PunditPolitics.com

Note From the Editors

admin — Sun, 18 Oct 2009 17:45:37 +0000

Sorry for the hiatus everyone, currently too many of the site’s contributors are engaged in full-time jobs and leading utterly too demanding of lifestyles in order to consistently contribute quality insights to this blog and the online political sphere at large. Over the coming months, we will be seeking out more contributors in order to reactive the website.

Regards,

Pundit Politics Team

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Can We Trust Google? A Review of American Anti-Trust Law

Jesse Smith — Sat, 22 Aug 2009 00:35:35 +0000

(This article is both an examination of the intended role of American Antitrust law and the case study of Google as possibly in violation of such law. Part I will focus on Google, Part II will look at the progression of Anti-Trust Law in the U.S.)

Part I: More About Google

In September of 1998, Google Inc. was created.

At its beginning, Google was nothing more than a quaint search alternative to the likes of Yahoo as well as many other search engines now long forgotten. Today, barely more than a decade later, Google has become a giant, employing over 20,000 personnel and generating more than $20 billion annually in advertising revenue. But don’t let the title of this article mislead you, by no means does Google possess a classic monopoly in the online advertising market. Google currently competes primarily with Yahoo, Microsoft and AOL in the e-advertising industry, but as long as Google Search continues to host the majority of internet search queries worldwide Google stands to remain as the dominant party in the growing online advertising game - a fact not remiss with the U.S. Department of Justice (DOJ).

A large component of Google’s success has been tied to the company’s investment in developing its brand, now appraised by many as the most powerful in the world¹. A Key component of Google’s branding has been to create the public perception that Google operates as a sort of public trust, one that considers the benefit of the consumer and society before all else, including the company’s own bottom line. Before Google, I suspect many would have thought such a degree of altruism would not be possible, or at least not effective, in a capitalist corporate world, but to Google’s credit they have continued to find ways to both make money and provide much free benefit for us all. In addition to providing the internet’s most effective navigation tool (Google Search) Google has continued to release and develop free web-based software such as Gmail, Google Docs, Google Analytics, etc, even though some of these products lack foreseeable avenues of significant monetization. On top of this, Google’s environmental reputation is nothing short of sterling, and it is consistently rated as one of the best companies to work for. As a consumer, there is simply a lot to like and respect about Google.

Still, the true genius behind the Google business model lies in the company’s ability to generate its profits through the innovation and expansion of the entire online advertising market and the internet at large for that matter. For example, Google Ads allows advertisers to control whether or not their ads will display based on the appearance or exclusion of certain keywords in a search query and/or webpage content. Suppose a certain TV retailer wanted an ad to display on Google Search only after a user searches ‘buy tv’. However, this particular store doesn’t sell Samsung televisions so they do not want the ad to display if the term ‘Samsung’ was searched. Using minor customization of Google Ads, a search of ‘buy samsung tv’ would not display the advertisement, allowing the TV retailer to more efficiently advertise by avoiding unlikely buyers. In this way, Google not only streamlines online advertising for existing advertisers, but also makes it a more viable option for companies targeting highly specific consumers - often small businesses.

Indeed, there are many examples showing Google to be a creator of industry, from their charting tools like Google Earth and Google Maps to their web-monetization tools like Google Analytics and Adsense to their creation of the web 2.0 AJAX technique, one thing is clear - Google’s products have provided a lot of free assistance. But despite Google’s knack for online services the company has been perhaps zealous in its ongoing expansion, which has included aggressive acquisitions into many pockets of online industry. Google’s most high profile were the purchases of Youtube and advertising giant DoubleClick. Although Google drew a good deal of legal attention at the times of these purchases they believed they were operating with competitive ethics in mind and likewise Google convinced the DOJ as much. Then, in 2008, a proposed advertising deal with fellow e-mogul, Yahoo, was rejected by the Department of Justice. The rejection was not because there was anything anti-competitive intrinsically with the proposed deal - in fact, Google has many similar deals in place - but rather because it would have further enabled Google to participate in future anti-competitive behavior.

