Dave Letterman Should Stick to Comedy

Dave had John McCain as a guest on his show tonight. I know he loves politics, but the man just doesn't understand the markets. They were speaking of the 15 billion dollar "loan" to the Big Three.

Dave recited the Reed/Pelosi mantra: if we give them the money, then the Big Three must devote half of their production to hybrid/alternative energy vehicles, for this will create a plethora of jobs in the industry.

There is one problem: the market. Expansion of jobs within a company require an increase of revenue. This revenue can come in the form of sales, bonds, or government subsidy. The first is the problem: sales. There is simply not enough demand to warrant that much production. People buy what they can afford, and these cars are more expensive to make. Moreover, it will take 5+ years to break even if gas prices stay low. If people don't buy those cars, Big Three is right back in the place they are now, and with a depreciating stock of cars.

So, in order for this bright idea to work, one of two things must happen: Gas prices skyrocket (and if the do, it is probably due to the dollar, meaning car prices will also increase) which will fuel some demand...or [the more likely solution] the government will force us to buy them by coercive methods

Neither is desirable. Trust me, if gas goes up to a point at which it is economically worth the cost for a hybrid, demand will increase for it. Markets will take care of the problem when the problem manifests...

...also, global warming is such a serious problem, it snowed in South Louisiana yesterday, so lets bring more expensive regulations on the already struggling car industry, because New Orleans can't handle this snow.

Economic Commentary Just Stinks...

I need to get a job writing for AP or Yahoo! Finance... Today on Yahoo! Finance, there was a headline titled "Inaction on Big 3 would Cost Taxpayers Billions". This peaked my interested, because it is obviously intended to get public support of the bailout. At the very beginning, I find this brilliant thought:

The U.S. auto industry's problems will cost taxpayers plenty whether or not the government helps Detroit.

Just walking away and letting the struggling Big Three automakers go under would drain government coffers by about as much as the $15 billion bridge loan that lawmakers are preparing, and perhaps much more, according to outside analysts. The costs would come from lower tax collections by the federal, state and local governments and the payment of extra unemployment, pension and other benefits to unemployed or retired auto workers.

This is plain nonsense...

First, lost revenue to the government is not taxpayer expense. It is taxpayer cost when the government spends money. If the government doesn't get the money, it should cut back and not spend what it didn't get.

Second, why should the government take on the insurance of the pension plans? Yeah, there will be some unemployment, but not 15 billion dollars worth. These folks will find other jobs if given the incentive to, and prolonging unemployment benefits rids them of the incentive. People are going to lose out because of this recession, but government intervension socializes the losses to everyone. If the government would just get out of the way, the recession will be shorter and recover haster, and the losses will be focused to a lot fewer people.