Sadly, we’ve created these problems, so only we the people can solve them.  Unfortunately I’m a pessimist; I doubt that we can pull ourselves away from our reality TV shows and other amusements long enough to actually make a difference.

If I grew up in a middle class home, and watched as my parents and neighbors enjoying the good life, with a nice home, two cars in the driveway, a big screen television, annual vacations, and frequent restaurant meals, I would expect the same for myself when I attained adulthood.

I may have been a very prudent young person, getting good marks in high school, and graduating from college or university.

But then, the train went off the tracks. After finishing school, it’s not fun to be confronted with the stark reality of our current economic malaise. Someone who entered the workforce in 1982, or 1992, or 2002, had the benefit of a relatively strong economy for many years to guarantee a good head start.

However, those unfortunate enough to enter the workforce after the credit crisis of 2008 have faced a much different reality. Good jobs, even for the educated, are much harder to find. Even those who started their working careers in 2005, 2006, or 2007 may not have had enough time to establish their careers before the down turn claimed many working lives.

Those unfortunates expected to now be living the “American Dream”, with a nice car, nice house, nice vacations, and every “i” imaginable (iPod, iPad, iPhone).

Instead, unable to find well-paying work, they find themselves, at age 20, or 25, or 30, living in their parent’s basement, with no real hope for anything better.

No hope.

It is that lack of hope, I suspect, that is the root cause of the “Occupy” movement. What else can one do if one cannot find a job, and has no prospects? Go to Wall Street and “occupy”, I guess.

Of course these protests are not just an American phenomenon, and in fact their origins are not on Wall Street, but instead are perhaps derivatives of the “Arab Spring”, and the protests in Greece, and other countries.

Alas, I’m sad to say, their occupation is misplaced.

This apparently leader-less movement is occupying Wall Street, the heart of American business, apparently because American business is to blame for our current problems. The fault, apparently, lies with the big corporations and their obscene profits, and the bankers who foreclose on homes and then declare massive bonuses for their top ranking executives.

This gives rise to the “99% ers”, rallying against the 1% of the population that apparently controls all of the wealth, and makes all of the profit.

Is it really the corporations that are the cause of all of our problems?

No.

It’s true that corporations exist to make a profit, so that’s what they do. But we as consumers have the ultimate power over corporations: we can choose to buy, or not buy, their products and services.

If I object to the fact that Apple Inc. makes most of their products at “sweatshops” in China where employees work for 12 hours per day in hot, unpleasant conditions for very low pay, I can choose to not buy an Apple product. (It was interesting to observe the out-pouring of love for Steve Jobs, after his death. The average American apparently loved the man who exported jobs overseas, but that’s another story for another day).

So if the corporations are not to blame for acting like corporations, who is to blame?

The answer, obviously, is the government.

Government spending has continued to increase for decades. That spending represents a burden on future generations (that same generation that is now protesting). But it was not just runaway spending that has caused our current crisis; there were other stupid policies that must also share the blame.

One glaring example was the government policy, promoted most heavily during the Clinton years, that every American should be able to own a home. Fannie Mae and Freddie Mac became, via the banks, the home mortgage lenders to every American that could breathe, and we still today read the absurd stories of the person earning $10 per hour working at McDonalds who qualified for a $300,000 mortgage.

Is it any wonder that an increasing number of homes are under foreclosure?

Of course the biggest mistake was the numerous bank bailouts. The government encouraged stupid lending practices (through artificially low interest rates, Fannie and Freddie, etc.). The banks, like a drunk with access to free vodka, kept on borrowing, and lending, and derivative swapping. And then, inevitably, it all went bust.

When John Q. Public borrows too much and can’t pay it back, he goes bankrupt.

That’s what should have happened to the banks. They should have been allowed to fail, causing the shareholders and the executives to suffer the losses that they created.

But the politicians, funded in large measure by these same banks, decided that the banks were “too big to fail”, so they bailed them out. Through various means (I won’t bore you with a discussion of the “Fed Discount Window”) the government took your money, and borrowed more, to paper over the bank’s mistakes.

