Glastris published a deeply researched magazine piece in the Washington Monthly under the headline "The Powers That Shouldn't Be." Glastris now regrets what he says was at least one bad call: He wrote that the next Democratic president should not elevate William J. Perry to secretary of defense. Perry subsequently performed that job with admirable skill during the Clinton administration. The impact of Glastris' misjudgment was blunted by the Democrats' failure to recapture the White House in 1988—a luxury I do not enjoy as I compile my own do-not-hire list. Hoping to avoid Glastris' error, I have researched this piece perfunctorily. But caveat emptor: I cannot eliminate entirely the possibility that one or two of the judgments rendered below flunks the test of time.
State Department. Do not appoint Bill Richardson, who by some accounts is the front-runner. Obama may feel he owes Richardson because the New Mexico governor endorsed him after dropping out of the presidential race and ended up being called a "Judas" by James Carville. But Richardson took his sweet time before embracing Obama; he dropped out in mid-January and didn't cough up the endorsement until late March. Richardson's résumé includes Clinton administration stints as energy secretary and as U.N. ambassador. He didn't perform either job particularly well. As energy secretary, Richardson rashly accused Los Alamos official Wen Ho Lee of espionage—a charge later proved false. As U.N. ambassador, Richardson didn't do anything anyone can remember except offer Monica Lewinsky a job three months before the story of her affair with President Clinton hit the Internet. "He has no great beliefs," observed Slate's David Plotz in June 2000, "which may be why he didn't mind flattering despots." Richardson has twice broken the world's record for most handshakes in an eight-hour period. He's very proud of this. Don't you find that alarming?
Also, do not appoint John Kerry. The 2004 election demonstrated that nobody likes him. That isn't disqualifying for a senator, but it is for a diplomat.
Also, do not appoint Anthony Lake. He made himself unconfirmable for Central Intelligence Agency director back in 1996 in part by saying on TV that he wasn't sure Alger Hiss was guilty. Heads up: Alger Hiss was guilty. If you think Hiss wasn't guilty and you want to get confirmed by the Senate, be my guest. But don't shoot your mouth off about it, because if you do, you'll be easy prey for the GOP. Also, I have to say that anyone who performs the mental calisthenics necessary to believe Alger Hiss may have been innocent runs a substantial risk that he won't have enough additional mental energy left to run the State Department.
Supreme Court. Do not appoint Hillary Clinton. The Supreme Court needs jurists, not politicians. Plus, Bill would drive the other justices crazy.
Treasury Department. Do not appoint former Clinton Treasury Secretary Robert Rubin. I explained why last week. (See "Robert Rubin's Free Ride.") Rubin has said he doesn't want the job anyway. Lawrence Summers, who succeeded Rubin, is said to be interested, but he's too closely linked to Rubin and to former Fed Chairman (and current Public Enemy No. 1) Alan Greenspan to be a wise choice. Plus, the hash Summers made out of Harvard's presidency suggested that even after holding one of the highest positions in government, Summers still was pretty clueless about getting along with other people—a crucial skill for whoever ends up managing the worst financial panic since the Great Depression.
Energy Department. Do not appoint Arnold Schwarzenegger. The supposed reason would be that Schwarzenegger is the rare Republican governor who's doing something serious about global warming. But if there's a shortage of Republican governors addressing climate change, can we really afford to remove one from state government? There's no shortage of Democrats who are at least as committed as Schwarzenegger to reducing greenhouse gases. Pick one of them.
Environmental Protection Agency or Interior Department. Do not hire Robert Kennedy Jr. He's too partisan and kind of a nut when it comes to policy. Check out this dangerously alarmist 2005 Rolling Stone piece about the purported link between autism and childhood vaccines. (To learn why Kennedy's piece was alarmist, see "Sticking Up for Thimerosal" by Arthur Allen in Slate, August 2005.) Throw in Kennedy's 1983 heroin bust, and you've got yourself an unconfirmable nominee.
Defense Department. Do not reappoint Robert Gates. Joe Klein floated this idea in a June Time magazine column inspired by Doris Goodwin's Team of Rivals, which shows how Abraham Lincoln co-opted his political enemies by appointing them to his Cabinet. The trouble with Klein's thinking is that it's all about politics and only vaguely about Gates himself, who gets good press mainly because he had the fantastic luck to succeed a disastrously bad defense secretary, Donald Rumsfeld. Nancy Soderberg, a former U.S. ambassador to the United Nations under Clinton, and Brian Katulis of the Center for American Progress, a liberal nonprofit, made a more substantive case last month in the Washington Post, arguing for Gates because he's not an ideologue and because he favors shoring up failing states before they become havens for terrorists. But it still adds up to "he's not as bad as those other blowhard Bushies." I think that's setting the bar way too low. Plus, I was never really satisfied that Gates came clean about his role in the Iran-Contra scandal.
Attorney General. Do not appoint Jamie Gorelick. It pains me to write this partly because I know and like Gorelick and mostly because by all accounts she performed brilliantly as deputy attorney general in the Clinton administration. But her subsequent hiring as vice chair at Fannie Mae, despite her lack of any background in finance, and most especially the $26.4 million she received in total compensation over a period of six years disqualify her for public office. As Jack Shafer has noted in Slate, Fannie Mae was a bipartisan trough for the politically connected, but the patronage and executive pay were particularly lavish under James Johnson, a Democrat who ran Walter Mondale's 1984 presidential campaign. (See "A Medici With Your Money" by Matthew Cooper, February 1997.) Gorelick needs a few more years of good works (the 9/11 commission was a good start) to rehabilitate herself.
It goes without saying—but I'll say it anyway—that Obama should avoid hiring Johnson for any position. Obama probably learned that lesson during the campaign when he made the mistake of briefly putting Johnson in charge of his vice-presidential search. He should avoid Franklin Raines, Johnson's successor, for the same reason.

