The Season of Hope

This more than any time of the year is the Season of Hope. Boosted by the joy (for most of us) of the holiday season, we now have the New Year as a source of hope.

Not only in the US but in many places around the world, 2008 more than any year in recent memory was a year of anticipation and wondering over who was going to be our next president. And as the economy got worse and worse, there was sadness especially for those whose jobs were affected. But out of this sadness grew some hope that there was somebody who could lead us out of the wilderness.

It is easy to think about how easy Barack Obama’s victory was on Election Night but until we went through our financial crisis in September, the election was pretty much a toss-up. But even for many of those who didn’t vote for him, the fact that a politician was able to inspire so much hope from those who were down and out and especially so much hope and passion from younger people was truly remarkable.

There is always that hope that the New Year will bring us a better life. This is the time of year when weight loss, exercise and stop smoking ads saturate the airwaves for those who are including these in their New Year’s resolutions.

Unfortunately for too many of us, the number one resolution for this coming year is to find a job. For those of us who have been looking for some time, we can tell you that it has not been easy. And now that the economy is taking a dive with more and more jobs being lost, it has never been harder to keep hope alive.

But when talking about hope, it is difficult not to talk about faith. Having hope is by definition, having faith that things will get better. For many of us, faith means believing that a higher being will help us through our low spots. But two other kinds of faith are at least as important. Having faith in oneself to prevail when times get tough is oh so difficult in the face of continued disappointment. But without it, it is oh so easy to sink into hopelessness and depression.

Hope begins in the dark; the stubborn hope that if you just show up and try to do the right thing, the dawn will come. You wait and watch and work: you don't give up. — Anne Lamott

But having faith in others can also provide an important source of hope. Too many of us feel that we have to go it alone. But there are always those who are willing to lend a sympathetic ear along with perhaps a hand although sometimes they seem so hard to find or are busy with their own lives. When times are tough, it is never more important to maintain a network of friends and acquaintances. After all, they too are experiencing the same human condition and often can benefit from your support. Few things can help with our self-esteem though tough times than the satisfaction of being able to help others in need.

My wish for all especially in these difficult times is that this coming year will bring an abundance of hope, prosperity and happiness!

Ending Insurance Discrimination

“There are two things you don’t want to see being made - sausage and legislation.” - Otto von Bismarck

Perhaps we should add the determination of auto insurance rates to this list when one considers all of the discriminatory ways this is done.

A Pittsburgh Post-Gazette article Bill would eliminate education as factor in insurance rates is about the outrage that a Pennsylvania state legislator has expressed over car insurance rates in his state being determined by the education level of the driver being insured.

Under one carrier's rates, a 37-year-old Pennsylvanian with a clean driving record and a Ph.D. would pay $546 a year to insure a 10-year-old sedan. If he were a high-school dropout instead of a doctor of philosophy, the rate would be $870.

As the legislator pointed out, “Why should (those who didn’t attend college) be discriminated against and penalized on their insurance rate because their family couldn't afford college?"

But there are many other ways that discrimination takes place as this article Are Car Insurance Rates Determined Unfairly? points out.

There are many arguments that can be made for the case that car insurance rates are discriminatory. For one, they discriminate based on age - the oldest and the youngest pay more, even if they are good drivers. For another thing, they discriminate on the basis of gender, with women paying less for insurance than men. They even discriminate against unmarried people, and since certain groups are not allowed to marry, this amounts to discrimination against them as well.

Insurance companies say that certain groups have more claims and that they need to adjust their premiums to reflect this additional risk. This argument makes sense for certain kinds of risk. For example, if a car model is more expensive to replace or repair and/or has a history of higher than average theft, it is only fair that the insurance company charges higher premiums for the additional risk it is assuming.

In addition, charging more for those who have already had more at-fault accidents is certainly fair again because of the additional risk to insure these people. But charging some people more because they are part of a group that they expect to have more accidents gets onto shaky ethical ground. In essence, it allows insurance companies to double dip — by both allowing them to raise rates after an at-fault accident along with also allowing them to charge more for some others even before they have even had their first accident.

Or put another way, shouldn’t a person pay a rate based on their own driving record? Shouldn’t all good drivers get the same best rate as long as they continue to be good drivers?

In addition to the above ways that insurance companies discriminate in setting rates, many are unaware of how credit scores affect insurance rates.

Your credit score can have a profound effect on the amount you have to pay not only for auto insurance, but for homeowners insurance also -- and perhaps on health and life insurance in the not-too-distant future.

The Insurance Information Institute, a trade association for insurers, says drivers at the bottom of the credit heap file 40 percent more claims than drivers at the top of the pile.

Not everyone agrees.

The Boston Globe reports Massachusetts' Attorney General Thomas F. Reilly and Boston's Mayor Thomas M. Menino have questioned whether a customer's credit history is really a good indicator of his propensity to file claims. They also charged that the use of credit information discriminates against minorities and low-income people and unfairly penalizes those who have gone through some life crisis like a job layoff or divorce.

Insurance regulators should ideally balance the interests of the insurance companies and the consumers they serve. This is especially important with a product like auto insurance which all drivers must purchase by law. But consumers are at a terrible disadvantage when going up against insurance companies that are skilled at working the system to their advantage. Any pretense for increasing premiums (or denying benefits) means more profits for them.

The situation with health insurance is a more extreme example of this.

The present health insurance system in the US allows companies to discriminate against policyholders they do not want to insure due to ‘preexisting conditions’ by either not offering policies or making them prohibitively expensive which accomplishes the same thing. This is a logical way to do things for a company trying to maximize profits but leaves those with health problems to fend for themselves and risk further health problems along with bankruptcy. Advocates for single payer health insurance in the US want to take the profit motive out of health insurance and replace the health insurance companies with a government run health insurance system like Medicare presently used for all of its over-65 population. But instead, President-elect Obama has proposed a system where the health insurance companies will still offer policies in return for giving up their right to reject coverage for those same ‘preexisting conditions’. Will the health insurance industry agree to this? Stay tuned.

The problem of insurance discrimination is really part of a larger problem caused by the anti-regulation mentality that Wall Street took advantage of (including the recent bailout financing the lavish executive lifestyles of insurance giant AIG).

In addition to discrimination, the insurance industry has exhibited some really sleazy behavior when they felt they could get away with it — and for the most part they have! For example, the Michael Moore film Sicko documented extensive wrongdoing by health insurance companies that in some instances resulted in needless deaths of patients while at the same time amassing record profits.

And then there were the many Hurricane Katrina victims who suffered through the loss of their homes and businesses only to see their insurance companies renege on their coverage.

Insurance companies may have paid out $11 billion to Louisianians in the two years since Hurricane Katrina, but they have also become a new villain in the tales people tell about the slow recovery here. Every neighborhood is full of horror stories about insurance companies that reneged on their promises, offered only pennies on the dollar in settlements, dribbled out payments, low-balled the costs of repairs, dropped long-time customers and sharply increased the price of coverage.

So while we have learned our lesson on making sure we will have enough regulation in the financial markets, we need to also make sure that we make the same needed regulatory reforms in the insurance industry. Indeed we have already made some progress when in September, Congress passed legislation to end insurance discrimination against mental health and substance abuse patients who usually had less benefits than those with physical health claims even from the same provider. This is a good start but we need to do more if we are going to be really serious about looking out for the welfare of those on Main Street instead of just Wall Street.

Santa Claus and Faith

During this holiday season I once again had the chance to see the 1947 classic Miracle on 34th Street which tells a story about when a nice old man who claims to be Santa Claus is institutionalized as insane, a young lawyer decides to defend him by arguing in court that he is the real thing.