That is the crux of the problem. The government is spending considerably more than they have.

Of course it’s not just the banks where governments are blowing money. The American government has spent trillions on wars in foreign countries for no obvious reason, and for no benefit to Americans. The wars have made America much less safe, and broke.

And that’s sad. If the government borrowed money to build roads and bridges, at least we’d have roads and bridges. But when you spend money on war, and bank bailouts, the money is gone and you have nothing to show for it but debt.

That leads to the inevitable collapse of the U.S. dollar, as foreign investors are no longer willing to buy American bonds. That’s why the U.S. Dollar Index, which peaked around 120 in 2001, is today around 75. That means in the last decade the U.S. dollar has lost well over 30% of it’s value.

In simple terms, and yes I am over-simplifying here, the government, through reckless spending, has given away a third of the value of the country.

That’s a reason to protest.

But the protests should not be happening on Wall Street. They should be happening in Washington.

Protesting on Wall Street makes the “occupiers” look silly.

They put on their clothes, made in China, that they bought at The Gap (a corporation), and take the subway (made by a corporation) to the protest where they take pictures with their Nikon Camera (Japanese corporation) and send text messages to other occupiers over their Apple iPhone (American corporation with production in China) over the Verizon network (a corporation). They are using products made by corporation to protest corporations.

That’s silly.

Instead they should be marching on Washington demanding an end to:

• corporate bailouts with government money;
• wars we can’t afford; and
• foreign borrowing that’s killing the currency.

Either the protestors don’t understand the problem, or they don’t want the correct solution.

Sadly, I fear the later.

It appears that the solution the protestors want is more government. They want government to solve their problems, through more taxes on the rich, or more spending, or whatever.

If the solution to the problem of too much stupid government is more stupid government, the economy is doomed.

Of course driving my car to the party burns fossil fuels. Burning a candle with wax made from petroleum products literally burns fossil fuels. And eating food at the party trucked in from distant parts of the world burns lots of fossil fuels. And one hour is nice, but what about the other 8,759 hours in the year? I live in Ontario, Canada, where most of our electricity is generated by hydro-electric power (from Niagara Falls) and from nuclear power, neither of which produce green house gases. Only 6% of our energy comes from coal, and that percentage continues to decline as we phase it out. So for me, shutting off the lights doesn’t really do much good for the environment; all it does is mean a little bit less water is spilled.

The point of Earth Day is make us feel like we did something. It’s like spending an hour in church on Sunday morning, and behaving badly for the rest of the week. Oh well, I spent an hour in church, I’m a good person.

I’m not a big fan of symbolic gestures. I am a big fan of real gestures.

So, if you really want to help the environment, shut off your lights all the time, give up your gas guzzling car and big screen TV, and make some real changes.

The organizers want to raise awareness, so that we will all write letters to the politicians and demand real change. Sorry, folks, but that’s the wrong approach. Politicians can’t make real change. All they can do is pass laws to limit our freedoms, and raise taxes. In the long run, that doesn’t help anyone.

If you really want to save the environment, save it. Reduce your consumption. Put all of your electronics on power bars so that you can shut them off completely when not in use. Your computer or TV in standby mode when not in use burns a lot of power. Eat locally grown foods. Learn to walk, or ride a bike. You don’t need the government to do these things. You can do them yourself.

Let me repeat: you can do them yourself. I don’t need to impose my will on others. I don’t need to encourage the government to impose my will on others. I make changes in my own life, and I hope that my example will encourage others to also make changes.

So what will I be doing during Earth Hour? I will be leading by example. I won’t be turning off all of my lights and sitting in the dark. I will be planting a plant. I will be starting some plants in pots, and putting them in the window, and then in a few weeks when it’s warm enough outside to transfer them outside, they will go into the ground. And a month or so from now I will start eating fresh lettuce, that I grew myself, that didn’t take any fossil fuels to transport to my house. And all summer long I will eat my own vegetables.

