From AOL Auto , a thorough debunking of the myth of Cash for Clunkers (C4C) success finally begins to hit selected parts of the MSM: Myth One: C4C was environmentally friendly Quicker than you can say, “Holy statistics, Mr. Wizard,” the numbers nerds ascertained that the new vehicles sold under C4C will use more—not less—fuel than the beaters that were turned in and destroyed. How can that be? Think of it on a personal level. Suppose you had a 10-year-old particulate belcher that, as the euphemism goes, needed work. Even if you lived in an Orlando suburb, you’d still be less than excited at the idea of piling the kids into it and lighting out for Disney World. But that new Malibu that gets a hell of a lot better mileage is a different kettle of green. You trust it; it’s economical; you drive it more. A lot more, according to another piece of research. CNW surveyed drivers involved in the purchase of the first 239,000 C4C vehicles. The average intended annual mileage was 10,894, up fr...

Despite all the hoopla over the supposed economic success of Cash for Clunkers [you don't need links for that, just go check all the usual suspects], WaPo reports today that a Congressional oversight panel says--surprise, surprise--we're not going to get all the auto industry bail-out money back: The federal government is unlikely to recoup all of the billions of dollars that it has invested in General Motors and Chrysler, according to a new congressional oversight report assessing the automakers' rescue. The report said that a $5.4 billion portion of the $10.5 billion owed by Chrysler is "highly unlikely" to be repaid, while full recovery of the $50 billion sunk into GM would require the company's stock to reach unprecedented heights. "Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount," according to the report, which is scheduled to be released Wednesday. The repor...

I said earlier that I would examine this paragraph by Dana Garrett in the light of the success of Cash for Clunkers: Great news all around, right? But, reader, if you hear a note of weeping in the national celebration of this program's success, it's those economic conservatives who, for entirely doctrinaire reasons, simply cannot admit they were wrong. A government stimulus program worked—in fact, it exceeded expectations—and that must be denied at all costs. You see, if they admit that a government stimulus program worked here, then they'll have to admit that such programs might work in other aspects of the economy as well. Too bad for them. Reality is rarely kind to dogmatists. A couple caveats first: 1) I would dispute Dana's assertion that economic conservatives reject the idea of government stimulus. The whole argument over the stimulus package found the GOPers arguing for stimulus in the form of tax cuts or payroll tax holidays, which everyone from Peter Orzag ...

Perry Hood responding here today : I think you feel stampeded, because Obama's package is not to your liking. Fair enough! What do you suggest? Perry Hood responding here even earlier today : Where is Pat Buchanan's plan? He hasn't one! So he is just one more of the Dr No's we see popping up on opposition side. This is no help!!! Perry Hood responding yesterday at Down With Absolutes: Dominique, now that you have expressed everything negative, what do you suggest that Obama and the Dems do about this economic crisis that is getting closer and closer to being a full blown depression? You'd think, viewing the world through the perspective of these comments, that we have a modern Diogenes, replete with lantern, looking for someone who will rise above petty politics and offer an alternative to the trillions and trillions of dollars of spending to prop up an economic system that is horribly broken with strategies that worked (or not) seventy years ago in a world withou...

From Wallet Pop : The Sports Business Journal reported recently that the National Basketball Association will take out a $175 million loan from Bank Of America and JPMorgan to bolster its ability to prop up teams suffering from the economic downturn. The money comes at a whopping 8.27% interest rate. Perhaps the NBA could have received better terms by borrowing the money from LeBron James. According to another SBJ report, the NBA expects gate receipts to stagnate, while sponsorships for events, venues, publications and team-related products have become a very tough sell. The players are also suffering, with many endorsement contracts bringing in half of what they did during the recent boom times. Overall sponsorships for the league are also up for renewal, and only a Hail Mary bucket could help it avoid a sharp decline in the revenue from these rights. The NBA is not alone in this decline. All pro sports, from the NFL to NASCAR, are struggling to find replacement sponsors for companies...

... and why we're not Sweden, either. Tyler Cowen, writing in the NYT , does an outstanding job of, well, making you feel helpless and doomed, especially when he concludes that neither shoveling tons of money or nationalizing the banks is liable to work. Instead, our best strategy may simply be to throw a few band-aids at the problem and hope it gets better on its own: THE BAND-AID METHOD A third approach to reform is to try to muddle through, with fixes here and there. The hope is that banks return to solvency over a few years, as markets improve. The results, though, are likely to be a lot of limping along, continued extension of credit to weak and ineffective banks, and not much resolution. But because we don’t have a few trillion dollars to spend on bank recapitalization — with or without nationalization — this may be the best that the American political system can do for now. The outlook is bleak. Perhaps true and irrevocable insolvency will force the hand of the regulators t...