While a movie about Santa Claus ostensibly deals with the secular part of the Christmas holiday, I couldn’t help but find a tremendous amount of religious significance in the movie, especially the way it centered on the idea of faith. Doris, in urging her daughter Susan not to believe in things like Santa Claus tells her that “Faith is believing when common sense tells you not to.”

Indeed this review on allmovie.com by Bruce Eder offers the following insight:

…sharp-eyed observers may or may not have noticed that the film essentially retells the New Testament's story of the life of Jesus Christ. …while screenwriter Valentine Davies' original story seems, superficially, to be the height of whimsy, about Santa Claus's appearance in the midst of that realistic setting, it becomes clear on closer examination that Davies borrowed liberally from the New Testament. Edmund Gwenn's Kris Kringle is almost more a substitute for Jesus than a screen-bound Santa. He enters a big city with his message of generosity and foresaking commercialism; he meets some doubters and some interested onlookers, and soon they're listening to him and starting to believe in him. Then he's betrayed and put on trial, not for his life but for his identity: he must prove he is who he says he is, or be imprisoned and labeled a madman and a pretender.

Indeed Kris performs a minor ‘miracle’ that Susan witnesses in Kris being able to speak in fluent Dutch to a child brought to Macy’s who was unable to speak English. She then tries to convince her mother Doris about Santa being real:

Susan: But when he spoke Dutch to that girl...

Doris: Susan, I speak French, but that doesn't make me Joan of Arc.

And then there is this exchange:

Susan: If you're really Santa Claus, you can get it for me. And if you can't, you're only a nice man with a white beard like mother says.

Kris: Now wait a minute, Susie. Just because every child can't get his wish that doesn't mean there isn't a Santa Claus.

This is similar to the argument that just because all prayers are not answered doesn’t mean there isn’t a God.

It can be argued that faith is something that many of us need to be able to cope with what life deals us as Judith Warner writes in her NYT article Do You Believe?

You have, in this climate, to carve out whatever little islands of belief that you can. My 11-year-old daughter, Julia, resolutely refuses not to believe in Santa Claus. No number of mall Santas, varying in face and demeanor, no amount of presents delivered straight to the door by UPS, can shake her from her faith. This is, I suppose, her way of preserving a sense of mystery and miracle in her otherwise dessicatedly secular world, where chocolate Santas at school have gone the way of the Pledge of Allegiance. And I admire her greatly for it.

But as much as I enjoyed believing in Santa Claus as a child along with my children when they were young, I still have mixed feelings about teaching children to have faith in something like Santa Claus. Once they are old enough to not believe any more, there is always the chance that they will then cynically question the value of all faith in others perhaps including God for those who were taught the value of religious faith. But for those like former Christian evangelist and now atheist blogger Daniel Florien in his posting Santa vs God, that would not be all bad.

But NYT reader Elizabeth A. shares these thoughts:

As an atheist, I've always loved Christmas. But I hate arguments that I have to be religious or "have faith" to really understand what it's about.

For me, Christmas is about family, and goodwill, and a time of the year when we get together to celebrate our love for each other and all of mankind. You don't need a mythology, religion, or fictional character to make that wonder-filled.

But lest we get too jaded and cynical, I would like to close with these words from NYT reader David Evans:

Mystery and magic cease to exist for people who are too afraid to acknowledge their own ignorance. People have a need to know, to banish fears and to pretend that they have control over their world, and what they don't truly know, they pretend to know. Why are we here? What force animates us? If you think you know, or have a ready answer that satisfies you, then you will never know mystery, and never feel the magic.

Deflation — Our Latest Worry

As we enjoy the holiday season with friends and loved ones, it’s hard to remember a time when we have had so much concern about how many of us are going to fare during an economy that grows ever more dismal by the week. Many have lost their jobs; others are looking over their shoulders wondering if they are going to be next. While some businesses have failed, others are on life support. It’s sure enough to put a damper on the holiday cheer.

And now we have our latest worry, the growing threat of deflation.

The biggest problem with deflation is that when businesses need to continually cut prices to spur sales, they eventually respond by cutting production. That results in growing job losses, and could, in the worst case scenario, even cause a depression.

We have heard from many that these are the worst times since the Great Depression. Now something comes along that may actually cause another depression.

How did we come to this? The simplified version goes like this.

The engine that drives our modern economy is credit. Consumers need credit to buy things like cars and houses and businesses need credit to have a steady reliable source of operating capital for things like buying raw materials and making the payroll. Cheaper and more available credit usually means people can spend more and businesses in turn can make and sell more goods which heats up the economy.

But when the economy gets too overheated, prices in general go up (inflation). So central banks like the US Federal Reserve (aka 'the Fed') will then put the brakes on the economy by raising interest rates making credit more expensive and less available. When the economy became weak and more became unemployed like in this last year, the Fed cut interest rates to stimulate credit. In normal times, this works reasonably well.

But the huge number of bad mortgage loans came back to hurt a number of financial services companies. Some failed while others were rescued by the government to try and keep the credit markets from collapsing. The $700 billion bailout from the US government was to try and make sure that credit would be available to businesses.

But smarting from the bad loans and weak economy, banks were still reluctant to extend credit. So the Fed continued to cut interest rates to banks to try and make more credit available. But now the Fed’s rate is as low as it can go (about zero) and credit is still hard to get. Companies like those in the auto industry can’t sell cars because credit is tight and they are also running out of operating capital for the same reason. So they must cut back production and lay off workers to try and stay afloat.

But people who are out of work (or are in fear of losing their jobs) drastically cut spending which forces companies to keep cutting prices (deflation) to attract customers until they have to further cut back on production and lay off even more workers which can lead to a deflationary spiral like the one that is believed to have caused the Great Depression of the 1930s.

Since interest rates cannot be lowered any more than they are, most economists (even conservative ones) feel that the only way to get out of this dire situation is for the government to stimulate the economy by pumping money into job creating projects like rebuilding the infrastructure even if it means massive budget deficits and the risk of possible inflation later on after the recovery.

So with the prospect of another depression coming if we do not do enough, the incoming Obama Administration’s first order of business is to put together a stimulus package that is large enough (and effective enough) to pull us out this mess we are in. As economics professor and former Secretary of Labor Robert Reich wrote in his blog on the subject of deflation:

The sooner we have a major stimulus package, the better. The danger is that it will be too small.

Politics As Usual?

As the story on Illinois Governor Rod Blagojevich drags on with his continued refusal to resign, some are questioning whether what he did was little more than politics as usual but just simply more blatant.

Just the connotation of the word ‘politician’ brings negative thoughts to most of us. Someone who is said to have gotten their position ‘through politics’ is assumed to have benefited more from connections and favors than skill and hard work. And while there are undoubtedly both good and bad politicians, many of us fear the worst when deals are made out of sight of the public. So when we read transcripts of wiretapped Blagojevich conversations of him blatantly shaking down people for money we were shocked. Not necessarily that the shakedown took place but that it was so blatantly discussed over the phone (even when he knew he was under investigation) instead of just being cleverly implied.

The total fear of not being caught along with the total lack of any contrition after being arrested in the face of such damning evidence have led some to speculate that there may well be some mental health issues here. This NYT reader opined:

Obviously Gov. Blagovebich (sic) is mentally ill…probably with bi-polar disorder. As a mental health professional who worked for 35 years with many of these difficult and unfortunate, people, I can say that he exhibits classic symptoms! He is being joked about as a nasty sociopath, but his delusional, paranoid, grandiose ramblings are way beyond that!