Such a sudden reversal of treatment from the DOJ was likely a shock for a company who’s informal motto is “don’t be evil,” but the timing appeared fortunate because Google had been a very early backer of Presidential Candidate Barack Obama, then well on his way to ascending to the white house. In fact, Google CEO Eric Schmidt was even a member of Obama’s transition team and he currently sits on Obama’s technology advisory council. Knowing all of this, it is easy to see why many including myself were led to speculate that Google would be allowed to operate with the utmost political trust. Since then, however, new events have transpired that lead me to believe my prior assumption could not have been more wrong.

While no formal antitrust case has been raised against Google, the antitrust division of the DOJ has been fairly blatant in its foreshadowing of an impending suit. On Jan 22nd, Obama appointed Christine Varney to the head of the antitrust division of the DOJ. Only months before this, Varney, who had been one of the top attorneys representing Netscape in their antitrust suit against Microsoft in the 1990’s, spoke out vociferously against Google, comparing them to Microsoft insofar as being a behemoth with the power to crush its competitors. Varney suggested that the government had been too slow in building a case against Microsoft, and even went as far as saying, “I think we are going to see a repeat of Microsoft.”² Since her appointment, Varney has not mentioned Google by name, but has added that she plans to take an aggressive approach to enforcing our nation’s antitrust laws, a daunting prospect for Google’s continuing prosperity.²

So, with the DOJ now breathing down Google’s back, the question becomes not if there will be an antitrust suit, but on what legal grounds? To answer we must not only look at the body of laws, but also at the history of the court’s interpretation of the law. At the outset, however, it is hard to imagine how a company that seems to go out of its way to improve industry could be in violation of laws designed with a very similar intent - to protect and promote industry.

Stay tuned for Part II…

1) Wired Magazine: The Plot to Kill Google

2) Wired Magazine: Why is Obama’s Top Antitrust Cop Gunning for Google?

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The Army of Misinformed Martyrs: Commentary on Health Care Reform

Keenan Pontoni — Mon, 17 Aug 2009 08:09:50 +0000

While politics often oscillates between being a source of extreme optimism and being a source of tragic disillusionment, it seems that many people in politics are used to such vicissitudes, and are immune to the emotional effects that accompany them. Indeed, I once thought I was capable of abstracting personal feelings from the polemics of the democratic process. Unfortunately, after attending Congressman John Dingell’s August 7th town hall meeting in Michigan, I was dislodged from my emotional indifference to the natural ebb and flow of politics and thrust into a whirlwind of so-called political passion. As I stared blankly at the unruly crowd, which was screaming at the representative who was given no opportunity to answer questions that were posed by interested voters, I observed what seemed to me as a failure of the democratic process.

While I will not claim the oft-stated opinion that the groups who attend town hall meetings with the sole intention of disrupting the meetings are working wholly and unquestionably against the democratic process, the meeting did leave me with a couple of observations: 1) There is a wealth of misinformation concerning health care reform; and 2) Those who are perpetuating such misinformation are in no way heroic and are in no way political martyrs; instead they are largely responsible for the breakdowns in the democratic process that plague town hall meetings nationwide.

The three most egregious myths about HR 3200 – the public-option health care bill – are the following:

Myth 1: The bill will allow illegal immigrants to get free coverage.

Section 246: “No Federal Payment for Undocumented Aliens. Nothing in this subtitle shall allow Federal payments for affordability credits on behalf of individuals who are not lawfully present in the United States.” As I am quoting the bill directly, there is no additional analysis needed.

Myth 2: The bill will pressure elderly citizens to end their lives prematurely.

Section 1233: “Provides coverage for consultation between enrollees and practitioners to discuss orders for life-sustaining treatment. Instructs CMS to modify ‘Medicare & You’ handbook to incorporate information on end-of-life planning resources and to incorporate measures on advance care planning into the physician’s quality reporting initiative.” The consultations are not mandatory and will only provide information requested by the patients. Again, I am merely quoting the bill directly.