That’s real change, that really helps the environment (and saves me money), and doesn’t involve the government imposing Person A’s opinions on Person B.

Happy Earth Hour.

Airport security is designed to put on a show, to give the impression that the government is vigilant, and is doing everything they can to stop terrorism. It’s obvious that millions of dollars have been devoted to purchasing fancy security scanners, and employing thousands of security personnel, to make it appear that the government is protecting us from bad people. When you enter the security line and take off your shoes, you have a visual reminder of how hard the government is working for you; they are even scanning your shoes.

Unfortunately we seldom stop to think about this. Why exactly am I taking off my shoes? Apparently it’s because one guy tried to blow up an airplane with his shoes. He wasn’t successful, but that one deranged lunatic was enough to cause millions of subsequent passengers to suffer the silliness of removing their shoes. They have fancy bomb detecting scanners at the airport; won’t they detect a bomb in my shoes?

They have even started swabbing hands, to look for explosive residue. It’s true. As we went through the airport, my wife, with our ten year old in tow, had her hands swabbed. Do they really think a mother with her child is making bombs? Again, it’s a case of putting on a good show for the rubes.

I have no objection to airport security. In fact, I am a strong supporter of airport security. I don’t want to be on a plane with a terrorist, or a nutcase, who wants to kill me. I support keeping the crazy people off of my plane. My objection is with how airport security is currently handled.

If you want to know how airport security should be done, go to Israel. Israel is located in arguably the most dangerous part of the world. Israel is constantly “at war” with some of their neighbors. If any country was vulnerable to an airplane passenger terrorist attack, it would be Israel. And yet, to the best of my knowledge, no-one has ever successfully hijacked a plane leaving from Israel. Never.

Why? What can we learn from the Israelis?

What we can learn is that the Israelis don’t put on a show for security purposes; they actually provide security.

In North America, we stand in line, waiting for our turn at the ticket counter, or the security line. At Israel’s Ben Gurion Airport, while you stand in line security agents approach you, and start asking you questions. There’s a great account of this in an article from the National Post, written by David Asper. They ask questions like:

Who are you? Can you show me your ticket please? Your passport? What were you doing in Israel? Where did you go? Did you visit with anyone? Did anyone give you a gift to take to someone back home? If so, may I see it? What’s it like where you live? Are you looking forward to getting home? Have you been in Israel before? And so on.

The security agents asking the questions are not low paid employees who took a day long course in airport security. These are highly trained professionals, with extensive training, who know exactly what they are doing, and what they are looking for. What are they looking for? Something that “fits the profile”, I assume. Someone who “paid for their ticket with cash, is traveling alone, comes from a place known for its extremism and looks nervous.”

I doubt that the Israelis are concerned about an 80 year old grandmother; that’s not the person that fits the profile.

And yes, I realize that this is not fair. The vast majority of people who travel alone, and pay cash for their tickets, and come from places known for extremism are perfectly good, law abiding people. It’s not fair that they are negatively profiled, but unfortunately, that’s the world we live in.

It’s not fair to those people, but it’s also not fair to me, either. Why would I, a man from Canada, traveling with his wife and two children, be required to take off my shoes? How likely is it that I will be blowing up an airplane, with my shoes, with my wife and children on board? Spending billions of dollars each year to screen my shoes is silly, and offensive. Spend the money looking for real terrorists, not just putting on a show. How would I do it? Here’s my plan for real airplane security:

1 “Lock down” the airport. Security should start at the entrance to airport, not the entrance to the plane. The only people who need to be at the airport are airport personnel, and actual travelers. If you are dropping someone off, or picking someone up, do it on the outskirts of the terminal, not inside. Why? See next point.

2 The airport should be infested with security personnel. Once you enter the airport, you should be subject to constant surveillance. That’s why non-travelers should be kept out of the airport. If you aren’t traveling, you don’t need to be there, but you also don’t need to be screened. The fewer the people, the fewer the screening required.

3 Screen early, and screen often. Copy the Israeli example. Before you get to the ticket counter, or the security checkpoint, security agents should have already said hello, and identified anyone who may require further scrutiny.