And Dick Cavett who is not a mental health professional but has written a number of excellent articles based on his own battles with depression offers these thoughts:

Is humor out of place on this subject? Probably. In Blagojevich, we are dealing with a sick man. Or, in medical terminology, extreme pathology.

I felt the need to get some expert opinion on just what the ethically challenged governor is a case of. I sought the counsel of the eminent Dr. Willard Gaylin, longtime practitioner and author on such matters — once entrusted with the care and feeding of my own tender psyche. He filled me in.

He described what would now be called a “sociopath,” a modern-day term for the older “psychopath.” It’s a complex, hard-to-treat ailment, and “anti-social” is the key phrase here.

Among the prominent traits of one so afflicted is the absence of any sense of guilt or shame. Empathy is unknown. The truth may be told, but only when it serves the often bizarre purposes of the teller. Never for its own sake.

The governor’s astonishing dare — Go ahead and tap my phones — brings to mind the much more normal Gary Hart’s “Follow me.” (They did.) It is explained by the sociopath’s absolute conviction that he is somehow immune from being caught.

Obviously, trying to perform a long distance diagnosis of someone we do not even know should not be taken as an authoritative word on a person’s condition. But while this man certainly needs to be brought to trial for these accusations, there are enough red flags that we can hope that the authorities will include a psychological examination as part of his trial process.

But getting back to politics as usual, our laws have a number of examples where the line between ethical and unethical behavior can be more than a bit blurry.

For example, while asking for money in return for a political favor is clearly illegal, offering a favor in return for another a.k.a. quid pro quo is usually OK as it is a generally accepted part of the political process.

While giving money to a politician for his own personal use is bribery and is illegal, giving money to that same politician’s campaign is OK as long as it conforms to election laws. Corporations put countless millions into campaign contributions and lobbying politicians to get a sympathetic ear. Some of those politicians like Billy Tauzin retired from Congress to get a lucrative job lobbying for the industry he once oversaw while in Congress.

Cushy ambassador’s jobs to countries that many of us would pay to vacation in are given out to the largest contributors to presidential campaigns. Is this bribery? The explanation given is that the politician is just choosing people he knows who can do the job well. But how much of a chance would the same person have at that job without the political contribution?

Even in the private sector, a salesman who pays his customer to buy his products is again committing bribery. But entertaining customers with meals and tickets to sporting events is considered a normal part of business that taxpayers help to subsidize since these expenses are at least partly tax deductible. Now while the customer can still buy from whomever he wants to, how many want to give up all of those goodies for the sake of principle?

I’m sure there are other examples but I think this makes the point. While we should certainly be outraged at the behavior of Governor Blagojevich it would be hypocritical for us to turn a blind eye toward the other behaviors that may well be legal under present laws but whose ethics are questionable. Congress has indeed made some progress on ethics reform in lobbying but there is still a long way to go.

And since it is widely believed that especially larger political contributors normally expect something in return from their candidates, perhaps it is finally time to seriously push for public financing of political campaigns. But Barack Obama’s bypassing of public financing for his presidential campaign may have killed that idea. When reneging on his promise to accept public financing, he wrote, "I am firmly committed to reforming the system as president, so that it's viable in today's campaign climate." It will be interesting to see if or how he follows through on this especially having to work with a Republican Party that on this issue would be understandably cynical.

Better Ways to Replace a Senator

A reader of the New York Times sent the following tongue-in-cheek comment about checking out Ebay for some gifts for Christmas and finding this:

Senator seats for sale. Only two remaining.

1. Illinois. Auction ends December 31, 2008. "Bidder must be over 35 years old and can pay in cash. Must be an Illinois resident although this might be worked out. No credit cards accepted."

2. New York. "Must be a New York resident. Very helpful if your last name is Kennedy. No prior experience required."

One of the unique things about this recent presidential election was that no matter the outcome, an incumbent US Senator was going to be elected. Surprisingly, this hasn’t happened since John F. Kennedy back in 1960. Governors have been dominating the presidential elections since then.

In addition to Barack Obama, Joe Biden, and (upon Senate confirmation) Hillary Clinton leaving the Senate for their new jobs, there is also talk of a future replacement for Ted Kennedy who is battling a malignant brain tumor.

But unlike executive positions like the US President who has a long line of successors and even state governor positions that usually have a lieutenant governor in waiting as a replacement, legislative positions are usually filled by a governor who appoints the successor.

Especially when one person is in charge of appointing someone who can be as powerful as a US Senator, is it any wonder that it is an invitation to corruption as in the case of Illinois Governor Rod Blagojevich who is accused of seeking bribes to influence who he would pick to fill President-elect Obama’s Senate seat? Maybe we need a better way to replace our legislators between elections — especially for a powerful post like the US Senate.

While the other Senate appointments may not be blatant crimes like in Illinois, they do raise some serious questions about our practice of appointing successors.

In New York, Caroline Kennedy is widely rumored to be a candidate for replacing Hillary Clinton. But there is debate on whether she is the most qualified or if her main appeal is the Kennedy name.

In Delaware, Joe Biden's son Beau has been mentioned to replace him in the Senate after his son’s tour in Iraq is completed. To help accomplish this, a cozy deal was set up where the governor will appoint a longtime senior adviser of Biden’s who has promised to serve only two years until 2010 when Beau can then run. Should someone have that much power in appointing ones successor — especially when it is a relative?

There is a similar question in Massachusetts where Ted Kennedy is said to want his wife Victoria to eventually be appointed for his Senate seat if he can no longer serve.

So are there better ways? The idea behind appointments is that special elections can be both costly and time consuming. But if an election involving all of the state’s voters is not practical, why not have the elected state legislators handle the voting on their behalf? One proposal would be for the governor to select a replacement (preferably from the same party as the departing senator) and have that person go through a confirmation process by the state legislature.

Another proposal presently used by Hawaii, Utah and Wyoming require the governor to fill a vacancy in the US Senate by picking from a list of three candidates submitted by officials representing the party of the departing senator.

Eric Zorn of the Chicago Tribune offers an excellent background article There are better ways to replace a senator for those wishing to explore this subject in more depth.

There is no perfect solution. Even these proposed solutions rely on some political wheeling and dealing. But they are a whole lot better than the system used by most states which gives the governor absolute power over US Senate appointments. And Governor Blagojevich if nothing else should remind us that absolute power corrupts absolutely!

Tragedy on Black Friday

Now that a little time has passed, we can reflect on the recent Black Friday tragedy where a Wal-Mart Employee Was Trampled to Death in New York.

By 4:55, with no police officers in sight, the crowd of more than 2,000 had become a rabble, and could be held back no longer. Fists banged and shoulders pressed on the sliding-glass double doors, which bowed in with the weight of the assault. Six to 10 workers inside tried to push back, but it was hopeless.

Suddenly, witnesses and the police said, the doors shattered, and the shrieking mob surged through in a blind rush for holiday bargains. One worker, Jdimytai Damour, 34, was thrown back onto the black linoleum tiles and trampled in the stampede that streamed over and around him. Others who had stood alongside Mr. Damour trying to hold the doors were also hurled back and run over, witnesses said.

To say this was all savage behavior would not be an understatement.

Some shoppers who had seen the stampede said they were shocked. One of them, Kimberly Cribbs of Queens, said the crowd had acted like “savages.” Shoppers behaved badly even as the store was being cleared, she recalled.

“When they were saying they had to leave, that an employee got killed, people were yelling, ‘I’ve been (in) line since yesterday morning,’ ” Ms. Cribbs told The Associated Press. “They kept shopping.”

