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Special Report
The Five-Cent Lemonade Stand
Another name for Obamanomics’ trillion dollar business model.
(Page 2 of 2)
This is beguiling rhetoric, but it is not the way anyone thinks (or can afford to think) in running a business. Businesses exist for the purpose of finding profitable ways to satisfy paying customers. The essence of private enterprise is that businesses go out of business if they aren’t up to the task of earning a decent return on capital deployed while, at the same time, satisfying their customers (the automakers, unfortunately, have failed miserably on both counts). The creation of employment and the enrichment of workers are byproducts of running a successful business, not ends in their own right.
The lemonade stand that the administration is erecting for Detroit’s benefit is like that of the kiddies in being rife with subsidies — with little regard for whether the resulting product is anything that any real (i.e. independent and value-conscious) customer would want to pay for. The subsidies range from government-backed warranties and tax breaks to lower the price of cars, to elimination of a great deal of outstanding debt for the auto makers and the provision of federal loans to cover their working capital needs.
In subsidizing General Motors, the government is effectively trying to make up for an unfavorable cost differential between GM and the most efficient producers, and between GM and the manufacturers of the most highly desired automobiles. Either way, the subsidies impose both direct and indirect costs upon the American people (use of taxpayers’ money, firstly, and then protectionism, disruption of trade, larger, more intrusive government, reduced return on investment and loss of productivity), and these are costs that are potentially open-ended and all too likely to mount over time.
To its credit, the administration seems to have recognized these dangers. It has acknowledged that it may still be necessary to hang out a bankruptcy sign — with a possible Chapter 11 reorganization for GM and the further possibility of Chrysler going into liquidation.
Even this government, it seems, may grow tired of the funny business of running a lemonade stand.
About the Author
Andrew B. Wilson, a frequent contributor to The American Spectator, writes from St. Louis.
Letter to the Editor View all comments (21) | Leave a comment
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Appleby| 4.14.09 @ 6:35AM
Look for the Union Label ....
Here in Kanukistan GM unionistas are shrieking that the Province of Ontario -- currently in massive deficit despite the 46% tax rate on the average employed person -- has a *Moral Duty* to support these bloated pensioners in the manner to which they demand, whether or not anybody ever buys another GM car.
That will be their next move in the USA. Count on it.
CS Lewis| 4.14.09 @ 8:39AM
To lump pensions just to the UAW and auto workers, who made a deal with the business, worked the work and then retired with their pensions is to ignore other pension holders not auto workers, who made a deal with the business, worked the work and then retired with their pensons also rightfully earned.
Businesses grew, prospered and made America the most successful country in the world by this process.
Not a word about government employees who have done the same with much less work required and a pension gained in so short a time and perks far beyond the average worker which they created and expanded while destroying businesses by making laws and remaking them until we have arrived at the condition the country is now in.
I don't hear anyone demanding to take away government employees retired or working, pensions or perks, or health care. They are in control, they are set for life.
And, it's getting worse, just as the article, "Scientific Pretense vs. Democracy" relates.
dcd| 4.14.09 @ 9:32AM
And don't forget those lazy soldiers who made a deal with the government that included extravegent pensions and benifits merely to risk their lives for national defense.
Robert Rosencrans| 4.14.09 @ 9:37AM
The bills have come due, and GM can't pay them.
Marc Jeric| 4.14.09 @ 12:15PM
Show me a strong union and I'll show you a dying or dead industry. Examples abound - automobiles, textile, electronics, steel, etc. Given enough time every union will come under the sway of either the mafia or the communists (which is the same thing). With one exception - unions of government employees. Their "work" cannot be outsourced so the destruction is continuing and permanent - see teacher unions where our education industry manufactures millions of illiterate morons voting for that empty suit and marxist Abu Hussein from Kenys. Or the bureaucrat who issued the visa extension to the 9/11 terrorist 6 months after he died his martyr's death.
CS Lewis| 4.14.09 @ 1:52PM
dcd... right on. the ones (vets), Janet the head of homeland security who is defaming, calling them right wing possibly ready to do harm to others.
This is to try to discourage Vets from going to Tea parties.
And just think of our military who gave their life for this country and their familes were just left with peanuts. Thank God for those people who are taking care of soldiers and their familes since the Iraq War began.
Rick Josey | 4.14.09 @ 2:54PM
We MUST care for our Veterans. They kept us free.
And we MUST vote out all these lunatics who are wrecking our country with their failed socialistic policies. You CANNOT get out of debt by throwing yourself further into debt. You have to stimulate economic growth through INCENTIVES. Does any sane business person walking this planet think it's an investment incentive to be TAXED INTO OBLIVION????
The nuts in Washington must go. VOTE THEM OUT... and meanwhile...
Head for a Tea Party...
www.PatriotHangout.com
nem| 4.14.09 @ 3:27PM
The comments regarding veterans pensions are interesting. But being a retired veteran (infantry and then Special Forces), I really am of two minds. First, I certainly believe that we need to care for those injured in the service of their country (I happen to be the only SF guy I know who does not have a disability) and certainly we need to provide sufficient incentives so as to get folks to volunteer for the military. But that said, the package really is pretty generous. Particularly when you consider that most of the fighting and dying is done by the youngsters. But a pension is only obtained by hanging around for 20 plus years (combat is not a prerequisit). So, regardless of one's MOS, deployments, sacrifices, etc., we all get the same pension based on rank and number of years at retirement. Approx 50% pay after 20 years and up to 75% after 30.
Its hard to gage what is appropriate. I understand the feeling that we deserve every penny of what we get. But, I can look at folks who really did earn their pay so to speak. Guys who routinely risked their lives. And I can look at a person who served in the Quartermaster Corps who never heard a shot fired in anger (nothing against QM guys). If sacrifice is the measure, why do they get the same pension?
Maybe some changes are needed. Don't know what, but if we are advocating that Vets deserve it because of their sacrifices, then the system should account for the differential in sacrifice. If not, then.......? What? I don't know. But I am not going to cry that I am underappreciated because I don't get enough money from the public weal.
Alan Brooks| 4.14.09 @ 10:56PM
play money? like the hundreds of billions for the prescription drug program?
Alan Brooks| 4.14.09 @ 10:59PM
or the 1990 Disabilities (i.e. cripples hoisted on buses) Act?
now, whose father signed that bill?
Warren A Scaman CPA| 4.15.09 @ 12:32PM
How about a 100 % Funded Pension, then they have a Right to their % as a secured creditor.
But get real... an Unfunded Promise is an unsecured Creditor. Place them all on Medicare. They had 30 year for their Union to get it funded properly.
Warren A Scaman CPA| 4.15.09 @ 12:32PM
How about a 100 % Funded Pension, then they have a Right to their % as a secured creditor.
But get real... an Unfunded Promise is an unsecured Creditor. Place them all on Medicare. They had 30 year for their Union to get it funded properly.