4 Use technology. Video cameras should be watching people as they enter the airport, to give on the ground security personnel a head’s up as to who needs to be watched more closely. They use security cameras in casinos in Las Vegas; presumably the same approach can be used in airports. That’s why point #1 above is so important. The fewer the number of people permitted to wander the airport, the fewer people need to be monitored by security.

5 Review passenger lists well in advance of the flight. Security should be reviewing the passenger manifest, and paying special attention to anyone that presents a higher level of risk. Similarly, the Canadian traveling with his wife and family, with no criminal record, should probably be subject to less scrutiny.

So what’s my point? My point is that we should be smarter about air security. Putting on a nice show, and asking a grandmother to take off her shoes, is not security. Questioning passengers is. It’s not a question of spending more money, although obviously airport security is costly. We need to spend smart, not just spend. If we took the resources we use to scan shoes, and put that money into real screening, we would be better off.

One final comment. The purpose of this site is to share my thoughts as to why having the government do everything for you is not a great idea. And yet I have just laid out a plan for very extensive government involvement in your life. I have argued for more security, and more intrusion. How do I reconcile that contradiction?

First, it doesn’t have to be the government that provides airline security. It could be the individual airlines, who presumably would have an incentive to enhance passenger safety, to increase their profits. “Fly the safe airline” could become a marketing slogan.

Second, air travel is not a right; it’s a privilege. I do not have to travel by air. I can drive. I can take the train, or take a cruise ship. If I don’t like this intrusive level of security, I can choose not to fly.

Third, given the choice between being blown up in a plane, or not being blown up, I would prefer the “not” option, and that means some restrictions of my personal liberty is required.

However, I must admit I am not comfortable with any of this. I am not comfortable with a reduction in my personal freedom. I am not comfortable giving the more power to the government. I don’t want them screening my because I want to fly somewhere with my family on vacation. I don’t want them tracking my every move. But I also don’t want to get blown up in an airplane. Life is a series of choices between imperfect alternatives, so I am forced to pick the “least imperfect”. I have to pick, but I don’t have to like it.

So, is government involvement good or bad, in the case of Hoover Dam?

One could argue that government involvement was essential in the case of the Hoover Dam, for many reasons.

First, only the government could negotiate the water rights necessary before the project could start. The states of Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming all use water from the Colorado River, so before a dam could be built to divert the water, an agreement was necessary. In January 1922, Secretary of Commerce Herbert Hoover met with the those state governors and negotiated the Colorado River Compact, which split the river basin into upper and lower halves with the states within each region deciding how the water would be divided. It’s doubtful that private enterprise could have negotiated that agreement.

Second, it’s unknown whether or not private enterprise would have taken the financing risk for construction, or even if it was possible for private enterprise to raise the necessary financing. The construction cost was $49 million, which in current dollars adjusted for inflation would be approximately $750 million. That’s a big risk for private enterprise to take.

However, one could certainly argue to opposite.

If a private company was to go to the six states and offer compensation and a share of the profits, I see no reason why a deal couldn’t have been reached.

As for financing, $750 million is a lot of money, but if you travel half an hour from Hoover Dam to Las Vegas, you will see the Wynn Las Vegas hotel and casino complex that cost $2.7 billion to build. I don’t believe private enterprise had any trouble obtaining the financing, and for almost four times the amount required to build the Hoover Dam.

It should also be noted that, while the government owns the Hoover Dam, it was built by private companies. Six Companies, Inc., was a joint venture of six companies that built the Hoover Dam (apparently under budget, and two years early).

So what’s my conclusion? Can large public works only be constructed by the government?

In my opinion, private enterprise can undertake large building projects. The Hoover Dam may therefore not just be an example of government building, but in fact is more properly an example of private know-how, and good old fashioned capitalism.

