and beating our breasts in dispair over Obama's non-progressive appointments we might just notice the others.

Of the four economists on the stage when he announced his starting  line up,  the two men got 112% of the  attention and comment. The two women :Melody Barnes and Christie Romer went unnoticed by the press, and us, altho they are both unequivocal liberals.

Brad Delong has been working himself up into (or maybe down from) apoplexy defending Romer in particular.

Here's the link.

http://delong.typepad.com/ad

Hypocrisy is almost never a good policy. Even the hypocrisy of remaining silent while people whom you respect say something with which you disagree.

In this case I disagree Josh and the many of you who have written to castigate those ceo's either for the use of corporate planes per se or for their use on this particular occasion.

I also disagree with the congressmen and columnists who have the same objection but I don't include them in the category of  people whom I respect  since at least in this particular case they are not acting in a way deserving of respect.They know better and they are insulting the voters with pretending otherwise.

Some questions and my answers.

o Does it make sense for a large corporation to own a company plane?

Let us assume . an employee costs his or her company $100 an hour (including fringes a base pay of $150K/year)  Now assume there are 10 of them flying to a location which involves changing planes (or a long drive). Calculate the time lost waiting in security lines, at the gate, on the tarmac.  Multiply that by a thousand dollars an hour and on that over-simplified basis  it will sometimes  makes economic sense for the  company to use a private plane.  

But that is indeed over simplified.If the company is spending that much for an hour of the employee's it's because that hour is worth more than that .

o Does it make sense to use that plane if the ceo is flying alone?

The ceo probably earns 10 times that of the employees in the illustration .Same calculation , same result. AOBTW almost certainly the ceo is accompanied by other highly paid employees..  

o Does it makes sense for the company to own a plane rather than renting  on a case by case basis?

 Pure mathematics.For a company the size of the Big 3, the answer is bound to be yes.

Once that buy vs rent decision is made, the hurdle  for use of the plane becomes even lower.  Old Irish saying: No sense buying milk and keeping a cow yourself.

You'd certainly use it for your  ceo flying to Washington.- with the advisors who are prepping her for the hearing.

o OK but should the ceo do that when the reason he's flying to Washington is to ask for help?

Assume he flew commercially and then this exchange occured..

.............................................................................................................................

Congressman A

 Mr. Ceo, does your company own a plane?

CEO

Yes

Congressman A

Do you think that is in the interests of your company and its stockholders?

CEO

Yes

Congressman A

Do you normally fly in that plane?

CEO

Yes.

Congressman A

Did you today?

CEO

No.

Congressman A

Why not?

CEO

I thought it would look bad.

Congressman A

You've already told us that you think it's in your stocholders' interests to use that plane yet you didn't do that because it would look bad. You're insulting our intelligence.Etc. Etc.

....................................................................................................................

 And ,I'd be insulting the intelligence of the users here at TPM if I let go unchallenged Josh's statement that those CEOs were wrong to fly to the hearing.

.

but for adult eys only,here's  economists thought of the Citi bailout terms.  

http://krugman.blogs.nytimes.com/2008/11/24/citigroup/

As predicted by Drs Smith and .Pangloss, our strongly motivated capitalists  create a constantly growing economy. The proceeds are used for a military budget = to the rest of the world's (madness!) , for furiously criticized entitlements, for non productive enterprises like NASA(why does the phrase "bread and circuses" come to mind), and to provide a constantly improving standard of living for the top 5% of the income distribution.

What's left is available for the remaining 95% of the income distribution,for government services and for the  infrastructure.

It's not enough.

So the unspoken bargain for the last 30 years  has been to provide declining government services and let the occasional bridge collapse in Minneapolis in order to attempt to prop up living standards for the remaining 95% of the population.But since there aren't sufficient resources for that , we outsource to Bangladore  jobs the could have been done in Baltimore and those great deals at Walmart are just sufficient to maintain the middle class at a level which,hopefully will  prevent them from voting Democratic.

Maybe this litany suggests some other possible approaches.

In response to yesterday's harangue a thoughtful commentator said, 'well there are some questions about free trade but - asking the Robert Reich question- how about those great deals at Walmart?'