Myth 3: Private insurance and employer-based coverage will cease to be offered.

Section 102: “Protecting the choice to keep current coverage: (a) Grandfathered Health Insurance Coverage Defined- Subject to the succeeding provisions of this section, for purposes of establishing acceptable coverage under this division, the term `grandfathered health insurance coverage’ means individual health insurance coverage that is offered and in force and effect before the first day of Y1 if the following conditions are met: (1) LIMITATION ON NEW ENROLLMENT- (A) IN GENERAL- Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day of Y1. (B) DEPENDENT COVERAGE PERMITTED- Subparagraph (A) shall not affect the subsequent enrollment of a dependent of an individual who is covered as of such first day. (2) LIMITATION ON CHANGES IN TERMS OR CONDITIONS- Subject to paragraph (3) and except as required by law, the issuer does not change any of its terms or conditions, including benefits and cost-sharing, from those in effect as of the day before the first day of Y1. (3) RESTRICTIONS ON PREMIUM INCREASES- The issuer cannot vary the percentage increase in the premium for a risk group of enrollees in specific grandfathered health insurance coverage without changing the premium for all enrollees in the same risk group at the same rate, as specified by the Commissioner.” This is a lot to swallow, but I included the exact and complete text so that it can be referenced accurately. The above shows that, conditional on continuing to meet basic standards, largely those that exist already, existing private insurance and employer-based coverage will be permitted.

A discussion of the merits and costs of the bill is outside the scope of this article; in explaining the aforementioned myths I hoped only to demonstrate that there are commonly-held beliefs that directly contradict the text of the bill. It would undoubtedly be the case that a bill that ensures illegal immigrants using taxpayer dollars, promotes euthanasia, and strips individuals of existing coverage would be detrimental and inhumane; the reality is, however, that such a bill does not exist. In order to have a meaningful discourse concerning health care reform, we need to hold accountable those self-proclaimed entertainers and pundits who are actively espousing misinformation concerning the bill. If we are able to to so, then we might be able to once again hold town hall meetings that provide a forum for constituents and representatives to discuss the bill on the basis of bill’s terms and to modify the bill as to garner the support of the electorate.

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There’s No Such Thing As Free Emissions Reductions

Keenan Pontoni — Fri, 31 Jul 2009 01:02:29 +0000

The American Clean Energy and Security Act that passed in the House and is awaiting approval in the Senate would be a sweeping and revolutionary change in environmental policy unlike anything we have seen since the Clean Air Act was passed in 1963. The bill is so broad and comprehensive in its applications that it has rendered most debates about its merits incomplete and ineffective, as if the two sides pitted against each other have merely been two ships passing. To simplify, the bill attempts to implement four principle policies:

A cap and trade program in which companies in the heavy industry and energy sectors would be required to own permits for carbon emissions. 85 percent of the permits would be free, and the remaining 15 percent of permits would be auctioned off in order to provide revenue needed to execute other measures in the bill.
A number of plans designed to mitigate the economic costs of lowering carbon emissions, including cash transfers to poor households whose energy costs will rise and unemployment benefits to those who will lose their jobs in affected industries.
Efficiency requirements and funding for research and development to improve energy efficiency.
A renewable energy requirement that forces large electricity providers to produce 20 percent of their output from renewable energy sources.

The above measures are designed in part to lower carbon emissions 17 percent by 2020 and 80 percent by 2050. Additionally, the bill hopes to invest in more efficient energy systems and in renewable energy sources.

That all said, the bill is overwhelming, which is why messages from pundits seem largely inconclusive and incoherent. I hope to clarify the confusion about the implications of the bill with the following two principles:

Though investing in energy innovation could lower energy costs and prove economically beneficial in the long-term future, cutting emissions given current energy capital is economically costly in the short run.
If the costs of the bill, in terms of transition programs and investment initiatives, exceed the revenue provided by the bill, then the bill will either fail to complete the transition programs and investment initiatives or the programs will demand outside funding from the government.