Drunken Bear in Colorado

Pretty funny clip from a Colorado newscast.

Alternative Energy for Mass Use

A good friend of mine is part of the in-house counsel staff at the North Carolina Electrical Cooperative Membership, the organization that represents the electrical cooperatives in NC. When Rick was a partner in one of our large Raleigh firms he was a labor law specialist but, to no one's surprise, Rick has become very knowledgeable about matters related to the power industry.

A few weeks ago, while at lunch, I asked Rick for his perspective on the viability of alternative fuel sources for mass use. I was thinking of T. Boone Pickens' plans for wind farms or massive solar farms when I asked this. Fortunately Rick has no engineering background so he did not confuse me with technical explanations. Rick said that power plants have to provide a certain level of power based on maximum anticipated useage. In other words, if, on a typical hot and muggy August day in the North Carolina Piedmont, one million homes in Raleigh normally run their central air conditioning our power plants have to constantly generate enough power to provide the electricity for those one million homes' AC units (even if only 800,000 happen to actually be running their air conditioners). So, if one million homes require a bazillion kilowatts of power then the power company (or companies) have to have that much power constantly available. Rick told me that it's more complex than this but since he's a labor lawyer and I'm an accountant we kept it simple.

According to Rick, the problem with alternative power sources (solar, wind, gulf stream)is that these sources of energy constantly fluctuate. So, if you have a massive solar farm down in the Sand Hills providing power to the City of Fayetteville and a few large clouds happen to pass by then the power provided by the solar farm decreases and thus you have a brown out. Rick's conclusion is that these alternatives are viable only on a smaller scale and are not feasible for providing power to cities or towns.

This makes sense to me but what do I know?