If the president, or prime minister, or whomever was to say “government is a waste, I’m cutting it to the bone”, he would be effectively terminating his own job. Conversely, the more he spends, the bigger the government becomes, and the more power he has. Would you rather be the CEO of a million dollar company, or a billion dollar company? Obviously the bigger the company, the more power it has, and the more powerful is it’s leader. Government grows to increase the power of the people running in it.

It would take a leader of great intestinal fortitude to actively cut the size of government. That would mean fewer jobs for his cronies, less spending, and less power. No-one gets in to politics to destroy the very institutions they want to control, so government will never shrink on it’s own.

Of course they justify ever growing government spending by quoting the work of John Maynard Keynes, the early 20th-century economist. Keynes essentially believed that individual people were stupid (he referred to their behavior as “animal spirits”), but that the government was smart, and therefore the government should be making all of the decisions. In boom times, the government would spend less. During recessions, the government would deficit finance and spend more to stimulate the economy, and end the depression.

There are two problems with this theory.

First, it doesn’t work in practice. Have you ever known a government to spend less? During boom times they spend a lot, and then during a recession they spend even more. When boom times return, they keep spending. Spending is never cut, debt remains forever (or at least until the currency collapses).

Second, Keynes theories have never been proven to actually work. That’s right, there is no proof that anything Keynes has proposed actually works. There have been no independent academic studies proving that governments are smart and people are stupid. In fact, all of the evidence would appear to prove the exact opposite.

Keynes supporters will give you a line of drivel about the “multiplier effect”. The government spends a dollar, but that creates, say, $1.50 of economic activity, as that dollar buys goods and services throughout the economy. The $1.50 in new economic activity is, according to Keynes supporters, more than enough to repay the original $1 in government borrowing, and so the economy is now better off by 50 cents. The theory, of course, is ridiculous.

In real life what actually happens is that the government borrows $1, but of course with interest over the course of many years will end up paying back $2 or more. The government creates a new program to spend the dollar, so a lot of the $1 is spent on government bureaucrat salaries, offices, supplies, and other expenses that have no value to the economy. Perhaps 50 cents filters through to the real economy, where it is spent, and perhaps generates 20 cents in new tax revenue. Hardly seems possible that 20 cents in tax revenue will be enough to repay the $2 in debt and interest created, does it?

Of course my example is simplistic, but you get the point. The government has nothing to lose, nothing at risk, so they can spend my money wherever they want. That’s in direct contrast to a private business person, who risks everything, and is therefore highly motivated to keep expenses low, and to earn a profit. And that, of course, is the secret to recovering from a recession: get government out of the way, and let private enterprise decide where risks should be taken, take those risks, and actually expand the economy.

And yes, I realize that if it wasn’t for the government mucking in the economy we wouldn’t have recessions in the first place, but that’s another story for another day.

Sense of Urgency

Valerie Jarrett, a senior White House adviser, said the president “feels a sense of urgency” about unemployment and the summit is part of an “ongoing effort to jumpstart the economy and create jobs.” She said other forums would be organized around the country.

At the same time, Jarrett said the administration is constrained by a budget deficit that reached a record $1.4 trillion in the fiscal year that ended Sept. 30 and is projected to be $1.4 trillion again this year.

“There are definite limitations to what the federal government can do,” she said in an interview.

Ya think? Ya think there are definite limitations to what the federal government can do? Here’s the problem, Valerie: the President is trying to “jumpstart the economy and create jobs.” That’s the problem. A President cannot create jobs. All a President can do is take money from someone, and give it to someone else. That doesn’t create jobs.

What creates jobs is a business man or woman who takes a risk, invests some time and money, and creates a product or service of value that people are willing to pay for. If the business is successful, the owner hires people to serve their customers. That’s how jobs, and wealth, are created. If the owner makes a bad product, or performs a bad service, the business fails, and the owner loses their investment. That’s capitalism. There are winners, and losers.

Here’s a trivia question for you: in the entire range of human history, how many jobs has government created? Answer: none. Zero. Zilch.

But wait, you say: what about all of those construction workers employed to build roads; are they not jobs created by the government? No, the government taxed me, to get the money to hire the people to build the roads. If they hadn’t taxed me, I would have more money, which I would have spent, or invested, and I would have created jobs.