So how did we get from what was supposed to be a promotional event to start the Christmas shopping season to this tragic result? Although Black Friday sounds like something sinister and deadly, the most common usage by merchants and the media simply refers to the beginning of the period in which retailers go from being in the red to being in the black. (i.e., turning a profit).

An interesting NYT article Media and Retailers Both Built Black Friday offers this observation:

In partnership with retail advertising clients, the news media have worked steadily and systematically to turn Black Friday into a broad cultural event. A decade ago, it was barely in the top 10 shopping days of the year. But once retailers hit on the formula of offering one or two very-low-priced items as loss leaders, media groups began to cover the post-Thanksgiving outing as a kind of consumer sporting event.

So what’s the problem here? All the stores are doing is offering some sales to stimulate business and in these awful economic times, they surely need all the help they can get. The problem lies in the “one or two very-low-priced items as loss leaders” being used to lure customers. Some of these items (like flat-screen TVs) are not only very attractive but are being sold at hundreds of dollars below market level prices to give extra incentive to those who are willing and able to fight the other shoppers to get to these values first.

And it stands to reason that people choosing to stand in line for hours overnight to fight for the best deal aren’t there to go home empty-handed.

NYT reader Teresa sums it up in her comment to the above article:

Wal-Mart and many other retailers have set up a system that requires antisocial behavior to get the best deal, by severely limiting the number of hot ticket items per store, for example, so that only the most aggressive shoppers are rewarded with the best value. It should therefore not surprise anyone that aggressive, antisocial shoppers are breaking down the doors and trampling people to get those deals.

So while the over-aggressive behavior of the shoppers cannot in any way be condoned, the merchants who use practices that reward this behavior deserve the most blame. There’s certainly nothing wrong with offering special sales to lure customers. But doing this with a tiny number of items sold at a loss is little more than a legalized Bait and Switch scheme. Ordinarily not offering enough advertised items at a low price constitutes fraud. But the Federal Trade Commission provides a loophole saying that this practice is OK as long as “the advertisement clearly and adequately discloses that supply is limited”.

So the clear solution to all of this is to close this loophole and require merchants to either offer all of their customers items at the sale price that day (instead of encouraging a fight over the few items in stock) or not offer the items at all.

A similar arrangement in which concertgoers fight for the best seats is known as festival seating.

On December 3, 1979, the Riverfront Coliseum in Cincinnati, Ohio, was the site of one of the worst rock concert tragedies in United States history. Eleven fans were killed and several dozen others injured in the rush for seating at the opening of a sold-out concert by The Who. The concert was using festival seating. When the crowds waiting outside heard the band performing a soundcheck, they thought the concert was beginning and tried to rush into the still-closed doors, trampling those at the front of the crowd.

For more, check out this video link. To try and prevent another tragedy like this, festival seating was outlawed in Cincinnati.

But unfortunately, other cities did not follow suit which resulted in Cincinnati losing concerts to other cities that did allow festival seating. So in 2004, festival seating returned to Cincinnati.

What’s especially sad about both of these tragedies is that they were so avoidable. A little common sense beforehand could have prevented us from having to ask all of the tough questions about how it all happened after lives were lost. Hopefully we will at least have learned our lesson well enough to prevent future tragedies on Black Friday.

Can We Give the US Automakers a Break?

The CEOs of the US Big Three automakers returned to Congress with some plans on how they are going to restructure their companies to become competitive if they receive bailout loans. But when discussing the Big Three, it is often said that the reason Detroit got into trouble was because they built cars that were gas guzzlers and unreliable. And while there are some serious problems to address such as a worldwide recession where sales of all of the major auto manufacturers are way down, I feel the all too common badmouthing of American automakers is a bit over simplistic if not unfair.

Let’s take each on separately.

Detroit builds gas guzzlers. Compared to automakers in other countries, the cars sold in America are less fuel efficient. But compared to other countries in the world that impose heavier gasoline taxes, the US has always had relatively cheap gasoline as detailed in this May 28, 2008 Time article Think Gas is High? Try Europe.

As American drivers groan over prices nearing $4 a gallon (at the time of this article), the French are paying $8.67 for a gallon of super, compared to $7.10 in January, 2007. A gallon of diesel in French gas stations averages $8.54, up from $5.35 just a year ago. And in the U.K. diesel costs $11.50 per gallon, compared to around $3.90 in the U.S. Across the European Union, the average cost of a gallon of gas runs to about 8.70 — more than twice what Americans are shelling out to fill up.

One big reason for the difference is that European governments put a much higher tax burden on fuel than the U.S. does. State and federal taxes currently make up just 11% of the pump price in the U.S., according to the Energy Information Administration; in France and the U.K., taxes account for an average of around 70%.

And in Japan, the price as recently as July was well over $6 a gallon. So this explains why for Europeans and Japanese, fuel efficiency has long been at or near the top of the wish list for their car buyers. This is why Europeans have long been known for the tiny fuel efficient cars that most Americans were not interested in buying (until perhaps when the price of gas crept up to $4 a gallon).

America has long had a love affair with the automobile. The ones we loved were stylish, comfortable, and had plenty of power. If they got decent gas mileage, that was a bonus. Yes there were those back then that drove cars like the VW Beetle but they were mostly looked upon as being bohemians. It was only when gas prices spiked in the 70s that American car makers had to start paying attention to demands for more fuel efficient autos — demands that European and Japanese automakers were immediately ready to satisfy because of their experience in serving their home markets.

So while it is easy to blame the Big Three for giving us all of the pickup trucks and SUVs that suddenly went out of fashion when $4 a gallon gas came along, it can be argued that they were only providing what the American marketplace was demanding and doing it at a nice profit. And Japanese automakers like Toyota and Honda also got into the SUV and truck business to try and get their share of those profits to be had.

So the problem is that many of the cars that make total sense to manufacture (and buy) when gas is at say, $2 a gallon look like foolish choices for automakers (and buyers) when gas spikes up to $4 a gallon and higher.

The practical difficulty for car manufacturers is that the conversion to smaller more fuel efficient models requires time and money for redesigning and converting its manufacturing plants. So the choice for the US automakers was to go for maximum profits in the short term with their present offerings or invest much of those profits into future fuel efficient cars while gasoline was still cheap.

An excellent NYT article At G.M., Innovation Sacrificed to Profits discusses this choice that G.M. had to deal with:

G.M.’s biggest failing, reflected in a clear pattern over recent decades, has been its inability to strike a balance between those inside the company who pushed for innovation ahead of the curve, and the finance executives who worried more about returns on investment.

The two views were rarely in sync — in effect, fighting over the steering wheel that controlled G.M.’s direction — and the internal battles distracted G.M. from spotting shifts in the marketplace.

As an alternative to dictating to a company that they must make fuel efficient vehicles, it has been suggested that we do what many other countries like in Europe do, which is to impose a tax on fuel to make conservation and fuel efficient vehicles the only sensible choice for both manufacturers and consumers. In addition, a tax on fossil fuels would help finance and hasten the development of alternative energy sources that we need in order to wean ourselves from imported oil along with addressing the issue of climate change. But a tax on fuel can be a terribly regressive one that hurts less well off people more than others. Perhaps a tax credit based on household income can address this inequity.

Detroit builds unreliable cars. Once the Japanese cars started to penetrate the US market in significant numbers, we started to notice the tremendous difference in reliability between US and Japanese cars. I spent far too much time in the repair shop with GM products I bought in the 80s. Many people who would ordinarily never consider buying a Japanese car were fed up with the reliability problems of US cars and decided on Toyotas and Hondas. For several years, Consumer Reports had difficulty recommending any American cars.