Reverting to Keynes. The 19th century  defense of Free Trade was that no country ought to waste assets doing something that could be done more economically elsewhere. After having defended freetrade from  his first speech at the Oxford Union  Keynes flip flopped to the view that

" Experience accumulates to prove that most modern mass-production processes can be performed in most countries and climates with almost equal efficiency"

He had long before  absorbed that

 when trade crosses a border, guns don't

was a fallacy after August 1914 when guns followed trade right across those borders.

So he summarized his position

"I sympathise with those who would minimize rather than with those who would maximize economic entanglements between nations."

OK enough already with  Keynes, what we're doing now is unprecedented. Neither economic theory nor experience gives us any guide as to what will happen as we  outsource those mass production processes to countries where workers are paid $500 a year. If Nocera feels that in order to be competitive GM

" needs to pay its workers what Toyota workers are paid, and not a penny more"

 why  isn't it logical for him to add that

  and Toyota needs to pay its Alabama workers what Bangladeshi workers are paid and not a penny more?

We haven't a clue where this process will take us. Maybe Robert Reich is right that we should relay and enjoy  "great deals" at Walmart and somehow earn the forex to cover the trade gap by "services".  Except that,what services? And what makes us think that they will be immune from competition from the bright young graduates from asian universities?

It's now accepted wisdom that we have to be energy self sufficient. Why only energy? Why shouldn't our goal be to be self sufficient , full stop.? For many countries that would be an idle aspiration. But not for us given our geography and resources.

Yes this makes me sound like Lou Dobbs but even a stopped clock is right occasionally.. 

Joe Nocera's  Talking Business in today Times is like the curate's egg: Good in parts.

He does a convincing job of explaining why a GM bankruptcy is "anything but a snap". And admirably  acknowledges something should be done to save the industry "Who wants to live in a  country without the kind of decent middle class jobs ...that auto has always represented?" But.

His analysis of GM's problems unconvincingly repeats charges which have been refuted by several of the commentators here. For example, the ever popular  "needs to dramatically reduce its legacy benefits".

Oh? Which ones.The defined benefit pension is fully funded (or was on Jan 1 since when possibly its investments have gone south.

The one specific citation legacy he cites "eliminating health care benefits for union retirees"  suggests he's unaware that those retirees rely first on medicare and that GM's expense is restricted to medigap coverage.

Then of course  comes  "needs to pay its workers what Toyota workers are paid in the United States-and not a penny more". 

Uh. Thinking the unthinkable- at the risk of having my TPM blogging privileges suspended ( no cheering please) does that have to mean de-unionization of GM? How about a Democratic Administration and Congress reviewing 60 years of anti union legislation and releveling the playing field so the  UAW has a fair shot at organizing Toyota ?

And to the response that will be vitiated by a flood or imports.....that's what tariffs are for . (Keynes: "The virtue of protection is that 'it does the trick',whereas...free trade does not"). Of course maybe Keynes got it wrong and Robert Reich and TomFriedman  know better.

Or just maybe JMK  was right and our last 40 years of trade policies were "flat earth" in more than one sense of that term..

It's instructive to watch the evolution of the Right's  position on a GM loan.

Starting position:

o we can't afford it

o the legacy costs mean GM can't compete

o the company should be punished for Lutz's scoffing at Global Warming.

o and (my favorite)  for signing a labor agreement that's "an inch thick". I''ve heard that irrelevant charge read again and again by a variety of commentators, glancing down at their Talking Points. .

So let it go into Chapter  XI.

When Wagoner says that the legacy costs were dealt with, the Right's response has been the ever popular  ignore the facts and repeat the charge.Louder.

But when told  that Chapter XI was impossible because no Debtor In Possession financing was available their resonse gives away the game: the Govt should provide guarantees for the DIP credit.

Oops. Turns out that we can "afford it". And that bankruptcy isn't required to deal with the legacy costs. In fact the chief, maybe only effect of bankruptcy with which they're concerned would be to cut workers'pay.

(the resulting write down of GM's $50 Bn of debt and payables  may also be the coup de grace to Paulson's anti Depression strategy, but hey, you can't worry about everything!)

That's the objective. The rest of the stuff is just static in the communications channel.

OK I can understand that it sticks in the craw of the Right that some long service UAW members are getting paid almost as much as a newly graduated MBA joining Morgan Stanley. That's unamerican. Workers are supposed to rely their wives income to help pay that sub- prime  mortgage. And hope their kids can do a couple of years at a Community College. They've no business living like us.