What do I mean by the first principle? Lowering emissions by 17 percent will be costly to industries who are being asked to lower the emissions. The increased costs of lowering emissions in the short run will be reflected in higher costs for all products that are in some way related to heavy industry and energy, which happens to be all products one can buy. The costs are passed to all manufacturers, sellers, and consumers, to a greater or lesser degree depending on their respective supply and demand elasticities, and the economy takes a hit. The economic damage of lowering carbon emissions by 17 percent in the short run is wholly unavoidable, no matter what the mechanism is for doing so. Until more efficient energy sources and systems are developed, the amount carbon emissions are reduced will be directly related to the amount the economy suffers. In this sense, lowering carbon emissions in the short run is a trade off that poses the following question: Do we value the lowering of emissions enough to spend the amount that doing so requires?

And the second principle? The bill spends a lot on transition programs to ease the economic costs of lowering emissions in the short run. The programs, in addition to investing in renewable energy and in efficiency-improving systems comprise a price tag much greater than the revenue that will be earned from auctioning off 15 percent of the pollution permits. For example, 15 percent of the 15 percent raised would be used to provide cash transfers to poor households whose energy costs will likely increase by at least 10 percent. Though it sounds nice to provide such transfers, the numbers do not add up. To fully mitigate the costs would require outside funding, either from the government or from third-party non-government organizations. Again, there is a clear trade off and another question is posed: Do we value the transition programs to ease the economic burden and the investment initiatives to improve efficiency and the availability of renewable energy sources enough to spend the amount doing so requires?

My point is neither to oppose nor support the bill; I hope only to illuminate the true costs associated with its plans. It would wrong to think the bill will be self sufficient since the costs of the bill are far greater than the revenues provided. Furthermore, though investment in energy efficiency may lower costs in the long run, reducing emissions in the short run is a trade off, as doing so is costly to all corners of the economy. In an effort to avoid taking sides as so many pundits have, I will pose the questions that will need to be answered by those considering the bill: Are we willing to spend the amount the bill demands? Can we do so in the current economic climate? And do the long-term environmental benefits and potentially long-term economic benefits justify the short-run expenses?

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Republican Party Watch: Romney leads Pack, Palin

Jesse Smith — Tue, 21 Jul 2009 16:45:16 +0000

Last month I examined the current landscape of the Republican leadership. Now, courtesy of the latest Gallup Poll, we can transition to a similar topic - the leading potential candidates for the GOP Presidential Primaries in 2012.

While the previous Gallup Poll reported that Rush Limbaugh and Newt Gingrich had a very slight edge over the rest of the field as the most influential voices in the Republican party, neither polled as a particularly serious contender for the 2012 GOP nomination. Instead, according to the latest Gallup Poll, Republicans support Romney with a leading-but-hardly-dominating 26%, followed closely by Palin with 21% and Huckabee 19%, followed by Gingrich with 14%.

For those pundits who had taken the rare opportunity to tune out of the Presidential race, Romney leading the pack must look like a complete reversal of his 2008 campaign when he was never the front-runner and had to drastically outspend his opponents just to stay in the ring. So what has changed? This time around, at least in the early goings, Romney is not only fund raising better than his likely opponents, but he is also seeing results in the polls. A sign of things to come or simply the default choice? Impossible to know for sure, so I will refrain from speculation.

While Romney has been quietly amassing resources and laying a foundation out of the spotlight, his most controversial opponent, Sarah Palin, has been doing what she does best - staying in the spotlight. On July 25th, 2009, Palin will officially resign as Governor of Alaska. While many that oppose Palin are rejoicing at the news, and her constituency is still scratching their collective head, all that is certain about this development is that no one knows what exactly motivated the move or how it will play out by 2012. Either way, democrats, republicans and independents are going to be talking about it for a while. But maybe that’s the entire point. Sarah Palin is flashy, but she is also polarizing and despite showing early fund raising infrastructure Palin has raised less than half as much as Mitt Romney in 2009.