Whichever it is, you should read his extensive take on why Chrysler should not receive another penny of public support. Here's a key excerpt : In section one, they blame it all on the credit markets. Specifically, the lack of ability of the Chrysler finance arm to lend to customers. But I showed the other day that consumer lending is still strong by banks. What they are really saying here, but they are smart enough not to utter the actual words, is that their sales depended on a finance arm that was willing to lend at below-market rates to people with bad credit scores, and the lack of this hidden subsidy is what is making it hard to sell their cars. Credit exists — what no longer exists is zero-percent-interest-to-anyone-who-walks-in-the-door-no-questions-asked financing. Instead of figuring out how to make cars that don’t require hidden subsidies to get off the lot, they are trying to get the government to fund their hidden subsidies. Two problems here: 1) This is a thought...

The January 2008 CBO white paper Options for Responding to Shortterm Economic Weakness was written by five economists and attempted to examine the effects of different kinds of government stimulus measures (chiefly, tax cuts vs spending in terms of GDP impact). Unlike the current Moody's model being bandied around by stimulus supporters (and most highly touted by Dr. Mark Zandi), the CBO report does not attempt to place a direct dollar multiplier figure on different types of stimulus, instead measuring them in terms of Large, Medium, and Small impact . Nonetheless, the similarity of the categories used with those of the Moody's model allows for a rough comparison. So let's take a look at how different stimulus strategies shake out in the two sets of analyses. The CBO rates the cost-effectiveness of various stimulus strategies thus [in no particular order between the items in each category]: Large impact Lump Sum Tax Rebates Tax Withholding Holiday Extending or Expanding ...

No kidding. There is a distinct difference between GOP obstructionism toward doing anything, and the idea that if we're spending hundreds and hundreds of billions we should actually take the time to study what we're doing and why. Because, after all, passing regulatory measures based on ideology rather than knowledge is how we got into this mess.

I can't make the graph copy here so it won't cut off the most important segment, so you'll just have to take a moment to click through the link and visit Coyote for a visual comparison on the fourth quarter performances of the US Here's what he notes: I think most readers of this site will understand the meme that somehow the recent Wall Street meltdown represented “unfettered capitalism under George Bush” is absurd. The US financial industry is the most highly regulated sector of the economy, and George Bush was in no way a free market capitalist. Bill Clinton, for example, had a better laissez faire record than Bush, in my scoring. But those pushing for a Euro-Japanese style corporate state (e.g. Barrack Obama) might beware. It probably comes as no surprise the US economy has outperformed the EU and Japan over the last decade, but would you believe we have also out-performed them over the last year? The chart below is from Paul Kedrosky, and shows GDP indexed to ...

Like an urban legend, the story that Caterpillar will begin rehiring 20,000 laid-off workers upon passage of the stimulus, turns out not to be true , much to the consternation (I suspect) of our progressive friends who had cited the report as support for the efficacy of the stimulus package. From IPR : If I were wearing a hat, I’d tip it to Don Irvine at Accuracy In Media for pointing me to this interesting development from ABC News. For weeks President Obama has claimed his "stimulus" plan allows manufacturers like Caterpillar to stop layoffs and immediately re-hire laid off workers. Obama even traveled to the company’s factory in Peoria, Ill. today to pitch his $1.1 trillion welfare-and-spending plan. One problem for the White House, however. Cat CEO Jim Owens never said such a thing. While Owens supports the plan because it includes hundreds of billions of borrowed dollars for highway construction and more government buildings, he never claimed he could re-hire recent...

Point of honesty: cassandra got to this first. But it's too good to pass up--especially when you look at the forlorn, almost teary look on Geithner's face. From HuPo : Administration officials were greeted with sarcasm and laughter Monday night when they briefed lawmakers and congressional staff on Treasury Secretary Tim Geithner's new financial-sector bailout project, according to people who were in the room. The laughter was at its height when Obama officials explained that the White House planned to guarantee a wide swath of toxic assets -- which they referred to as "legacy assets" -- but wouldn't be asking Congress for money. Rep. Brad Sherman (D-CA), a bailout opponent in the fall, asked the officials to give Congress the total dollar figure for which they were on the hook. The officials said that they couldn't provide a number, a response met by chuckling that was bipartisan, but tilted toward the GOP side. By guaranteeing the assets, Geithner hop...

Anonymous (who posts a lot across the blogosphere if you hadn't noticed) raised some really interesting points/criticisms of my geeky post down the page on why pump-priming is not a good metaphor for working with the economy. In a nutshell, the criticism is this: Aren't you just throwing in a lot of jargon to support the classical libertarian idea that the government should do nothing? And is this reasonable while so many people are in trouble and the system is whacked? Good question. Actually, I am not in favor of government inaction, and I am not a blind follower of the tax cuts will do it all if we just wait theory. I think it was a particular form of government inaction, of misregulation rather than de-regulation that got us into this mess, or, I should say, these three messes. Mess one: the massive and growing unemployment and downturn in consumer spending. Mess two: the structural deficiencies of our financial system Mess three: the virtual bankruptcy of government ...