But while Consumer Reports still judges Japanese cars overall to be more reliable, US cars have made significant progress in closing the gap. CR says that Ford’s cars are now as reliable as the Japanese brands with GM's being a mixed bag and Chrysler unfortunately trailing the pack. My present car, a ’97 Pontiac Bonneville with 235,000 miles on it is still going strong. But people who were happy with the Japanese cars they owned are understandably going to be loyal to those brands that have served them well. And frankly, this loyalty is going to present a big challenge to US automakers to get these customers back.

Fortunately, Congress is working on an emergency $15 billion aid package to tide the US auto industry over until the new Congress and Obama Administration comes on board to consider more permanent solutions. While the automakers are far from blameless for the mess they are in, the intense scrutiny and negative feelings aimed at them especially compared to the financial services industry that has gotten mostly a free pass in addition to all that money is more than a bit unfair.

Struggling auto companies from other countries are sure to get help from their governments if needed. Meanwhile, we in the US need to remember that with the latest unemployment figures showing a massive loss of 533,000 jobs for the month of November and about 2 million for the year, the loss of a great deal more jobs associated with the auto industry would be a catastrophe that we must prevent from happening!

The Aftermath of Mumbai

Before the terrorist attacks in India last week, probably few Americans had even heard of Mumbai. But it is the city that was formerly known as Bombay just like Beijing was formerly known as Peking.

Mumbai is India’s largest city with a population of over 13 million and is its financial capital along with being its largest maritime port. So in many ways, Mumbai is to India what New York City is to the US. So when Mumbai was victimized by organized terrorist attacks just like New York City, it is not hard to understand why many Indians consider this to be their own 9/11.

And what did America do after 9/11? After grieving for the senseless loss of life, the next step was to find out who did this and then not only send troops to Afghanistan to get the people who did attack us but also send troops to attack Iraq because we thought that they might attack us (in keeping with the Bush Doctrine).

It is not taking very long to point the finger at where the terrorists came from as detailed in this NYT article US and India See Link to Militants in Pakistan.

American and Indian authorities said Tuesday that there was now little doubt that militants inside Pakistan had carried out the terrorist attacks in Mumbai. Indian officials said they had identified three or four masterminds of the deadly assault, stepping up pressure on Pakistan to act against the perpetrators of one of the worst terrorist attacks in India’s history.

To make things worse, Pakistan which is mostly Muslim and India which is mostly Hindu have a lot of bad blood between them, including several wars over disputed territories in Kashmir — and both have nuclear weapons!

So now the US is doing its best to keep India from doing what the US did after 9/11 which is send troops to the offending country to wipe out the terrorists. And while keeping what would be a terrible war from starting is a good thing, it is an awkward position for the US to be in because of how hypocritical it all looks for many in India.

The mounting evidence increased the pressure on the United States to find a way to resolve the tensions between Pakistan and India, two nuclear-armed neighbors. The officials said there was still no evidence that Pakistan’s government had a hand in the operation, although investigators were still searching for clues of outside support for the terrorists.

Thus far, India is showing restraint while the pieces of the puzzle are being put together in trying to find who is ultimately responsible for the attacks. But if it is determined that Pakistan’s government was part of the operation, it is hard to imagine that some external military action would not be eventually be undertaken in Pakistan to deal with this.

But even if it is shown that the terrorists are stationed in Pakistan but had no government involvement, an equally crucial question is whether the weak government (assuming they are sincere about doing something) has the power to do much about bringing them to justice.

It is widely believed that Osama bin Laden is hiding somewhere in Pakistan. During the presidential debates, now President-elect Obama said that if he were to get “actionable intelligence” about the whereabouts of bin Laden or other “high-value terrorist targets”, he would take them out with or without the permission of the Pakistani government.

So assuming the terrorists are proven to be based in Pakistan, unless the Pakistani government is willing and able to complete the task of rooting them out and bringing them to justice, somebody else may have to do the job. But who? We all fear India getting into another war with Pakistan with possible nuclear consequences. But if not India, the US may be dragged into this mess. With the promise by President-elect Obama of the US withdrawal from Iraq, more US troops will likely then be sent to Afghanistan to finish the job of dealing with Al Qaeda and the Taliban. Will this mean expanding the war into Pakistan anyway? In reality it already has.

Officials in New Delhi might also feel less compelled to follow calls for a controlled response from the Bush administration, which has steadily escalated a campaign of airstrikes on Pakistani soil using remotely piloted aircraft. The Pentagon has even sent Special Operations forces into Pakistan to attack suspected militant targets, partly in an attempt to stop the militants from crossing the border into Afghanistan, where they are helping fuel an increasingly robust Taliban insurgency.

Fortunately, there are some incentives for both India and Pakistan to avoid going to war. India’s economy has progressed very well in recent years. They know that a war would not only cost many lives but also be a setback to the progress they have made as a nation. As for Pakistan, they surely know that to continue to be an accepted sovereign nation in the world community, they will have to do their part to cooperate in bringing the Mumbai terrorists to justice. And just as important they must show that they will no longer allow their country to serve as an operating base for terrorists.

Writing Is My Labor of Love

On this, my 50th article posted since my entrance into the blogosphere, now is a good time to reflect on it all including the attitude that many professional writers have for those writers like me who are not paid to write. This includes not only bloggers who publish online but also authors who have self-published books in print media.

Thanks to fellow blogger John McIntire, a.k.a. MacYapper, I have another example of how some professional writers like Mike Seate of the Pittsburgh Tribune-Review feel about amateur writers in his article Mourn not for the end of pointless blogging which includes the following:

As a paid, professional journalist, I find it troubling to have chosen a profession that's attracting more imitators than the new Beyonce video. Writing is a tough gig, and the fact that millions of people choose to do it for free is a mystery to us paid writers.

You can read McIntire’s complete response to Seate’s article in his blog posting, which argues that bloggers are more interested in just being themselves rather than imitating Seate. In addition he says that just because a writer is paid does not necessarily make him good.

But I would like to add an important point to the discussion:

Just because a writer is not paid, it does not necessarily make him bad.

All of those who are now professional writers were at one time unpaid writers whose talents were noticed and valued enough by someone to get an opportunity to write professionally.

Most amateur writers frankly need not give up their day job. But in addition to those who write simply for the enjoyment of it are undoubtedly others with talent who are waiting and hoping for their opportunity to write professionally. So to dismiss all unpaid writers as being unworthy of being read smacks of ignorance and prejudice.

In addition to being a blogger, I have also made a writing contribution as a self-published cookbook author. Unfortunately, the same attitude of ignorance and prejudice is more than apparent there too. Virtually all mainstream media outlets have made a decision that all self-published books are unworthy of attention and are best ignored.

This attitude is conveyed loud and clear by Pittsburgh Post-Gazette Book Editor Bob Hoover in an article written back in 2000 Caught in a tangled Web of self-publishing.

Because vanity (self-published) books are not edited, checked for accuracy -- and perhaps even libel -- or polished by rewriting, this and most major newspapers do not review them. More often than I care to remember, I've listened to and been insulted by self-published authors who have dropped a few bucks on their book to discover that the paper won't touch it.

It's not pleasant to confront a prickly author with this policy, and while one or two of these books mistakenly slipped past me in eight years, I've stuck to it -- out of sheer necessity. The policy is a sensible way to limit the field considered for mention.

