How's Your Bailout? Automotive Edition

The Wall Street Journal reports that General Motors is getting ready to pay back some of the money it borrowed from the federal government ahead of schedule. That sounds like good news, until you learn that it is paying back the loan with money cash it got from the auto bailout.

General Motors Co. plans to begin paying back a $6.7 billion loan it owes the U.S. government starting late this year, putting it on track to potentially repay the entire note by the middle of 2011, said a person familiar with the matter.

But in a move that could be controversial and risky, the car maker plans to use other money it received from the government to pay back the borrowing.

State Finance Directors Warn of More Trouble Ahead

The Wall Street Journal reports that next year's state budget problems will likely be larger than this year's.

Short-term budget gaps have battered states as revenues plummeted during the recession. Aided by about $250 billion in funds from the stimulus package expected through the end of next year, states managed to close the gaps this year. But both finance directors, speaking at a Pew Center on the States event in Washington, were pessimistic about their states' futures beyond fiscal 2011.

"We're facing a cliff in 2011 when stimulus dollars run out," said Mitchell Bean, director of the Michigan House Fiscal Agency. "There is not an end in sight, even in recovery."

Death by Government: Swine Flu Vaccine

Scott Gottlieb writes in the Wall Street Journal that three flawed policy decisions have led to a shortage of swine flu vaccine in the United States.

The first fateful policy decision, made last spring, was to forgo vaccine additives—called adjuvants—that activate the immune system and make shots more potent. Adjuvants allow a smaller supply of vaccine stock to be stretched across more doses. These adjuvants are included in H1N1 vaccines world-wide, but not in the U.S.

Why do adjuvants matter? An adjuvanted H1N1 vaccine being used in Europe contains 3.75 micrograms of vaccine stock. The same vaccine in the U.S., without the adjuvant, requires 15 micrograms of vaccine for equal potency. If we used adjuvants, we could have had four times the number of shots with the same raw material.

The second cautious decision was to require that the H1N1 vaccine be a single shot. The government demanded single-dose syringes because they contain smaller amounts of thimerosal than multi-dose vials. This mercury-containing vaccine preservative continues to stir concern it can trigger childhood autism, even though this has been firmly disproven.

The third policy decision was to stick for too long with a proven, but slow process for making flu shots that uses chicken eggs to grow the raw vaccine material. Shots can be made much faster using mammalian cells to grow vaccine, and this process is already being used in Europe. The cell-based vaccines are unlikely to be approved in the U.S. Our precaution when it comes to vaccines means we don't easily embrace novel technologies, even if the Europeans would part with some of their limited supply.

Once again, we see that overregulation, passed in the name of public health, is actually preventing people from getting immunized against the flu. The hype over swine flu is likely overheated, but it is a particularly nasty strain. Does anyone doubt that the private sector would have been able to distribute vaccine faster and cheaper than government, had it been given the opportunity to do so outside of burdensome and counterproductive regulations?

Cash for Clubbers

The Wall Street Journal has discovered yet another government giveaway program tucked into the federal stimulus bill. Did you know there's a tax credit for buying an electric car ... and that it applies to electric golf carts?

Congress's fabulous golf cart stimulus.

We thought cash for clunkers was the ultimate waste of taxpayer money, but as usual we were too optimistic. Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama's stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart.

The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart. Even in states that don't have their own tax rebate plans, the federal credit is generous enough to pay for half or even two-thirds of the average sticker price of a cart, which is typically in the range of $8,000 to $10,000. "The purchase of some models could be absolutely free," Roger Gaddis of Ada Electric Cars in Oklahoma said earlier this year. "Is that about the coolest thing you've ever heard?" (more)

Writing in the Wall Street Journal, Ted Olsen stands up for the First Amendment, even when the political elites find it annoying.

Is outlawing political speech based on the identity of the speaker compatible with the First Amendment? Tomorrow, the Supreme Court will hear arguments to determine the answer to this question.

The case—Citizens United v. Federal Election Commission—involves a 90-minute documentary produced by Citizens United, a small nonprofit advocacy corporation. "Hillary: The Movie" examines the record, policies and character of the former New York senator, now Secretary of State, Hillary Rodham Clinton. The documentary was set to be broadcast during Mrs. Clinton's presidential primary campaign. But the broadcast was banned when the Federal Election Commission declared that the broadcast would violate the 2002 McCain-Feingold campaign finance law.

McCain-Feingold, and every supposed reform and restriction of political speech, is little more than an incumbent protection plan, designed to make campaign resources scarce for those who would challenge those already in power. Congress should have the courage to repeal it. The Supreme Court should have the wisdom to strike it down.

Amendment X: Stimulus in Michigan

The Wall Street Journal notes the work of our colleagues at the Mackinac Center for Public Policy in showing the ineffeciency of government-directed economic subsidies.

For the past 14 years, Lansing politicians have offered $3.3 billion in tax credits through the Michigan Economic Development Corporation and spent another $1.6 billion in outlays to create and retain jobs. The subsidies have ranged from tax breaks for Hollywood, to money for new industrial plants, to millions for TV ads starring Jeff Daniels and Tim Allen talking about business and tourism in the state.

It's one of the largest experiments in smokestack chasing in American history, but one thing it hasn't done is create jobs. An exhaustive new 100-page study by the Mackinac Center for Public Policy, a Michigan think tank, has reviewed where all the money has gone and what came of it. The study finds that for every 100 jobs that were promised with these tax credits over 14 years, only 29 arrived. Dare we call this cash for clunkers?

Transparency Chic

Here's a little known Transparency fact, "The dream of state-provided transparency goes back as least as far as Abraham Lincoln, who established the Government Printing Office, which disseminates documents like the Congressional Record, on his first day in office in 1861." Printing and distributing for free a printed record may have been a novel idea at the time. But times and technology have changed. Sadly much of our government has been stuck in 1860's thinking and hasn't kept up with the possibilities of the digital age.

Someday your government may have as little privacy as you do.

Katherine Mangu-Ward
AUGUST 21, 2009, 1:03 P.M. ET

Newborn babies have their own blogs and grandmothers are on Facebook. We Google potential dates. Privacy is dead. But one kind of information is still cozily locked away, safe from prying eyes: the law. President Obama may have come to Washington promising greater transparency, but progress has been less than impressive.

While the feds stumble toward openness, geeks and developers who made oversharing a way of life are bringing their can-do attitude to government transparency. Can't find what you're looking for on Regulation.gov? Try the new, user-friendlier OpenRegs.com. Frustrated by the terrible interface of Obama's Recovery.gov? Check out the easily-searchable Recovery.org. (more)

The Cap-and-Trade Bait and Switch

I've spoken in the past on how cap-and-trade can be an effective, market-based way to limit unwanted emissions. If done properly, cap-and-trade is a powerful tool that imposes a proper price on externalities, and solves the ever-vexing "Tragedy of the Commons".

Regardless of your opinion of cap-and-trade schemes generally, David Schoenbrod and Richard Stewart write in the Wall Street Journal that the Waxman-Markey bill moving through Congress isn't it.

Waxman-Markey is largely top-down regulation dressed in cap-and-trade clothing. It purports to set a cap on greenhouse gases, but the cap is so loose in the early years that through the use of cheap offsets the U.S. need not significantly reduce its fossil-fuel emissions until about 2025. Then the bill would require a nosedive in fossil-fuel emissions. This balloon mortgage pledge of big cuts later is unlikely to be kept.

The top-down directives come in three forms. First, electric utilities, auto makers and states get free allowances on the condition that they comply with regulations requiring coal sequestration, alternative energy sources, energy conservation, advanced auto technology and more. Second, many other provisions of the 1,428 page bill mandate outright regulation on subjects ranging from how electricity is generated to off-road vehicles and household lighting. Third, still other provisions provide subsidies for government-chosen technology "winners" such as alternate energy sources, plug-in vehicles and weatherization of old buildings.

Hattip: Volokh Conspiracy

Tax Withholding Is Bad for Democracy

One of the most clever and sinister ideas every devised by a government bureaucrat is the concept of automatically withholding the payroll tax. With every paycheck the government involuntarily takes a portion of your money before it ever reaches your wallet.

From the government's perspective this is great. They get a steady stream of your money to spend and most people don't think about how much they're paying because it's incremental and semi-hidden. No doubt our national perspective on taxes and government spending would be quite different if every working person had to write a quarterly check to the government, just like tens of millions of self-employed people currently do.

So is the payroll tax. End them both and voters will have a healthier understanding of the government burden.

By CHARLES MURRAY

August 13, 2009

America is supposed to be a democracy in which we're all in it together. Part of that ethos, which has been so essential to the country in times of crisis, is a common understanding that we all pay a share of the costs. Taxes are an essential ingredient in the civic glue that binds us together.

Our democracy is corrupted when some voters think that they won't have to pay for the benefits their representatives offer them. It is corrupted when some voters see themselves as victims of exploitation by their fellow citizens.

By both standards, American democracy is in trouble. We have the worst of both worlds. The rhetoric of the president tells the public that the rich are not paying their fair share, undermining the common understanding from the bottom up. Meanwhile, the IRS recently released new numbers on who pays how much taxes, and those numbers tell the people at the top that they're being exploited. (more)

The Whole Foods Alternative to ObamaCare

Perhaps only in the Wall Street Journal would the founder of a natural food store quote Margaret Thatcher while opposing the proposed Health Care Reform.

Eight things we can do to improve health care without adding to the deficit.

By JOHN MACKEY

"The problem with socialism is that eventually you run out of other people's money."

—Margaret Thatcher

With a projected $1.8 trillion deficit for 2009, several trillions more in deficits projected over the next decade, and with both Medicare and Social Security entitlement spending about to ratchet up several notches over the next 15 years as Baby Boomers become eligible for both, we are rapidly running out of other people's money. These deficits are simply not sustainable. They are either going to result in unprecedented new taxes and inflation, or they will bankrupt us.

While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction—toward less government control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone: (more)

Barack Obama = Montgomery Brewster

"Brewster's Millions" is one of my favorite forgotten movies from the '80s. I was working up a piece comparing our President's fiscal policy to the plot of the movie, but Edward Lezear beat me to it in the Wall Street Journal:

In "Brewster's Millions," a comedy starring Richard Pryor, a man is told he can keep $300 million if he manages to spend $30 million in one month. The movie documents -- with a great deal of humor -- his difficulties getting the money spent. The Obama administration is currently facing a similar problem with its "stimulus" spending, only without the humor. (more)

Is this clip, Hume Cronyn sets up the plot. Watch for fleeting explitives:

Asking the Fox to Regulate the Henhouse

Today, President Obama proposed a massive increase in government control over the financial sector:

President Barack Obama on Wednesday proposed the most sweeping overhaul of the way the U.S. government oversees financial markets since the 1930s. He pushed Congress to grant the Federal Reserve and the executive branch of government vast new powers to supervise previously unregulated aspects of the economy, while reorganizing other aspects of oversight.

Why is more government always the answer, even when government intervention fueled the crisis in the first place? We're reminded of Paul Krugman's big government solution to the last recession:

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Thanks to Arnold Kling for finding this little gem from the archives. If the economy ran on hubris, Barack Obama would be a goldmine.

More startling charts from the Wall Street Journal

Why should we be worried about inflation? Arthur Laffner looks at the money supply in the Wall Street Journal.

And here's a look at government spending as a share of the national economy:
You need to be a subscriber to read the entire article.

WSJ- "Boom Town"

The Wall Street Journal notes that the recession isn't hitting Washington, D.C. quite as hard as the rest of the country:

With unemployment for all government workers about half the private sector's rate, the Beltway has been spared the tightening elsewhere. The federal government is the second largest job sector in the area, making up 11.6% of jobs, while state and local government workers add another 10.4%. According to a February survey by the Greater Washington Initiative, Washington area business executives were also "significantly more positive" about their own companies and the region's prospects than about the national economy. Translation: It's good to be close to Uncle Sam when stimulus funds start flying.

I'm glad our nation's capital is feeling so, what's the word, stimulated. I jsut wish it didn't come at the cost of our fiscal stability and long-term solvency.