I am heartily tired of the rampant war of words between the GOPer and Dem talking points on the stimulus and the current meltdown . There is precious little serious dialogue going on between the two camps that makes any sense, and a complete unwillingness to deal with the other side's best arguments rather) in Paul Krugman's ideological posturing that passes for economic policy presentation. But let's be honest: Krugman is hardly the best point man for Keynesian stimulus, as much as he might like to think so. That title belongs to Dr Mark Zandi of Moody's, whose recently released analysis of the House stimulus package is the most powerful document that the Obama administration has to support its plan. It is in this document that we get Zandi's "bang for the buck" table that has become the favorite talking point for liberals and progressives, because it argues that income support and other forms of direct Federal spending create a far stronger economic ...

Here's what I wrote a few days ago about President Obama's edict that CEOs of corporations receiving Federal bail-out money will have their pay capped at $500k: This is only intended as a first step. Because virtually every corporation receives some sort of government funding (research grants, tax breaks, etc.), pretty much just like every university does, this precedent will ultimately allow the government the power to cap the pay of anybody in the corporate world, not just those whose businesses are in trouble. And here's the link Bowly sent me last night, from the Financial Week : Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance, House Financial Services Committee Chairman Barney Frank said. “There’s deeply rooted anger on the part of the average American,” the Massachusetts Democrat said at a Washington news conference today. He said the compensation restrictions would apply...

... and like Jethro ciphering out by the cement pond ("Uncle Jed, Uncle Jed, is naught plus naught another naught") ... I'm wondering in the light of this story : WASHINGTON — Ongoing combat operations overseas could cost the United States more than $860 billion over the next 10 years, further ballooning the defense budget, experts told Congress on Wednesday. That total includes plans to dramatically draw down the number of troops in Iraq in the next few years, according to officials from the Congressional Budget Office. Even with reducing the number of deployed combat troops to 75,000 worldwide, the CBO estimates that the Defense Department faces recurring personnel costs of at least $69 billion a year, coupled with other equipment repair costs. Lawmakers on the House Budget Committee said those estimates will only increase the pressure on budget planners to make difficult choices in how to properly fund the department. "Let there be no mistake: We’ll spend whatever...

Over at Delawareliberal , Deldem provides a (completely unconscious, I suspect) example of this. Here's the paragraph with the sentence in bold that caught my eye: The classic refrain from Wall Street and the Republicans, in opposition to President Obama’s $500,000 cap on the salaries of those bank executives who have so failed in their jobs that they required billions of taxpayer money, is that 1) the market should determine the salaries; and 2) the best get paid the best. Those two excuses are, of course, wrong. Banks were failing all last year, but the market did nothing to prevent those failed CEOs and executives from receiving hundreds of millions, if not billions, in bonuses that they did not earn. Indeed, some of the bonuses paid out had the feel of a literal robbery. And if these miserable failures in life did earn that money, if they were the best, then why are banks failing everywhere? Why did they need a federal bailout? OK, I was poised to say (in my own, long-winded ...

[h/t Liz Allen] Go here for a raw list of every bank that has thus far received TARP funds. It's not alphabetized, and it doesn't give you any idea how much each bank received. UPDATE--later I found the list below with amounts. It makes fascinating reading. You'd think there would be somebody in the State aware of this, or maybe even--I don't know--a newspaper that would publish the fact that Wilmington Trust, WSFS, and Bancorp were taking the money. The 31 January WNJ story documented the horrible condition of Wilmington Trust's accounts, but said nothing about the application for TARP funds, even though the bank applied for them on 12 December. WSFS received $53 million, prior to 23 January. Did I miss the story? From other sources I discover that The Bancorp received $45 million and Wilmington Trust got $330 million. So that's $428 million to Delaware banks out of the $700 billion. So far....

Here is the key paragraph in President Obama's WaPo Op-Ed today: What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift , bold and wise enough for us to climb out of this crisis. [emphasis added] Here's the problem: Swift does not equate with rushing lemming-like over a cliff. Back in October the Congress passed the first TARP bailout that then-candidate Obama supported. Problem: they passed a bill so flawed that it handed money over to banks and other financial entities with virtually no requirement to ever lend the money, and contained such dramatic opacity rules that the Federal Reserve either will not or cannot tell American taxpayers (a) who got their money or (b) what was done with it. Here's the problem: Strong , even as the President conceives it, means strong relief and strong stimulus . Bluntly speaking, I suspect that getting out of this bill with 10-15% pork is the unavoidable o...

... is the apparently forthcoming Obama administration edict that corporate heads who take government bail-out money will have their annual salaries capped at $500,000. First, a note for truth in advertising purposes: I have always said that when you take the government's dime, you allow the government to call the shots. These companies have no inherent right to my tax dollars, or even to stay in business. That having been said, here's why this is terribly dangerous, this appeal to what could only be characterized as progressive populism: 1) You pretty much get what you pay for. Senior government officials don't make these salaries, but they have multiple incentives to forego them (temporarily) while they "serve": (a) access to power; (b) indirect compensation and benfits such as you and I can only dream about; and (c) the tremendous post-government salary, lobbying, and consultancy multiplier. Within the ranks of senior corporate executives there is treme...