Hi Ho, Hi Ho - It's Off to Work Obama Goes

I was wondering this morning how President Elect Obama will deal with his upcomming transition. Obama will be the first president since Kennedy to be elected from the Senate and it just seems that this will help him (as it could have helped McCain). He has been working with those Senators who were re-elected for four years now and so he should understand their likes, dislikes and how to negotiate with them. My understanding is that Clinton, not having dealt with Washington politics, came in like a bull in a china shop and immediately alienated quite a few folks in Congress (and the Pentagon). Obama is a smart guy and since he understands the Senate I think he'll do a pretty good job transitioning into the presidency.

I'm very anxious to start hearing news of potential cabinet appointments and I would not be too surprised if Obama picks some moderate Republicans. I'd love to see Bill Richardson get a cabinet post. Anyone out there have any suggestions?

It's Done!

I have cast my votes and can now move on to other worries (such as, will Notre Dame be able to beat Boston College this weekend). The North Carolina polls opened at 6:30 this morning and when I left my gym at 6:00 it was raining pretty hard. My plan had been to leave work at around 3:00 this afternoon and vote but something told me that the rain may prompt people to delay voting until later. So, I hurried through breakfast and a shower and left home at 6:45 for the polling place. When I arrived I found a short line and by 7:15 I had done my civic duty and was on my way to work (arriving only about 10 minutes later than normal). When reporting at the poll I was tempted to use my father's name and vote for Obama (he's a die hard Republican who thinks Sarah Palin is a breath of fresh air) but didn't want to end up in jail.

Any way; on to the future.

Iraq War Policies

Both John McCain and Barack Obama have significantly different views on the war in Iraq and I'm not sure I agree with either of them. John McCain pledges to keep a significant troop presence in Iraq until we win (and he's not the only person to have said this). I'd really like to hear Senator McCain define "win" as it pertains to the war in Iraq. In a conventional war (WWI, WWII) terms of surrender are agreed to before one side can declare victory. That's not going to happen in Iraq, ever. The surge (I'll get to that later) has helped stabilize Iraq but the Shia-dominated government cannot get around to sharing power (both political and economic) with the Sunni minority and anyone who understands (at all) the historical problems between the Shia and the Sunni shouldn't be surprised by this. Think about it; Republicans and Democrats can't agree on anything of substance but yet we expect these two radically different Islamic factions to sit down at the same table and be civil to one another. Some form of democracy has been around since the Magna Carta and we still have a hard time making it work. How in the world can we expect societies that have either been subject to tribal law and/or authoritarian regimes to suddenly become functional democracies. I think the best we can hope for in Iraq is what we have today and I am not certain what we'll gain by staying on. Also, the argument that goes, "if we leave before we win, the dead will have died in vain" is a non-starter. Someone needs to explain (in concrete terms) what the incremental gains will be if we stay longer and how many lives are expected to be lost to achieve those gains. To put this in business terms, if a company has invested millions in a new product line and the product line is not profitable, and is not expected to be profitable, the fact that millions have already been invested is not a viable reason for staying the course.

Senator Obama (and others) has said that he will "end the war". That also will not happen. If a President Obama puts into effect his plan to draw down all but a stabilization force within 16 months he will not have ended the war; he will only have ended our involvement in the war. So Senator Obama should be honest and say that this war cannot be won (as described above) and we are simply ending our involvement.

One of John McCain's criticisms of Senator Obama is that Obama will not admit that the troop surge has worked. Senator McCain draws a cause and effect relationship between the surge and a much more stabilized Iraq. I don't believe that the cause and effect are as well-defined as Senator McCain would like to believe. While the surge had to have had positive effects what is frequently left out is that at the same time the surge began Shia Militias, under the control of Muqtada al Sadr, declared a cease fire and the Sunni Awakening Groups were organized. The Sunni groups took on Al Qaeda in Iraq and destabilized that side of the insurgency and the Shia Militia's cease fire ended their deadly attacks on US troops. If the Awakening Groups were to close up shop tomorrow and the Shia Militias were to end their cease fire, we'd be in the situation we were in before the surge.