The “cash for clunkers” program would allow car owners to turn in their old gas-guzzlers in exchange for a voucher for up to $4,500 to help buy a new, more fuel-efficient vehicle. Way too many people still drive their SUVs and large trucks because they apparently don’t care about the harm that their vehicles do to the environment. Smaller cars generally cost less up front than big gas-guzzlers, and they use much less fuel. But SUV drivers bought SUVs instead. So these drivers are apparently not motivated by the price of a vehicle or the ongoing cost of fuel. Perhaps they will be motivated by the prospect of a $4,500 voucher. I hope they will be, because that would mean fewer gas-guzzlers on our roads. But it pains me to realize that we have to bribe people into doing the right thing. — Mary Shaw, Philly Freedom.blogspot.com
“Cash for clunkers” is a bad idea whose time seems to have come. Congress added trade-in incentives for old gas-guzzlers to a $106 billion supplemental appropriations bill. Motorists who have owned an older car or truck for at least one year may trade in their vehicles and receive vouchers to help pay for new, more fuel-efficient models. The bigger the fuel-efficiency gain, the bigger your voucher, up to a maximum of $4,500. The program, which is expected to start in August and run through October, is supposed to help the auto industry and modernize the U.S. auto fleet. It’s modeled on similar plans in many European countries, which have boosted new-car sales. The program is capped at a total cost of $1 billion, down from $4 billion in earlier versions. Even $4,500 per clunker may not be enough to help many owners trade up: Clunker “owners are either not looking for an increased car payment or cannot afford to purchase a new vehicle, which averages nearly $30,000,” a report by analysts at Edmunds.com concluded. They believe the program will struggle to produce sales of 250,000 vehicles — or half of Congress’ goal. — Washington Post editorial
“O.K., Thursday’s jobs report settles it. We’re going to need a bigger stimulus,” argues columnist and economist Paul Krugman. Krugman contends that the U.S. economic reports look “depressingly familiar to anyone who has studied economic policy in the 1930s. Once again a Democratic president has pushed through job-creation policies that will mitigate the slump but aren’t aggressive enough to produce a full recovery. Once again much of the stimulus at the federal level is being undone by budget retrenchment at the state and local level.”
From the Washington Post: “The number of jobs on employers’ payrolls fell by 467,000, the Labor Department said. That is many more jobs than were shed in May and far worse than the 350,000 job losses that economists were forecasting. Job losses peaked in January and had declined every month until June. The steep losses show that even as there are signs that total economic activity may level off or begin growing later this year, the nation’s employers are still pulling back.”
In a New Yorker profile titled “The Contrarian,” Federal Deposit Insurance Corp. chairwoman Sheila Bair is variously referred to as a “Republican regulator liberals love” and “the skunk at the picnic.” A Bush appointee, Bair was among the few voices warning about the economic threat posed by subprime mortgages. The University of Kansas graduate, former aide to Bob Dole and onetime Kansas congressional candidate discusses her roots in Independence (“It’s an area where people make it, but you’ve got to work at it,” she said) and recalls working as a teller in a small-town bank in the simpler ’70s. “Everybody had a 30-year fixed-rate mortgage back then,” she said. “It was a ritual to come in and make your mortgage payment personally. There was a kind of pride in living up to your obligations, and, on the lender side, in making loans that people could understand and afford.”
Given the loot stolen by investor Bernard Madoff and the lives he ruined, the maximum 150-year sentence imposed today seems just — if symbolic, given that he’s 71. But Madoff and one of his accountants, who also has been criminally charged, represent just a sliver of the global financial collapse. Texas billionaire R. Allen Stanford faces charges of bilking investors, too. But where are the other perp walks, prison sentences and accountability for what has cost so many investors so much?
Former Securities and Exchange Commission Chairman Christopher Cox “adopted practices that undermined the enforcement division’s efforts to investigate cases of corporate wrongdoing and punish those involved, according to interviews with 19 current and former SEC officials,” the Washington Post reported. For example, Cox required investigators to get the commission’s approval before subpoenaing documents, compelling interviews or approaching a company about a civil settlement. The cumbersome process resulted in long delays and had a chilling effect on investigations, according to current and former agency officials.
Writer Michael Medved sees in the dramatic decline in residential mobility “grounds for encouragement and reassurance,” he wrote for USA Today, viewing it as especially positive for kids and stable families and communities. “Too often, news reports ignore the unanticipated blessings that flow from the tough business climate,” he said. “Numbers suggest a dramatic drop in revenue for lotteries and casinos meaning less money squandered on gaming and less risk of gambling addiction. Other figures suggest fewer divorce filings as fewer couples can afford legal bills and separate residences.”
Some struggling Wichitans likely wish it was already open, but it’s good that Laid-Off Workers Center is now taking appointments. The center opens June 1 and will offer financial assistance for food, shelter and utilities and help in job searches. Kudos to the United Way of the Plains for operating the center and for its commitment to helping those in need. To make an appointment, call the United Way’s information number, 2-1-1, between 8 a.m. and 5 p.m.