Mike Huckabee, who is sitting at 19% in the polls, is right in the mix with Romney and Palin. If you suppose that Romney has the financing and Palin has the flair then Mike Huckabee has the charisma. Huckabee gained a lot of momentum in 2008, coming out of relative obscurity and winning over many Republican voters with his charm and candor. Huckabee doesn’t have much fund raising prowess, at least not yet, but it ’s hard to find a person that actively dislikes Mike Huckabee, and that might have something to do with the fact that as of July 20th, 2009, Huckabee polls the best of any likely GOP candidate against Barack Obama.

Whoever does come out on top will need to compete with the fundraising behemoth that is the Obama campaign, which raised over $750 million throughout the 2008 campaign. Barring an Obama meltdown in his first term, there is no reason to expect he won’t be able to raise a similarly ginormous amount of money in the face of a strong Republican opponent. In light of Obama’s vast resources, any successful challenger will need very deep pockets. Advantage Romney.

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Iranian Election Irregularities, Impact on U.S. Relations

Michael Toney — Fri, 26 Jun 2009 05:56:33 +0000

On June 12, 2009, Iran held a presidential “election” that saw the unabashedly anti-American incumbent President Mahmoud Ahmadinejad win an astonishing and suspicious 66% of the vote, while his only real challenger - moderate reformist Mir-Hossein Mousavi- received a mere 33%.

There have been many allegations of fraud made by Mousavi’s supporters, who have been protesting in the streets of Terhan. Nonetheless, it will be difficult to conclusively prove election fraud with the information currently being made available. Lacking concrete proof, the combination of the security council admitting the number of votes recorded in 50 cities exceeded the number of eligible voters by a combined 3 million votes, and statistical analysis indicating that there is only a 1 in 200 chance the published vote numbers were not altered make it reasonable to conclude the election was fixed. Many columnists have questioned how this ‘farce’ of an election should impact President Obama’s diplomacy with Iran. The spirit of these questions are wrongheaded; I am more curious why so many pundits think the Iranian election th should affect Obama’s diplomacy with Iran in any way.

In his first months in office, President Obama has made it clear he is willing to deal diplomatically with non-democratic, illegitimate regimes, especially on important issues such as national security and nuclear nonproliferation. Clearly the most pressing issue in Obama’s relations with Iran is stopping the Iranian nuclear program. A nuclear-armed Iran is a nightmare scenario for a number of national security experts - so it makes sense that this would be the salient issue for President Obama. In light of the urgency of this issue, why should President Obama care that Iran held fraudulent elections? This question becomes even more pertinent given the fact that Ahmadinejad is currently supporting Iran’s nuclear program and Mousavi supported Iran’s efforts to buy nuclear technology from Pakistan when he was prime minister. Both serious candidates support Iran’s nuclear program, so how much should the fact that the election was fraudulent really matter from Obama’s perspective?

While the Iranian regime’s blatant abuse of both protesters and human rights is, in Obama’s own words, “deeply troubling,” is it so troubling that the United States should subvert its own pragmatic national security interests in an idealistic stand against the human rights abuses the US has had no trouble ignoring in the past? This is a vexing question the goes beyond the scope of the election itself. There is, however, an even more fundamental reason why Iran’s electoral fraud should not impact the US’ relations with Iran. President Obama was willing to engage Iran on June 11th when it was clearly a non-democratic and arguably illegitimate regime. Why should president Obama no longer be willing to engage Iran after June 12th, when it was still a non-democratic and arguably illegitimate regime?

Iran is a country where the “supreme leader” holds all the real power and makes the most significant appointments (including half of the guardian council - a 12-member body charged with electoral oversight and ensuring the government stays true to the principles of an Islamic state). This “supreme leader” is chosen not via direct election but by the vote of a council of government-screened Islamic scholars. What difference does a fraudulent presidential election make in an already clearly nondemocratic Iran?