And what about President Obama, who got elected on a promise to withdraw troops from Iraq and Afghanistan, and is now doing the opposite, with a “surge” of 30,000 more troops on the way. A surge? Who is this guy; George W. Bush? Here’s a quote, from Der Speigel’s report on his speech announcing the increased war effort:

Extremists kill in the name of Islam, he said, before adding that it is one of the “world’s great religions.” He promised that responsibility for the country’s security would soon be transferred to the government of President Hamid Karzai — a government which he said was “corrupt.” The Taliban is dangerous and growing stronger. But “America will have to show our strength in the way that we end wars,” he added.

Unfortunately for Mr. Obama, the average person is now gradually realizing that rhetoric is empty, and only actions matter. The average person on the street understands that the “war” in Afganistan is an un-winnable war. The Russians occupied for many years, and left in defeat. The Americans (and Canadians, and others) have been there since 2001, and despite the most sophisticated weaponry in the world, and billions of dollars, and thousands of lives lost, nothing has changed. A fancy airplane is no match for a local who knows which cave to hide in. We haven’t found Bin Laden, and we won’t win this war (which really isn’t a war; I don’t recall Afganistan ever attacking us).

The sad truth is that the words “Bush” and “Obama” are interchangeable. Both have engaged in un-winnable wars for political reasons, and both will continue to spend money to stay in power. Obama’s plan is exactly the same as W’s: big surge now, that can be drawn down to declare victory just before the next election. It didn’t work for W, and it won’t work for O.

Sorry to be such a downer, but government’s don’t create jobs.

They tax, and they fight wars.

So spare me the job summits, and spare me the “surges”, and, Mr. Government, stand aside so that real people can take risks and create real jobs.

Today our biggest investment, after our house, is our car.  Back then, after our house, the biggest single investment was a piano.  Everyone wanted one, both as a status symbol and as a means of entertainment (before TV, the internet, and iPods).  Eventually demand dropped, and piano production moved overseas.

Mr. Tucker makes the point that a once vibrant industry declined, but the world did not end.  What would have happened if FDR had done what Obama is doing today and nationalized the piano industry (like Obama is doing with the banking and automotive industry)?  Presumably the industry would have limped along for a few more years, at a huge cost to taxpayers, before eventually collapsing due to lack of demand.

It’s sad to lose an industry, but it’s even sadder to spend billions in taxpayer money to try to prop up a dying industry.  Obviously the automotive industry creates millions of jobs in North America, but if we decided to buy cheaper and better cars overseas, so be it.  Strong auto makers will survive in North America; the  rest won’t.  It’s sad, but that’s how it works, and all the government meddling in the world cannot change reality.

I am struck first by the euphoria surrounding the Inauguration. Millions of Americans have done everything in their power to travel to the heart of Washington to “be a part of history.” I don’t fully understand why someone would want to brave the crowds and the cold and the security to witness a 20 minute speech, when you can get a much better view watching at home.

I don’t fully understand it, because I am a white Canadian living in Canada. I suspect if I was black, living in the United States, and if I had witnessed racism first hand, I would probably have a very different view. I was born in Toronto, a city that today has more “non-whites” than whites. My best friend growing up was Jewish. I had many friends who were black, Chinese, East Indian. I even had one or two American friends. Obviously there is racism everywhere, but growing up in my middle class neighbourhood on the outskirts of Toronto, I never experienced serious racism first hand.

My father, also a Canadian, went to university in Indiana in the late 1950s. I remember him telling me the story of a fellow college student, who happened to be black, asking my father where he got his haircut. My father gave him the name of a local barber, and my father’s friend came back to tell him that the barber refused to cut his hair, due to the colour of his skin. My father immediately passed the word around campus, and none of my father’s friends ever got a haircut from that barber again. So I understand that racism exists; I’ve just never experienced it directed at me.

I also understand that as late as 1970 there were many college football teams in the U.S. that had no black players. That’s astounding.

