Quick hits on money and politics

June 6, 2011

1)  “Taxpayers are still subsidizing billionaire bankers” – Tim Carney, Washington Examiner

They sure are. No one believes Washington will let big banks go bust when the next financial crisis hits. As a result, banks have lower borrowing costs than if the market believed the American taxpayer would not again ride to the rescue. In short, Dodd-Frank fails to fix the biggest problem with the U.S. financial system.

2)  “Obama Tunes Out, and Business Goes on Hiring Strike” – Michael Barone

Obama’s phony budget plan marked both an economic and political turning point, Barone says in a piece with Ayn Randian feel to it:

After April 13, Obama Democrats went into campaign mode. They staged a poll-driven Senate vote to increase taxes on oil companies. They launched a Mediscare campaign against Ryan’s budget resolution that all but four House Republicans had voted for. That seemed to pay off with a special election victory in the New York 26th congressional district. The message to job creators was clear. Hire at your own risk. Higher taxes, more burdensome regulation and crony capitalism may be here for some time to come. One possible upside is that economic bad news may no longer be “unexpected.” Another is that voters may figure out what is going on.

3)  “The Real Cost of the Auto Bailouts” – David Skeel, WSJ

Great analysis that notes a) neither GM nor Chrysler would have collapsed without the bailout, b) the true cost of the bailouts is closer to 430 billion and c) the following:

The indirect costs may be the worst problem here. The car bailouts have sent the message that, if a politically important industry is in trouble, the government may step in, rearrange the existing creditors’ normal priorities, and dictate the result it wants. Lenders will be very hesitant to extend credit under these conditions.

This will make it much harder, and much more costly, for a company in a politically sensitive industry to borrow money when it is in trouble. As a result, the government will face even more pressure to step in with a bailout in the future. In effect, the government is crowding out the ordinary credit markets.

None of this suggests that we should be unhappy with the recent success of General Motors and Chrysler. Their revival is a very encouraging development. But to claim that the car companies would have collapsed if the government hadn’t intervened in the way it did, and to suggest that the intervention came at very little cost, is a dangerous misreading of our recent history.

Oh, it now looks like the much heralded Chevy Cruze is a lousy product.

4)  “Among GOP, anti-tax orthodoxy runs deep” -WaPo

Oh, so now when a political party sticks to its principles, it’s a bad thing? BTW, I am still waiting for the “Among Dems, big government orthodoxy runs deep” headline.


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