I am not totally unsympathetic to this viewpoint. After all, in this digital age the number of self-published books has become overwhelming. Trying to find the gems among the ever increasing pile of self-published books is no small amount of work. But in simply choosing to ignore all self-published books, the mainstream media is simply taking the lazy way out while doing a disservice to deserving writers along with their readers. As even Hoover laments:

Despite the steady outpouring of mediocre unoriginal books, it's never been harder to find a publisher who'll pay you to write.

More than ever, traditional publishing houses (ones that pay its authors instead of the other way around) along with literary agents are for the most part unwilling to spend any time or take any chances on previously unpublished authors. They know that the path of least resistance is to go with authors who are already well known by the book reading public rather than take a chance on a promising newcomer. So for even the most talented new authors who wish to write professionally, sometimes their only chance is to self-publish a book to show the world their stuff and hope to someday be ‘discovered’. Others resort to blogs to try and accomplish the same result.

So how do we sort out the promising writers without making it an overwhelming task? To begin with, the plain truth is that the great majority of blogs and self-published books are written for little more than the enjoyment they bring to their writers along with family and friends.

But for those few who may have the talent and ambition to write for a wider audience, companies who offer self-publishing services need to establish some recognition programs like iUniverse (who I used to self-publish my cookbook). This would help to establish some standards for content and editing which separate books that have a realistic chance for commercial success from the rest of the pack.

While we see an unending parade of authors from the mega publishers hawking their books on the talk show circuit and elsewhere, it is often overlooked that local authors with talent can be at least as compelling for their audiences. Talent shows for aspiring entertainers have been around forever and are still going strong as today’s reality shows like for example, American Idol. Why not also give aspiring writers a chance to show their stuff?

Instead of asking media outlets to read through a pile of unsolicited books, they can instead invite interested local authors to submit an electronic sample of a dozen or so pages of their book along with perhaps a marketing plan to show that the authors are really serious about marketing their work. From that, the most promising submissions can then result in an invitation to send the complete work for review and possible featuring in an article or interview. This would all take a bit more work than simply ignoring all unpublished authors, but the payoff would be thrill of seeing the launch of new local stars into the writing field. Blogs are even easier to evaluate since their format already presents a tidy list of writing samples for the interested reader to check out.

As for me, my blog has been a labor of love that has already created a great deal of satisfaction for me in getting to share my thoughts with readers. But I would be lying if I didn’t admit that it would be even more satisfying to have a wider audience and perhaps even get paid to do something I love. All people like me are asking for is a chance to have our work read and judged on its own merits instead of just being brushed aside as unworthy without even being read. To those who have had the opportunity to make a living as a professional writer, we just want the same chance to attain success that somebody once gave you when you were starting out. Isn’t that only fair?

Let's Move Up the Presidential Inauguration Date

There have always been a number of ideas for Constitutional Amendments to be considered. I feel that some like one to make flag burning illegal are decidedly frivolous. On the other hand, others like getting rid of the Electoral College are ideas which should have long ago been adopted.

It seems like everybody just can’t wait for President-elect Obama to finally take over the presidency. Usually, the wait isn’t that big of a deal but we have a full-blown financial crisis to deal with. Among other issues, the American Big Three automakers are crying for a relief package and especially GM is unsure whether they can wait until January 20th before having to file for bankruptcy. Meanwhile, an unpopular lame duck president is pretty much biding his time until then. Why do we have to wait so long?

For those who think this wait is bad, there were even worse crises to deal with that lead to the passage of the Twentieth Amendment in 1933:

This amendment's primary purpose was to reduce the amount of time between the election of the President and Congress and the beginning of their terms. Originally, the terms of the President, the Vice President, and the Congress began on March 4, four months after the elections were held. While this lapse was a practical necessity during the 18th century, at which time a newly elected official might need several months to put his affairs in order and then undertake the arduous journey from his home to the national capital, it had the effect of impeding the functioning of government in the modern age. This was seen most notably in 1861 and 1933, as Abraham Lincoln and Franklin D. Roosevelt each had to wait approximately four months before they could deal with the crisis conditions (The Civil War and Great Depression respectively) the country was in.

Back in 1933, it was decided that 'the modern age' back then didn’t require a whole four month wait to get ready for a new presidency. But back at that time, the airline industry and even TV were in their infancy. Now with the computer and Internet as part of today’s modern age, the need to keep the inaugural date of January 20 in keeping with the world of 1933 makes even less sense.

While some extreme views believe in a new president taking over immediately after the election in November, it is necessary to allow some time for the new president’s transition team to make appointments and assemble a team to govern. A natural date for the new president’s inauguration can be on (or right around) January 3 when the new Congress is sworn in.

So is it worth it to go through the considerable effort to pass a Constitutional Amendment just to move up the presidential inauguration date a mere 17 days? For most of the inaugurations, especially when the president is being sworn in for a second term, it may all seem frivolous. But for 1861, 1933, and now 2009 it is anything but. This is why we should have the foresight to enact an amendment now to move up the presidential inauguration date to January 3rd so we can better deal with a future crisis during the presidential lame duck period.

A Sweet Deal for US Agriculture

Right now, the fate of the American automobile industry is in the hands of Congress. The choice is between bailing the industry out with loans or forcing the companies to file for bankruptcy with the hope that they are not later forced into liquidation.

Then there is another way that some countries have resorted to saving their industries. And that is subsidizing their domestic industries while at the same time imposing tariffs on competing imports. Would anybody ever consider saving the Big Three by the US government subsidizing purchases of their products while imposing tariffs on competitors like Toyota and Honda?

The answer from most everybody would be a resounding ‘no’. After all, that’s protectionism! We’re the US and we believe in free trade! And besides, many of us like our Japanese cars and don’t want the government to tell us which cars to buy. But while few of us would ever want to resort to protectionism to save the US auto industry, why do we accept these same practices when it comes to US agricultural products like corn and sugar?

Corn in addition to feeding animals and humans is now being used for two other specific purposes, corn ethanol and high fructose corn syrup. Both of the latter two generate tremendous profits for the main player in the corn industry, Archer Daniels Midland (ADM). But ADM could not even participate in these areas if it weren’t for government subsidies and tariffs to make it possible.

The idea of replacing at least some of our imported oil with a renewable domestic agricultural product is certainly attractive. But the price of corn ethanol was not competitive with gasoline, so the US government gave this product a helping hand in the form of a $.51 per gallon subsidy. But a number of unintended results happened. With so much of our corn crop going into fuel, the price of corn tripled. And since corn is used to feed farm animals that produce some of our meat, the price of that went up too. In addition, the price of other farm staples like wheat went up aggravating world food shortages because farmers found it more profitable to raise corn instead.

But as it turns out, corn is a terribly inefficient way to make ethanol compared to sugar cane which is widely grown around the world and has helped countries like Brazil to completely wean itself off foreign oil. How does the corn ethanol industry not only survive, but thrive? Simple. The US government slaps a stiff tariff on imported sugar so that the domestic US price of sugar is double the world price. And just to make sure we don’t work around the sugar tariff by importing sugar cane ethanol from Brazil Congress has imposed a tariff of $.54 per gallon on imported sugar-based ethanol in order to protect corn producers from competition.

But wait, there’s more! What does this do for all the US manufacturers who use sugar in their products? Some like candy makers have been moving to locations outside the US to avoid the sugar tariffs. While some manufacturers like Hershey who have moved facilities to Mexico claim labor costs are the reason, much lower costs for a crucial raw material undoubtedly make the move even more attractive.

So with the price of sugar being kept artificially high through tariffs to protect the corn industry, the corn industry can then take advantage of this situation to offer its own solution to the food industry in the way of high fructose corn syrup (HFCS). Because of the resulting cost advantage, this product has now been substituted for sugar in most of the processed products we consume.