Taking it a little further, many people wrongly equate accurately tallied votes with free, fair and competitive elections and democracy. However, even if all the votes in this election had been counted correctly, it would have been neither a free, fair or competitive election nor a harbinger of democracy, as some wishful thinkers would hope. This is because in order to gain permission from the Ayatolla to run for president, all candidates ”had to pass an ideological and political litmus test that rejected more 400 other candidates, leaving only Mousavi, Ahmadinejad, and two other establishment types”(link). The Ayatolla all but hand picked which candidates could run for president. The fact that the vote count was likely erroneous doesn’t really matter. Even if all votes for this largely figurehead office had been accurately counted, the process still would have been a far cry from a free, fair and democratic election.

When one considers the preeminent importance of preventing nuclear proliferation in Iran, coupled with the fact that Iran did not significantly change before or after the fraudulent elections, how the Iranian election should affect US policy with Iran becomes a much less interesting debate than why it should at all.

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Latest Poll: Republicans Lack Leader - I Blame McCain

Jesse Smith — Sat, 13 Jun 2009 18:44:39 +0000

Exactly who speaks for the Republican Party these days? According to the latest Gallup poll, 18% of democrats think Rush Limbaugh is the primary speaker for the Republican Party, while republicans themselves can’t come to more than a 10% consensus for any republican leader. Only a year ago the answer would have been a resounding ‘John McCain.’ But the subsequent political maneuverings of the McCain campaign not only compromised McCain as the present and future leader of the Republican Party, but also left the party without a clear direction, as reflected in this latest poll. Even during the Republican primaries there was a great deal of political division among the republican presidential candidates and the priorities of their voter constituencies - most notably between the Christian base of Mike Huckabee, the Mormon and fiscal bases of Mitt Romney, and the military and moderate republican bases of John McCain.

Shortly after McCain prevailed in the primaries, it became clear in the polling that McCain was not appealing broadly enough to Romney or Huckabee supporters. The McCain campaign, aware of the Republican Party’s already somewhat maximized base, felt compelled to do something extreme - adding Sarah Palin to the ticket. In choosing Palin, the campaign picked a VP candidate very different from its presidential nominee. They augmented the ‘John McCain as the one voice atop the Republican Party’ strategy into the ‘John McCain and Sarah Palin as the two separate voices atop the Republican Party’ strategy. At the time, the Republican campaign saw that the less-than-unifying McCain would not carry the 2008 electoral vote. But, perhaps with a pseudo-second ideological leader appealing to an entirely different set of voting blocks, the republicans could achieve a broader appeal and win over the electorate.

Now if at this point you’re asking yourself how the Palin selection was any different from every other VP selection, allow me to clarify. Joe Biden, for instance, was selected to provide international relations experience and to help carry the state of Pennsylvania, among other considerations. While Obama and Biden have their political differences, these are minuscule compared to their common ground and as such it’s safe to reason that the vast majority of both Obama and Biden supporters viewed either candidate as an adequate leader for the Democratic Party. However, can the same claim be made about the McCain/Palin ticket? Seeing as the two Republicans hit the campaign trail - and indeed embodied - substantially different ideological messages, I would say no.

In contrast to the prototypical VP pick, which serves to complement and reinforce the presidential nominee’s positions, much of Sarah Palin’s appeal actually clashed with McCain’s appeal and vice versa. McCain campaigned primarily on his experience, both in military and political matters, as well as his ability to bring about real change in republican leadership. Palin, by contrast, offered zero experience and looked like a reincarnation from the Bush Administration with her colloquialism and lack of precise public speaking. Similarly, for Palin supporters, Palin appealed primarily as a strong female leader and as a religious conservative, qualities both somewhat at odds with John McCain’s past divorce from his then recently-mangled first wife and his questionable pro-life record. Furthermore, Palin’s populist demeanor clashed somewhat with McCain’s long-held ‘I’m a maverick’ posturing - despite the McCain campaign’s attempt to bring Palin into the maverick fold.