I guess if I couldn’t get a haircut, or couldn’t play football, or if I was ostracized or mis-treated because of my skin colour, I too would be rejoicing today. Being black no longer means you can’t be President.

And that’s a very good development.

And that is why there is such euphoria in the States today.

Today there is euphoria, but what will there be tomorrow? Will President Obama actually be able to do anything? Can he solve the economic crisis? Can he eliminate the massive burden of debt we are carrying? Can he fix the horrendous structural problems now facing the U.S.?

Personally, I don’t think so. I don’t believe the government can actually solve any problem. The government can raise or lower taxes, and they can spend my money, but that does not change reality.

Obama’s only chance for success is if he can convince the American people to fix this mess themselves. If he can convince people to live within their means, to pay down debt, and to not expect the government to take care of them, he will be America’s most successful President. He will succeed if he can convince Americans to take care of themselves.

I’m pessimistic on that front, because government officials tend to want to us government power to fix things. Why go into government if you want to lessen the role of government?

One final thought: President Obama owes a huge debt of gratitude to George W. Bush. President Bush greatly expanded the role of government. He has dramatically curtailed individual freedoms. Thanks to George W. we now think it’s normal to have to take our shoes off before boarding an airplane, stupid as that is. We are used to government intrusion in every aspect of our lives.

If President Obama wants to use the full power of government to enforce his agenda, the American people will not resist, and for that he can thank George W. Bush.

The pro-bailout faction, who call it a "rescue" instead of a "bailout" to make it sound more appealing to the populace, keep quoting the job numbers. Millions of jobs will be lost, they say, if the Big Three are allowed to fail. That may be true, but it’s still a bad idea. Let me count the reasons:

1 Bankruptcy destroys a corporation, but it doesn’t destroy physical assets. If General Motors declares bankruptcy tomorrow, all of the General Motors machinery and factories will continue to exist. All the suppliers stamping plants will still exist. Physical assets are not lost; they simply change ownership. New owners will buy the assets, for cents on the dollar, and re-deploy those assets by starting new companies. And given how poorly the existing owners have used those assets, wiping them out is a good idea.  

2 Speaking of the Big Three, management has done a horrible job. Instead of focusing on cost cutting and quality, they have spent the last decade focusing on building big SUVs and big trucks. It’s Honda that has perfected the Honda Civic (now the number one seller in Canada, and high on the list in the United States), and it’s Toyota that invented the Prius, the most popular ultra low mileage car that is currently mass produced in the world. Giving money to the Big Three simply rewards them for these past mistakes, and guarantees us more of the same.

3 We all know how governments work. If they give money to the Big Three, they will want control. They will place limits on executive compensation (which given past history for those clowns isn’t an entirely bad idea), but they will also tell them how to run the company. They will mandate that a certain number of cars must be "green"; they will tell them were to maintain plants and build new ones (presumably where their voters are). In a free market, companies should be free to make their own decisions, good or bad. If they make bad decisions, they fail. If governments make bad decisions, we the taxpayers have to pay for their mistakes, and that’s a bad idea.

4 A government bailout doesn’t solve the problem. Restructuring is necessary, but if the government pays for the sins of the past, restructuring won’t happen.

5 A bailout would be a band aid solution. Whether Detroit gets $25 billion or $50 billion, if their cost structure remains out of whack, they will continue to lose money. If they keep building vehicles that no one wants to buy, they will keep losing money. And when it’s taxpayer’s money, I object.

Bailing out the banks was bad enough. The auto makers would be worse. And then whomever comes next (credit card companies? computer makers? Shoe shine boys?) will drag us down even further.

There comes a time in life when we must all pay for our mistakes. If you drink too much wine on Saturday night, you will have a hangover on Sunday morning. If you spend more than you make, you may be faced with personal bankruptcy. And if a car company makes very expensive lousy cars, the ultimate solution is bankruptcy, so let’s do it, get it over with, allow new owners with new management and a new vision to take over the assets, and get started on building a new, vibrant, efficient North American automotive industry.