HFCS has come under increasing scrutiny as a possible contributing cause of obesity or even type 2 diabetes. However, the evidence is not conclusive and The Corn Refiners Association is mounting a media campaign to refute these claims. But whether the claims are true or not, HFCS would be a moot point if it weren’t for the subsidies and tariffs supporting it to begin with. For more, please check out this link Tariffs and Subsidies - The Literal Cost of High Fructose Corn Syrup.

The Archer Daniels Midland Corporation (ADM) has been the most prominent recipient of corporate welfare in recent U.S. history. ADM and its chairman Dwayne Andreas have lavishly fertilized both political parties with millions of dollars in handouts and in return have reaped billion-dollar windfalls from taxpayers and consumers. Thanks to federal protection of the domestic sugar industry, ethanol subsidies, subsidized grain exports, and various other programs, ADM has cost the American economy billions of dollars since 1980 and has indirectly cost Americans tens of billions of dollars in higher prices and higher taxes over that same period. At least 43 percent of ADM's annual profits are from products heavily subsidized or protected by the American government. Moreover, every $1 of profits earned by ADM's corn sweetener operation costs onsumers $10, and every $1 of profits earned by its ethanol operation costs taxpayers $30.

So while many in Congress are saying “drop dead” to the US auto industry because they are supposedly against corporate welfare, some of the same people apparently choose to look the other way when agricultural companies like ADM feed at the public trough. Other than contributions, how has the corn industry amassed so much political clout? Much of it can be explained by the Iowa caucuses held each presidential election year. With this contest at the crucial beginning of the primary election cycle, some presidential candidates have spent a considerable amount of time and resources to pander to Iowa voters. And with corn being a major industry in Iowa, you can bet that most candidates are not going to raise much of a stink about corn subsidies even though they mostly benefit large corporations instead of the typical small farmer there.

And what about President-elect Obama? He has come out in support of sugar subsidies as detailed in this link Obama Sends Strong Sugar Policy Signal.

While this political stance is somewhat understandable since Obama represented an agricultural state, our protectionist policies for agriculture need another look to determine where to go forward from here. In a letter to farmers supporting the 2008 Farm Bill, he admitted, “With respect to the sugar program specifically…it’s true I have had concerns about the program…”

One of the major ways to try and improve the plight of US industry should be to revisit and if necessary renegotiate many of the trade agreements we have with other nations to make sure that we have the same access to their markets as they have to ours. Many other countries resort to protectionist policies to the detriment of US workers. The choice of Bill Richardson for Secretary of Commerce who is an experienced international negotiator is an encouraging first step in the right direction.

But having said that, it is most difficult to persuade other nations to change their protectionist policies when they have the ready argument that we also have protectionist policies of our own. So if we really want to promote ‘free trade’ to the world, we have to stop talking the talk and start walking the walk!

The Greed of Insider Trading

I was stunned to see the article in my local Pittsburgh Post-Gazette, SEC charges Mark Cuban with insider trading. Although Mark Cuban is probably best known for his high-profile ownership of the NBA Dallas Mavericks, he is also a Pittsburgh native who has had some Pittsburgh Pirates fans dreaming of him to someday buy the team and use his vast wealth to turn that sorry team around.

One part of the article really raised some questions in my mind.

During a phone call that lasted almost nine minutes, according to the complaint, he promised to keep the information about the stock sale private but then "became very upset and angry" and said, "Well, now I'm screwed. I can't sell."

He later called his broker and told him to sell all his holdings in the company, the complaint said. At the time of the sale Mr. Cuban owned a 6.3 percent stake, which made him the company's largest-known shareholder.

"Sell what you can tonight and just get me out the next day," he said, according to the complaint.

Other than his broker ratting on Cuban which would be hard to believe, how can the SEC know so much detail about a particular phone call unless they were tapping his phone? And if they were tapping his phone, what were the reasons for doing it? The answers should make for an interesting trial for the media to follow.

But the biggest question and what makes this all so stunning is: Why would somebody so incredibly wealthy take a chance of going to prison over trying to keep from losing (for him) such a paltry sum of money?

OK, we’re talking about $750,000 dollars which is more than many have made in their entire lifetimes. But Cuban’s net worth is said to be over 2 billion dollars. Keeping in mind that a billion dollars is 1,000 million dollars, it is clear that the amount of money in question is a small fraction of 1% of his net worth.

Would anybody be foolish enough to risk a prison sentence for that? For now, we must presume Cuban to be innocent until proven guilty. But what about Martha Stewart with an estimated worth of over $600 million who was convicted of a similar crime centering on insider trading?

According to U.S. Securities and Exchange Commission in a federal indictment, Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone stock in late 2001. The day following her sale, the stock value fell 18%.

It’s hard not to wonder what Stewart and Cuban (if he is found guilty) were thinking of. Moral values aside, when large amounts of a particular stock are bought or sold by individuals right before a major company announcement that affects the price of the stock, this immediately raises a giant red flag to the SEC for them to investigate. Could they be like other people in these positions with such giant egos that they didn’t think they could ever be caught?

The laws around insider trading are actually quite complicated. For those wishing to learn more, check out this article in Wikipedia.

Most surprisingly for me, I learned from the article that there are those who have made arguments for legalizing inside trading. It has been argued by some that inside trading is beneficial in that it makes the markets more efficient. Others argue that it is a victimless crime since both the seller and buyer are entering into a transaction voluntarily. In fact, it is the US that enforces insider trading laws far more stringently than many other countries.

While large investors with their resources inevitably have some advantages over smaller investors, one of the hallmarks of the US stock markets is their regulations that do their best to keep all investors on as level a playing field as possible. The stock market is more than just a place for high-flyers to make their millions. It is also a place for the average person to invest his or her savings for things like college tuition or a secure retirement that are a part of the American Dream. The advantage that those on the inside gain from trading stocks is offset by the losses of those on the outside that don’t have the system rigged in their favor.

While there’s always the slim possibility that the janitor may stumble onto inside company information while cleaning out the trash cans, in the real world the people with the access to the beneficial inside information are the rich and powerful in the corporate boardroom along with those who are rich and powerful enough to have connections to them. For these people to try and take advantage of inside trading to make even more money is little more than outright greed. Let’s face it, the rich and powerful have enough legal advantages over the rest of us. We certainly don’t need to add any illegal ones!

Should We Bail Out the Big Three?

It wasn’t too long ago that we were agonizing over whether we wanted to see a bailout package approved to rescue financial companies like AIG. Because it was said that doing nothing would result in the credit markets drying up and causing businesses to perhaps shut down, Congress held their noses and voted for it. The results so far have some banks using the bailout cash to buy other banks instead of using it for loans which is not what anybody had in mind for this money. So from this we have learned a lesson that if our government is going to offer money for bailouts, we have to be especially careful to attach enough strings to the offer to make sure the money has the desired effect.

So now the Big Three automakers, GM, Ford, and Chrysler are financially reeling and asking for government loans to keep them going. While nobody is going to help a smaller company stay alive in such a situation, the automobile industry and all of the other industries that support it represent a huge number of US jobs. Is this another example of companies that are too big for us to allow them to fail?

I think that this is really a tough call because if presents a conflict between what we should do as a matter of principle and as a matter of practicality.

As a matter of principle, this is a no-brainer. Free enterprise capitalism owes its success to the principle that the strongest companies, the ones that do the best job of satisfying its customers, will survive and thrive while the weakest ones die off. Governments that try to meddle in this process to keep the weak companies alive are doing a disservice to its citizens.

Making this situation more uncomfortable is while it may be bad for government to get involved with rescuing companies in the first place, our recent experience with the financial services bailout tells us that if we also need to attach enough strings to the money, sometimes even dictating to the company how it should be structured. So the government is not only helping to finance a private company, it is also running it. This takes us even further from the free enterprise system we prize.

And especially with these companies getting more than their share of criticism over the years (much of it deserved) for being unresponsive to the car buying public, it is easy to understand a lot of the sentiment especially from conservatives like David Brooks in his NYT op-ed piece Bailout to Nowhere that allowing the Big Three to go into bankruptcy may be best for us in the long run.

This is an excruciatingly hard call. A case could be made for keeping the Big Three afloat as a jobs program until the economy gets better and then letting them go bankrupt. But the most persuasive experts argue that bankruptcy is the least horrible option. Airline, steel and retail companies have gone through bankruptcy proceedings and adjusted. It would be a less politically tainted process. Government could use that $50 billion — and more — to help the workers who are going to be displaced no matter what.

While many believe that bankruptcy is the equivalent to going out of business, there are two main types of bankruptcy available to US businesses. Chapter 7 bankruptcy is the kind where the company does go out of business and its assets are sold to satisfy creditors. But under what is called Chapter 11 bankruptcy, the company stays in business and gets a breather from creditors in exchange for submitting to some control from the courts and possible restructuring of the company to give it the best chance to eventually pay back the debt. So for those who advocate bankruptcy like in this Fortune article GM: Better off bankrupt, they are referring to Chapter 11 bankruptcy.

But alas there is the conflicting practical aspect to all of this. In normal times, forcing the Big Three to file for Chapter 11 bankruptcy instead of getting bailed out makes sense. But these are far from normal times. We have an economy that is in the worst shape since The Great Depression of the 1930s. While Chapter 11 bankruptcy is seen as strong medicine for these ailing companies, the cure during this weakened economy may prove to be a fatal blow to these companies leading to Chapter 7 bankruptcies which most people agree would be a disaster for the US. Among other things, pensions and health insurance from these companies may be lost. Can we afford to take a chance of this happening?

There are a couple of other arguments against forcing the Big Three to resort to bankruptcy. One is that credit even for financially strong companies is still tight. For companies in bankruptcy, adequate lines of credit may prove to be impossible to obtain. The other argument is that car shoppers may be reluctant to buy from a company who they fear may go out of business.

Automotive News, an auto industry publication makes their case in an editorial titled The Cost of GM’s Death.

Even if GM could get debtor-in-possession financing to keep the lights on (which it can’t), Chapter 11 means a collapse of sales and a spiral into a Chapter 7 liquidation.

GM’s 100,000 American jobs will die. Health care for a million Americans will be lost or at risk. Hundreds of GM’s 1,300 suppliers will die. Their collapse could take down Ford Motor Co. and Chrysler LLC, perhaps even North American transplants. Dealers in every county of America will close.

The government will face greater unemployment, more Americans without health insurance and greater pension liabilities.

Criticize Detroit 3 executives all you want. But the issue today is not whether GM should have closed Buick years ago, been tougher with the UAW or supported higher fuel economy standards.

In the next two to four months, GM will run out of cash and turn out the lights. Only government money can prevent that. Every other alternative is fantasy.

While President-elect Obama is in favor of government financial help for the Big Three, many Republicans in Congress are cool to the idea. While it is unclear that anything will happen during the lame duck session, perhaps the coming year and a new president will result in a meeting of the minds and a way to help the US auto industry weather this financial storm that is battering so many other businesses.

As a condition of the government loan, it is reasonable to first require the management of the Big Three to offer a viable plan (perhaps involving some company reorganization) to show how they can turn their fortunes around and compete with the Toyotas and Hondas.

I would like to conclude with an excerpt from Bob Herbert’s NYT op-ed article 'Drop Dead' Is Not an Option:

It’s easy to demonize the American auto industry. It has behaved with the foresight of a crack addict for years. But even when people set their own houses on fire, we still dial 9-1-1, hoping to save lives, salvage what we can and protect the rest of the neighborhood.

This whole matter needs some intensive thought. At the moment, Washington has tremendous leverage over the failing auto industry. The government should craft a rescue plan that is both tough and very, very smart. That means dragging the industry (kicking and screaming, no doubt) into the 21st century by insisting on ironclad commitments to design and develop vehicles that make sense economically and that serve the nation’s long-term energy security requirements.

What I would like to see is creative thinking on both ends of the bargain. Let the smartest minds design a bailout that sparks a creative revolution in the industry.

The Silent Power Struggle

It was nice to see President and Laura Bush extend a warm welcome to President-elect Obama and his wife Michelle during their first visit to the White House that will become their residence starting on January 20th. After all, Bush said that he wanted to extend the same warm welcome that the Clintons extended to them at the end of their term.

But while all of this ‘making nice’ is going on, beneath the surface is a silent power struggle going on between the outgoing and incoming presidents. While all of the attention understandably surrounds the incoming president, the outgoing president can take advantage of his low visibility out of the spotlight to use executive orders and pardons to address some unfinished business before leaving office.

This has been true of all outgoing presidents, but with a president who has been so notorious for his expansion of executive power during his term, perhaps we need to keep more of an eye on him.

A New York Times editorial So Little Time, So Much Damage does just that.

While Americans eagerly vote for the next president, here’s a sobering reminder: As of (Election Day), George W. Bush still has 77 days left in the White House — and he’s not wasting a minute.

President Bush’s aides have been scrambling to change rules and regulations on the environment, civil liberties and abortion rights, among others — few for the good. Most presidents put on a last-minute policy stamp, but in Mr. Bush’s case it is more like a wrecking ball. We fear it could take months, or years, for the next president to identify and then undo all of the damage.

But the Obama transition team is not asleep at the switch. In addition to the high visibility part of the transition like filling cabinet positions, they are busy with another agenda as described in a Washington Post article Obama Positioned to Quickly Reverse Bush Actions.

Transition advisers to President-elect Barack Obama have compiled a list of about 200 Bush administration actions and executive orders that could be swiftly undone to reverse White House policies on climate change, stem cell research, reproductive rights and other issues, according to congressional Democrats, campaign aides and experts working with the transition team.

Few citizens including many political junkies have much of an understanding of executive orders. The best article I have found to explain this subject in a Q & A form is a Wall Street Journal blog, Executive Orders 101. And for a more conventional encyclopedic summary there is this article from Wikipedia which itself includes a number of interesting links for those wishing to study this subject in more detail. Interestingly enough, executive orders are not even explicitly mentioned in the US Constitution.

Even so, most of us feel that it is desirable when necessary to give the president some powers to get things done without being bogged down by the Congressional decision-making process. But obviously, this power can be abused. Although these executive orders have been made by many administrations from both parties over the years, is it fair to make a bigger deal out of what President Bush is doing now in his final months of office?

It has been well documented that President Bush is the most unpopular president since these popularity polls have begun many years ago. In addition, the electorate has sent a resounding message that a solid majority of them do not like the Bush policies. Toward the end of the election campaign, even John McCain was openly critical of the Bush years. Given this, you would think that Bush should at least have the decency to just keep things running until the new president comes on board with his policies.

Instead, this administration has been about seizing as much executive power as possible to the point of distorting the spirit of Constitutional checks and balances between the branches of government. While those on the Republican side may approve of this conduct, surely they should realize that when their party is no longer in power that the Democrats may very well feel entitled to do the same thing once they take over the presidency. And that is not a positive trend for our way of government no matter which party one supports.

It's no wonder that so many people are anxiously counting down the days until Bush finally leaves office!