From a Wall Street Journal column by “What’s the Matter With Kansas?” author Thomas Frank (in photo) about how it can be difficult for some conservatives to govern when they are anti-government:
“So this is how it works with conservatives at the helm: We starve government agencies of resources, we keep their employees’ pay well below their private-sector counterparts, we make sure they know what we think of them as they wait their turn at the photocopier. Then we demand they protect us when there’s a problem with extremely complex financial instruments, whose designers are defended by some of the best-paid lawyers in the world. And when the regulators inevitably fail? We declare indignantly that the problem begins and ends with them.”
After 54 years, someone from Wichita is once again governor. Mark Parkinson — a Wichita native who graduated from Wichita Heights and WSU before graduating from KU law school and moving to Olathe — was sworn in Tuesday as Kansas’ 45th governor. Parkinson will represent the entire state, of course. But here’s hoping he will be attuned to the challenges facing south-central Kansas, including Cessna Aircraft’s announcement today that it is laying off an additional 2,300 people, extending its summer shutdown and suspending its Citation Columbus program.
Kansas budget problems don’t look quite as scary when compared with those of many other states. Cumulatively, states are having to resolve a multiyear budget gap exceeding $281 billion, according to the National Conference of State Legislatures’ new report on state budgets. “The fiscal situation facing states is like a bad horror movie,” said Corina Eckl, director of NCSL’s fiscal program and author of the report. “The details get more gruesome, and the story never seems to end.”
U.S. News & World Report recently ranked the top 10 winners in the recession. The list included home gardening (sales at Burpee seed company are expected to jump 25 percent in 2009), Hollywood (rentals and box office sales are up), McDonald’s (same-store sales in the United States rose 6.8 percent in February) and romance novels (Harlequin saw North American sales rise $3 million in the fourth quarter from a year earlier).
Columnist Meghan Daum wondered if the distrust many Americans feel about the bank bailout helps them identify with the uncertainty many romance novel heroines feel about their suitors. “Maybe these books are recession-proof not because they offer an alternative to uncertainty,” she wrote, “but because they reflect it back at us — with a lot of sex thrown in (and a happy ending).”
The conservative warnings about how the president and Congress are moving the country to socialism may be falling on deaf — or at least confused — ears. According to a Rasmussen Reports poll, just 53 percent of those Americans surveyed think capitalism is preferable to socialism. Still, only 14 percent of those surveyed said they thought the government would do a better job of running the auto companies, and fewer than that said government would be good at managing financial firms.
“We don’t want you to pity us; we want you to notice us,” Detroit Free Press columnist and best-selling author Mitch Albom wrote about the attention this year’s Final Four brought Detroit. Albom warned: “This is our city, but it’s your America. What the rest of the nation is suffering, we went through first. And if our leaders aren’t wise, what we’re enduring now, you may endure next.
“You can’t cut off your manufacturing arm and expect to build. You can’t outsource everything and expect to lead the world. And you can’t treat blue-collar industry as a bunch of dumb rivetheads who need the government to run them, while allowing the banking world to do as it pleases with taxpayer money.”
Bank stocks jumped last week after the Financial Accounting Standards Board eased its “mark-to-market” requirement that securities be valued at fair-market value. Rep. Todd Tiahrt, R-Goddard, was one of many lawmakers lobbying for the accounting change. “The current rules have exacerbated the banking and financial crisis and should have been corrected a long time ago,” Tiahrt said. “Billions of dollars have been artificially written down by banks using these standards, and that has caused lending to dry up and capital investments to slow down all across the country.” But some critics complain that the change could make it easier for banks to hide their financial problems.
It’s Friday, and it’s time for another report showing rising unemployment. The nation lost 663,000 jobs in March, the fourth straight month in which job losses have topped 600,000. As a result, the unemployment rate jumped from 8.1 to 8.5 percent, the highest rate since 1983.
Wichita has had its own bad employment news this week, as Cessna Aircraft and Bombardier Aerospace announced more layoffs.
Nobel Prize-winning liberal economist Paul Krugman is getting a lot of attention for criticizing the Obama administration’s bank bailout, even showing up on the cover of Newsweek. But he sounded on board with the president’s goal of health care reform Sunday on “This Week With George Stephanopoulos.” “When you look at the long-run budget problem, it’s a health care problem,” Krugman said. “Demography, aging of the population, is a manageable-size issue. Rising health care costs is totally unmanageable. So (Obama) can’t control Medicare and Medicaid unless there’s control of health care costs, and most people think that has to be a comprehensive health care reform. So health care reform is . . . his version of Social Security for FDR, and it’s the only way that you can possibly get the federal budget under control.”
