no third solution

Blogging about liberty, anarchy, economics and politics

Category Archives: Michigan

Demand vs. Supply: Public Wi-Fi Put on Hold

January 2nd, 2009

Anecdotal evidence, at least, affirms that the laws of supply and demand still prevail over politics. I, for one, am relieved.

Kip Esquire recently asked, “Whatever happened to municipal wi-fi?” which like most feel-good political moves, designed to give everybody something for nothing, seems to have dropped off everyone’s radar. This made me think about our own, local initiative, to provide Wi-Fi free to everyone in Oakland County., an initiative that I opposed from day one. Why, for instance, is one of the wealthiest counties in the country providing “free” anything to anyone.

In any event, after about a year and a half of piloting the program in several municipalities where coverage was spotty at best, the officials finally pulled the plug on Wireless Oakland in June of 2008. Apparently, amidst the economic turmoil, the company providing the service & infrastructure has had difficulty obtaining financing.

Oakland County’s press release states that they intend to re-implement the program as soon as it is possible, and that the program was a success:

Forty-six million minutes of free internet have been consumed in the Phase One deployment since March 2007. These results far exceed the original business model projections.

When a good or service is priced below its market-equilibrium price (the price at which quantity supplied = quantity demanded) there will invariably be an excess of demand over supply. This is elementary economics.

The trusted, elected officials couldn’t bother to know, or to understand this fairly simple and straightforward principle. Or in the worst-case, they knew it, but willfully ignored it. In either case, they’re unfit to govern.

How to Save the Auto Industry

December 19th, 2008

There are a number of recommendations to help “save” the Auto industry that would probably be more effective than the current Bridge Loan, but they won’t be tried, and they probably won’t even be suggested anywhere else. You’ll never hear anyone in the Mainstream Media saying that taxpayers (from whom the bailout money purportedly comes) should receive an equity share in the failing companies.

I previously suggested that the auto bailout will never be repaid, at least not in any meaningful sense. In reality, anyone who pays taxes should be able to claim an equity stake in the companies that have been bailed out with their money. This will never happen, but I think it would be preferable to the outright corporate welfare that is Teh Auto Bailout “Bridge Loan”.

It’s not the only thing that could work.

In 2007, General Motors paid $37B in taxes. With that in mind, here’s a solution to bail out the Auto Industry without taking money from the rest of us. Open the floodgates:

  • Eliminate all corporate taxes — all of them — any corporate income tax, however applied to big businesses or small ones. Wipe them all out, retroactive to January 1, 2008.
  • At the same time, eliminate all corporate welfare, including but not limited to preferential loans (which would reset to a fair market rate), tax deductions or credits, all direct subsidies, etc. Wipe them all out, retroactive to January 1, 2008.
  • Eliminate capital gains taxes and dividend payments, which depress the rate of economic growth and capital accumulation. Eliminate these taxes for everyone.

If General Motors can’t stay solvent with $37B of it’s own income, then there is no reason to give them any amount of other people’s money#.

Give the markets a taste of freedom. Instead of the Government siphoning our productivity into net-value destroyers like Archer Daniels Midland, instead of taking our money and giving it to Brontosaurs like General Motors, let people decide what will be produced, where, by whom, and in what quantities. Let the people keep the full rewards for those sacrifices they choose to make.

The Bailout is appealling to politicians because it’s the solution that allows the government to exercise the greatest amount of control over the industry, how it is run, how people work and are paid, and what is produced. It is backdoor fascism, which will be exacerbated if the funds already committed are not enough to forestall the Big Three’s demise.

Post script: Would now be a good time to mention that the Capital Gains taxes are going to increase in 2010?

Will the Auto Bailout Be Repaid?

December 19th, 2008

An awful lot of GM shares have already changed hands today.

If you knew that the government was going to bail out the Auto Industry, you could’ve bought shares of GM yesterday at $3.66 and sold them today for $4.30 — a 17% profit overnight. Someone knew, that someone just wasn’t you: just yesterday signs pointed to Big Three bankruptcy.(“Now” is Friday, December 19, 2008 at 9:48 Eastern)

GM probably got about $8B in short-term financing this morning. I have no idea what the terms are, or what the interest rate is, although I can say with 100% certainty that this rate is far lower than GM could otherwise obtain, which means that nobody was willing to voluntarily lend them the money. Additionally, the people from whom this money was extracted will never be compensated for assisting them.

If GM turns a profit next quarter or next year, are we going to receive dividend checks in the mail? Of course not. If and when GM repays this “loan” plus interest to Uncle Sam, do we get our money back? Of course not.

So, how’s about they give us some of equity? At the very least, give us a debtholder stake. General Motors real value is approximately zero anyways.

The same anti-freedom principles that are used to justify taking money from productive people, and giving it to unproductive companies (on account of having grown too big to fail) could similarly be used to expropriate an equity share, or ownership of this subsidized debt, in the companies bailed out, which would then be distributed among taxpaying individuals in one way or another (this could be an aliquot distribution, or it could be quotal based on taxes paid, etc.)

For years, decades even, General Motors and Ford (and to a lesser extent, Chrysler) were profitable companies. For decades their employees were well paid. They bought summer cottages, boats, large trucks that get shitty MPGs, they added on to their homes or bought new ones. They never went to college, they didn’t have to, but they could afford to send their kids. They were middle-class and upper-middle class working folk, the epitomization of the “American Dream”. For decades, labor and management and shareholders alike were probably overpaid. They are all to blame.

Now, the day of reckoning has arrived and they want more of our money?

no third solution

Blogging about liberty, anarchy, economics and politics