I’m not suggesting that the McCain campaign was oblivious to these clashes. Quite the opposite actually. The McCain campaign simply hoped that republicans would view the McCain/Palin ticket as covering all of the essential ideological bases, while choosing to overlook the hopefully not-to-egregious contradictions. Not only did this effort fail to win the presidency, but it left the Republican Party with a confused message and lack of direction. It should come as no surprise, then, that without a united policy agenda Republicans cannot agree on a single representative leader. And if anyone’s to blame for this lack of cohesion - which is always a fun and productive thing to do - my vote is for McCain.

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GM’s Collapse: A Story of Prosperity, Decline and Defeat

Keenan Pontoni — Wed, 10 Jun 2009 01:52:55 +0000

Michigan is sad. I hear about it everyday from the family and friends I have who still live there. “It’s a sad day for Michigan,” my mother says nearly every time she calls. “But the weather is nice today,” she concedes. Michigan is sad, as is the country, after GM’s collapse. Indeed, we should not downplay the significance of GM’s apparently ineluctable filing of Chapter 11 bankruptcy on 1 June 2009 - more than a century after GM’s founding on 27 September 1908. It comes as an unsurprising but hard-to-swallow finale to a decades-long decline in market share and profits. Unfortunately, the purported predictability of GM’s demise, or a comprehensive understanding of why it occurred, does little to soften the blows endured by manufacturers, auto workers and Americans in general as a result of GM’s fall and ultimate collapse.

Just what does this mean for the U.S. economy, already saddled with the collapse of Lehman Brothers and burgeoning government debts? The negative affect of the ensuing layoffs will take time to reveal itself as the loss of industry spreads from its epicenter in Detroit, but when put in the context of the entire U.S. industry sector certain indicators suggest that the actual impact of the GM collapse may not be commensurate with its symbolic impact as a face of industry.

Analysts have jumped all over the bankruptcy, using it to reinforce long-held beliefs about business structure, efficiency and government intervention. The story tends to be told the same way: GM used an expansive corporate organization throughout the middle of the century to thrive in a market where a variety of products dominated. Then the company started losing profits to more efficiently made and higher-quality cars from automakers like Toyota, Honda… etc. In a short span of time, GM went from controlling more than half of the American demand for cars to less than a quarter. Bogged down by rigid union contracts and a stubborn adherence to a diverse and expansive corporate form, GM’s cost structure prohibited it from competing with its Japanese and European counterparts. Soon there was little to do but watch the downfall of an American manufacturing empire.

But despite the pervasive reports opining about the inevitability of GM’s fall, it did not have to happen this way. Like many economists, I tend to view market competition in terms of natural selection, where corporations are like self-evolving organisms whose ‘fitness’ is determined by their bottom lines. In good times, even unfit companies can survive. But when disaster strikes, the standards for fitness raise dramatically and the least profitable companies die off. The unhappy reality is that just when GM was making the changes it needed in order to survive in a competitive market, economic disaster struck and swept away its hopes for long-term recovery. GM may have been able to evolve to match the efficiency of its competitors, but demand dropped abruptly and left GM without the resources it required to actualize its evolution. At best the world’s demand for cars is at a very low 60 million a year, but with the saturation of supply, more than 90 million cars a year are being produced. GM simply could not survive in a world so short in demand and so plentiful in supply.

What was the evolution that was occurring in GM, and why should we care? The changes included a renegotiation of GM’s contract with the United Auto Workers union such that benefits were reduced to rates similar to their competition; a downsizing of the previously over-expanded corporate structure; and a successful commitment to producing less costly, higher quality cars. All of the changes were in place before the end of 2007, and all of them were contributing to improvements in GM’s market share. But the changes weren’t complete enough for GM to compete after the economic recession, where only the strongest would survive. GM simply needed more time. The federal injection of $50 billion was intended to buy GM the time it needed, but sadly it wasn’t enough. Most of the money was used to pay debts and pensions, doing little to lower the costs of production. Additionally, demand has worsened, credit is still hard to come by, and structural changes take multiple years to realize.

We should care that GM was on the right track before the recession because it informs us of a couple important realities. First, American-made cars can be efficiently produced while achieving a high level of quality. