Archive for May, 2009

Larry the Liquidator With a Speech GM and Chrysler Never Heard

Saturday, May 30th, 2009

Check out this brilliant clip of Danny Devito as “Larry the Liquidator” in “Other People’s Money.”  It is must viewing for any companies in multi-year tailspins that wish to avoid oblivion.  Thanks to reader Tim McCarville for sending this along.

Fed-Up Maryland Millionaires Say Adios

Wednesday, May 27th, 2009

Another big-spending, high-tax state ran into budget problems last year.  Naturally, Maryland politicians played the class warfare card and hiked taxes on millionaires.  As in California, New York, and elsewhere, the wealthy of Maryland appear to be fighting back the only way they can:  with their feet.

According to this Wall Street Journal piece, state tax authorities reported the number of returns filed by millionaires is down 33% for the year.  Of course this is partially due to the recession.  But no doubt some taxpayers finally got fed up enough to leave.  “Christopher Summers, president of the Maryland Public Policy Institute, notes: ‘Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it’s easy for them to change their residency.'”

Last month I wrote a post titled “Scaring off the Taxpayers Who Shoulder  the Load” about New York’s governor Paterson wishing Rush Limbaugh and his taxes good riddance.  Now billionaire (and former gubernatorial candidate) Tom Golisano is taking his money to low-tax Florida.  He got tired of paying New York an extra $13,000 a day for the privilege of living there.

It’s very easy for most wealthy people to change their residency.  If they leave New York, New Jersey, Maryland, and California for the friendly confines of Florida, South Carolina, and Virgina, who will pay for the bloated governments they leave behind?

A Peak Into the Future of Buying a Car

Wednesday, May 20th, 2009

The Obama administration has announced it will impose new mileage and tailpipe emission standards for any companies selling cars in the US.  What will the new standards, that will require a fleet average of 39.5 mpg, mean?  I’m not a futurist, but common sense and an understanding of basic economics suggest some likely outcomes:

  • Car prices are going up.  The White House claims the new rules will add $1300 to the price of producing a car. It’s probably best to assume that’s a lowball figure.
  • We will be driving smaller cars.  This is the only practical way to increase gas mileage substantially in the near future.
  • More fatal car accidents.  Larger, heavier cars are safer. The main way automakers will meet the new guidelines is by making their cars smaller and lighter. There is no doubt some accident victims will die in small cars that would have survived in larger ones. Since it’s a tradeoff, I’d like an honest estimate of how many Americans will sacrifice their lives to this policy. If the White House has not calculated this number, it hasn’t done its job.
  • The price of the relatively few big cars produced will be through the roof.  SUVs will again be highly profitable for auto companies, but on a much smaller scale, since their production will be limited. It’s likely you’ll be paying a significant premium over sticker price. When demand exceeds supply (and future supply is restricted by law), prices go up.
  • Used SUVs will jump in price.  Again, it’s supply and demand. Many will choose used SUVs over new clown cars.
  • A massive rush to buy larger vehicles before the regulations kick in.  When people fear something they want will soon be more difficult to find, they buy it.
  • A brisk market for replacement parts for large vehicles.  People will hold onto their beloved gas-guzzlers as long as possible, rather than dumping them for new golf carts. Witness the 1940s and 1950s American cars on the roads of Cuba. This could generate opportunities for someone to organize networks for buying/selling/trading auto parts more efficiently. And the after-market parts business is likely to boom.

Does this list sound depressing?  Excessive government regulation rarely works to the benefit of consumers.  Let me know what I’ve missed, and I’ll add your predictions to the list.

Win-Win Regulations?

Wednesday, May 13th, 2009

Often during a policy debate, a group will claim its big-government proposal would be more efficient for business than the status quo.  This is particularly common with environmental regulations.  Not only will the air be cleaner, but corporations will make more money.  It’s a win-win situation!  But does it make any sense that companies would spend their own money fighting legislation that would help them?

Businesses have one main goal:  to make money.  Smart businesspeople are always looking for ways to improve their company’s profits.  Those that don’t usually perform poorly.  Early adopters of good ideas make out especially well.  So doesn’t it follow that executives have an interest in implementing any policies that would improve their bottom line?

What political types would have you believe is that they understand industry better than those who run companies.  This type of arrogance is common among politicians, bureaucrats, and lobbyists with no practical experience.  When executives make bad decisions, they are punished financially either through job loss or weak stock prices.  When regulators screw up, they blame executives.  Which ones do you trust more?

A Government-run NBA: The National Bailout Agency

Thursday, May 7th, 2009

Felix Rohatyn, who guided the mid-1970s bailout of New York City as head of the Municipal Assistance Corp., now thinks the US should create a federal agency to “temporarily” bail out state and local governments unable to solve their own budget crises.  I think that’s a REALLY bad idea.

Nearly all states and many cities have laws requiring they balance their budgets.  Taxpayers strongly support such laws, as they understand politicians don’t have the discipline to restrain spending on their own.

A massive bailout agency (what federal agency remains small?) would protect state and local governments from having to make tough decisions.  A recession triggers an unexpected budget shortfall?  Don’t cut programs and lay off personnel.  Label every spending item “crucial,” and apply for bailout bucks.  Politicians hate to act like responsible adults and consider tradeoffs.  State and local governments will view belt tightening as stupid, and the explosion in spending could be staggering.

Rohatyn says, “I think there is a yawning need for a serious look at urban and state problems.”  I agree.  But let’s not just look, let’s learn a lesson from what we’ve seen:  politicians will not act responsibly unless we force them.