Another bailout-related outrage: The political action committees of five large beneficiaries of Troubled Asset Relief Program funds gave $85,300 in campaign contributions to members of Congress in January and February, including some lawmakers who serve on panels that oversee the program. Bank of America’s $24,500 of largesse included $1,500 for House Majority Leader Steny Hoyer, D-Md. House Minority Whip Eric Cantor, R-Va., received $2,500 from Citigroup and $10,000 from UBS (one of AIG’s counterparty recipients). The four congressional campaign committees are taking such contributions, too. If TARP recipients’ PACs insist on continuing their campaign contributions, all members of Congress should do as Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., have and decline to accept them.
“Many economists and analysts are worrying that the United States might go the way of Japan, which suffered a ‘lost decade’ after its own real estate market fell apart in the early 1990s. But I’m more concerned that the United States is coming to resemble Argentina, Russia and other so-called emerging markets, both in what led us to the crisis, and in how we’re trying to fix it,” wrote Desmond Lachman of the American Enterprise Institute. He argued that the parallels between U.S. policymaking and what we see in emerging markets are clearest in how we’ve mishandled the banking crisis. “We delude ourselves that our banks face liquidity problems, rather than deeper solvency problems, and we try to fix it all on the cheap just like any run-of-the-mill emerging market economy would try to do,” he said.
“The debate on the budget is phony, the howling on deficits a charade,” wrote columnist E.J. Dionne. “Few politicians want to acknowledge that if you really are concerned about long-term deficits, you have to support tax increases.”
Meanwhile, “Frontline” had an interesting but depressing program this week on the national debt. It spread the blame, reporting on the estimates of how much Barack Obama’s budget will add to the debt but also noting how the Bush administration cut taxes while it was waging two wars and approving a huge entitlement expansion (Medicare prescription drugs). Experts on the program agreed that curbing Medicare and Medicaid spending is the biggest challenge.
Jake DeSantis, an executive vice president of the American International Group’s financial products unit, publicly resigned on the New York Times Op-Ed page today, tired of the “dysfunctional environment” and a $1-a-year job that required him to spend “10, 12, 14 hours a day away from my family” but had nothing to do with the credit default swaps that imperiled AIG. He wrote: “After 12 months of hard work dismantling the company — during which AIG reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by AIG and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn.” DeSantis said his March 16 bonus was $742,000 after taxes. “None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.”
Wall Street responded favorably Monday to the Obama administration’s bank bailout plan, but columnist Paul Krugman did not. “Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing,” Krugman complained. He argues that rather than the government buying up toxic assets, it should follow the time-honored method for dealing with the aftermath of widespread financial failure: “The government secures confidence in the system by guaranteeing many (though not necessarily all) bank debts. At the same time, it takes temporary control of truly insolvent banks, in order to clean up their books.”
Krugman wrote: “That’s what Sweden did in the early 1990s. It’s also what we ourselves did after the savings and loan debacle of the Reagan years. And there’s no reason we can’t do the same thing now.”
Alaska Gov. Sarah Palin announced last week that she would accept only 69 percent of the estimated $930 million in federal stimulus money slated for her state. She said she objects to federal strings on some of the money. But some critics accused Palin of trying to keep up with other Republican governors who may run for president in 2012 and are also turning down some of the money. “It is very clear that the governor is doing this just to further her own narrow political national agenda and ambitions,” said Patti Higgins, chairwoman of the Alaska Democratic Party. Republican Senate President Gary Stevens suggested that Palin was getting publicity for refusing some money while knowing that the Alaska State Legislature likely would override her and accept the money. Democrat Bob Poe noted the irony of the opposition to the stimulus, given that “federal spending represents about one-third of Alaska’s economy each year.”
Meanwhile, South Carolina Gov. Mark Sanford explained in a Wall Street Journal commentary why he wants to use $700 million of the about $2.7 billion going to South Carolina to pay down state debt.
“We’re in a once-a-century financial crisis, and yet we’ve actually descended into politics worse than usual,” columnist Thomas Friedman wrote. “There don’t seem to be any adults at the top — nobody acting larger than the moment, nobody being impelled by anything deeper than the last news cycle. Instead, Congress is slapping together punitive tax laws overnight like some Banana Republic, our president is getting in trouble cracking jokes on Jay Leno comparing his bowling skills to a Special Olympian, and the opposition party is behaving as if its only priority is to deflate President Obama’s popularity.
“I saw Eric Cantor, a Republican House leader, on CNBC the other day, and the entire interview consisted of him trying to exploit the AIG situation for partisan gain without one constructive thought. I just kept staring at him and thinking: Do you not have kids? Do you not have a pension that you’re worried about? Do you live in some gated community where all the banks will be OK, even if our biggest banks go under? Do you think your party automatically wins if the country loses? What are you thinking?”
So far, Wall Street approves of the Obama administration’s plan to buy toxic assets from banks. The market went up sharply this morning after Treasury Secretary Timothy Geithner outlined the plan. Last month, the market tanked after Geithner announced a vague overview of the plan.