What I don't understand is why many people here don't see that's what's going on. No matter how much lipstick they've  put on the pig what this is all about is that  the Right see's a golden opportunity to rid itself of the UAW. End of story..

And we should know which side we're on, brother.

 In the instructions on how to blog I don't find any discusson of the preview function. It's obvious from the existence of the button that it exists but it's simply not mentioned in the section on Blogging contained within Welcome to my TPM.

Presumably it will be obvious to a new user that touching the Preview button will start whatever that process is and sooner or later he or she will give it a try and learn that way.. Once they get to the Preview page however there's no button for returning  to Create Entry in order to correct if necessary and then  publish the entry.

Presumably for  most users it's intuitively obvious they can do that by using the return- to- prior- page arrow. Nevertheless. perhaps a sentence to that effect  should be added to the  procedures for blogging.

Our objective re GM should be to provide enough cash so that its $50 bn of debt and payables aren't held hostage to a Chapter  11.

There are a lot of other things at which we could aim: green cars, punish the management, cut workers pay and benefits( a great favorite). None of which I think are appropriate.

Governments can't run car companies,decide what they ought to fix  or even what if anything needs to be fixed.

Nevertheless , we need to prevent GM from failing now.

Rather than the funds being provided as an investment with strings attached it should be provided as a Senior Issue of  Preferred Shares  convertible into  ,say, 98% of the common if a dividend is not paid.Callable.

I'm reminded of Harry Truman at the 1956 convention which nominated poor Adlai Stevenson instead of Harry's candidate Averill Harriman :"I've never before seen so many people be wrong in the same place".

It would be such madness if GM went into bankruptcy that it is insane to even discuss it.

What we learned from Lehman Bros - or apparently didn't learn- is that we can't , repeat can't anticipate the knock- on effects of a massive bankruptcy which this would be.. Put aside the economic effect of adding a million people to the unemployed  about which the conservatives can only summon up some crocodile tears before moving on to wail over the desperate unfairness of suggesting the top 5% of the income distribution should see their taxes return to dread levels of 2000.(Which in fact I think should not happen right now)  What about GM's debt ? When that is marked to market after GM's declares Chapter XI will that facilitate Hank the bank's attempt to get credit moving ? Pigs could fly.

At a time when every serious public economist :Krugmann, Samuel Brittain, Martin Wolf is telling us that it is simply not possible to go too far in combatting the slide of this recession-into depression., that we must play every card in the deck, it is beyond idiocy to contemplate a GM bankruptcy.

And spare a moment to consider GM's net work of suppliers who will be decimated. Apart from the unforecastable financial effect as they too go under,what about the know-how not just at GM itself but distributed over that endangered net work ?Not just in current products but in products in development which will never see the light of day. Has Tom Friedman considered that blow to our technology base. Of course not.If he spent more time in Dayton instead of Dubais he might have at least an inkling of what's halppening in the real world. 

I can only assume that W and his advisors are so consumed by the desire to depress US wages that they are unable to bring even their feeble mental resources to bear on this prospect. Or at best that they are simply playing  a frivolous hand of  Get The Next Administration  by kicking the obviously  correct decision down the road .

And OBTW spare me a lengthy sermon on how GM brought this on itself. Guess what? I probably agree that it did. And I don't care. I don't want to destroy whatever chance we have of avoiding a world wide Depression in order to punish Lutz and Wagoner. Sentence them to scrubbing the White House floors if we want to punish them.Don't bring the whole world's economy down to do it.

Madness.

A couple of days ago Artappraiser linked to a discussion of this topic by the Templeton  organization. .

The discussants,mostly  academics ,supported-with caveats- the Market's effect upon moral values ,in most cases not so much for itself as because of their conviction than any alternative approach would be worse..

A non academic I won't generalize ,just present some data..

Every company in which I was in a position to know what was actually happening practised one or another, or some combination of fraudulent accounting,dishonest invoices,  bribery, price fixing and insider trading. In every case this was not considered a cause for much, if any, soul searching to the fairly large number of executives who knew about it.

Who, I expect  would have subscribed to the Templeton consensus while considering themselves  pillars of the community , highly critical of the criminal behavior of the lower class.  .

It's remotely possible, but statitically improbable,  my experience is unique. From Smith to Friedman economists have argued convincingly that personal gain a.k.a greed is  a powerful motivator. Surely  a corallary is  that greed will motivate individuals to work not only hard and innovatively  but also immorally. Unless there is some counterveiling force (Galbraith's term).

Or of course unless the definition of immoral behavior changes at the office door.

It might have been more illuminating it the Templeton question had been

Does decreased regulation of markets improve moral values?

I have a two letter answer to that.

A couple of days ago Artappraiser linked to a discussion of this topic by the Templeton  organization. .

The discussants,mostly  academics ,supported-with caveats- the Market's effect upon moral values ,in most cases not so much for itself as because of their conviction than any alternative approach would be worse..

A non academic I won't generalize ,just present some data..

Every company in which I was in a position to know what was actually happening practised one or another, or some combination of fraudulent accounting,dishonest invoices,  bribery, price fixing and insider trading. In every case this was not considered a cause for much, if any, soul searching to the fairly large number of executives who knew about it.

Who, I expect  would have subscribed to the Templeton consensus while considering themselves  pillars of the community , highly critical of the criminal behavior of the lower class.  .

It's remotely possible, but statitically improable  my experience is unique. From Smith to Friedman economists have argued convincingly that personal gain a.k.a greed is  a powerful motivator. Surely  a corallary is  that greed will motivate individuals to work not only hard and innovatively  but also immorally. Unless there is some counterveiling force (Galbraith's term).

Or of course unless the definition of immoral behavior changes at the office door.

It might have been more illuminating it the Templeton question had been

Does decreased regulation of markets improve moral values?

I have a two letter answer to that.

Tom Friedman today joined the Administration's opposition to help for the big three auto makers. 

The Administration's position was to be expected : auto workers are clearly not as deserving of rescue as the legion of Wall Street MBAs now benefitting from the Bail Out. Friedman's disdain for everyone within 200 miles of Detroit requIres more  consideration in part because  it reflects opinions that are not unfamiliar in this space.

His "usual suspects" include "visionless management and overly generous labor contracts". And ,In passing he upbraids GM for throwing  "too much energy into lobbying". As if the money spent on that had  the slightest effect on GM's operations. But let's return to his basic indictment.

Working backwards, those labor contracts,I guarantee you , would not seem overly generous if applied to one Thomas L. Friedman. Clearly the Big Three's wage rates are a multiple of what's on offer in the lesser developed countries -which suggests some questions about trade policy. But compared to the developed world?  Jeff Madrick in the Nov 24 Nation Nation tells us that "roughly half the OECD countries pay higher or equivalent wages to workers in manufacturing".

Well then , "visionless" management?. Friedman is scathing on the prospect that taxpayers should bail out auto management personified in Bob Lutz whom he thinks can clearly not run an auto company because he stupidly resists admitting the existence of global warning. And warming to his task ,Friedman castigates the entire Michigan delegation since the beginning of time for having shielded the B3 from global competition which would otherwise, presumably ,have them into Upper Middle West Tigers.

His solution inter alia  is that the management should go and there should be "tearing up existing contracts with unions".

Passing  over the low hanging fruit of  his short sharp plan for dealing with workers I'll make my own heretical comment about auto management. They're not dumb. At all.  They've risen through the ranks in a darwinian stuggle to which the dumb succumbed at far lower levels. They're smart men and women who know what they do even if , like Friedman, they make an ass of themselves when they talk about something outside their field.

Well perhaps they're smart enough but not like those superior people,the geniuses (or is it genii) who manage the foreign companies which are currently cleaning their clock..Really? In the roughly half my business career I spent abroad I naturally had a chance to compare foreign managements -from many countries-with american managers. Maybe Friedman would have been able to find a difference, I couldn't.

To prevent this from going to multiple volumes assume with me that our auto  managers are about the same as foreign ones and  workers' pay is in the same ball park. Then why are our firms failing?

A good question and one deserving a good answer before we throw billions at fixing a problem which may not be a problem which needs to be fixed. In fact may not be the problem.Or even a problem. 

If it isn't UAW's greedy negotiating or the B3's managements' stupidity, what then?

Friedman gives a nod to health care costs and then dismisses it with the irrelevant comment that GM refused to back HRC's  health plan. If Health care's a a problem ,it's a problem no matter how poorly GM used , or didn't use.it's DC influence 15 years ago. Put it into the list of usual suspects and let's move on.

Foreign competition? Even if the OECD countries pay their workers a decent wage are their competitors to GM benefitting from LDC suppliers who exploit their workers ? Put them on the list.

Our capital markets? Does the tyranny of quarterly EPS growth require not make it more likely but require  Detroit's management to give development the accordian treatment: expanding and contracting it from quarter to quarter as the bottom line permits ?.

Our accounting conventions? Is Detroit marking to market -and terrifying Wall Street- when its competitors wouldn't dream of doing something so foolish?

In short, I don't know why Detroit's failing.And I'm certainly convinced Friedman doesn't. But it's almost certainly not because the UAW has done a professional job of representing its members and I gravely doubt it's because its manager aren't up to the world wide standard in making cars( whatever their retrograde opions on Global Warming about which they orate as freely and with as little relevance as Friedman  lays down the law about the auto industry).

If that industry is to be helped-which it should be- the two condition which should not be made part of the deal is that the management should be fired and the workers' pay cut.

.

The arguments for replacing Lieberman as  Homeland Security Chairman range from :

 we hate him and   want to show just how much we do

to

 he must  be sanctioned pour encourager les autres -so that potential turn coats will know there's a cost.

.If we had 62 senators either argument would be persuasive but we don't.

Let us assume that sooner or later there'll be an  Obama nominee for the Court being filibustered and there'll be 56 Democratic Senators, plus Snowe, Collins and Spector willing to vote for closure and we need Joe..

That's the criterion.

The argument for depriving him of Homeland Security and giving him a lesser position, is even less persuasive. There's no point in almost jumping over the Snake River. 

If we need his vote , we need his vote, there's no point in risking it for a minor sanction which won't even serve as a warning to future Liebermans.

We're stuck with Joe.let's make the most of it.

I blogged here a couple of days ago  Scott Simon's Obama Problem(and ours) criticizing Scott for his reference on last Saturday's Weekend Edition to Obama's rejection of Reverend Wright.

In fairness to Scott it appears to me that he did Obama an unnoticed favor during the campaign. With respect to William Ayers.

I wondered idly how Simon had handled the William Ayers issue during its repeated appearances in the Priimaries and the General Election.Living in Chicago,clearly, he would have to have known about Ayers and it seemed that that would have provided a basis for him to have commented My wife suggested googling :Simon and William Ayers. Which I did.

I didn't find any current references but It turns out that on Sept 8 2001 Scott interviewed Ayers and discussed with him his just published  book "Fugitive Days". It was of course in connection with that book that the New York Times  also interviewed him resulting in an article that appeared on-of all days- Sept 11th 2001  from which the damaging quote was extracted to the effect that Ayers 'was only sorry that the Weathermen bombings were not more successful' or words to that effect.

I've just replayed the tape of that Simon interview, from the npr archives.

It was penetrating. In particular Scott pushed Ayers to discuss leaving a bomb in a Pentagon Rest Room.

 Ayers-or someone close to him-called the the Pentagon a half hour before the bomb was scheduled to explode and it was removed without damage. Nevertheless, Simon, correctly I think, asked Ayers to consider how he would have felt if someone had walked into that Rest Room and been killed. Ayers answer was essentially that they had taken precautions to make sure that that wouldn't happen. And that it didn't.

The interview concluded aimiably enough.

So far the only success of googling Simon and Ayers has been this seven years old interview. Probably that means that Simon was silent on the matter during this past year..

If so. in effect he did Obama a favor.

He must have considered referring back to it-possibly even replaying it. . If he'd done so and if that resulted in an increased audience for that tape ( perhaps it was used to some extent by Obama's opponents) I can imagine it would have hurt Obama however unfairly..Not because Ayers comes across as monster. He doesn't. But at least to me  his justification of that particular Pentagon incident could have been  harmful. Surely it  would have been deeply unpopular with some of those blue collar voters whom Obama was later successful  in capturing .

Simply on journalistic grounds Simon must have considered replaying that tape  this past year. For whatever reason he didn't.

You can form your own opinion by going to the npr archives yourself , for Weekend Edition Sept 8 2001.

For myself, I  withdraw my criticism of Simon's treatment of Obama.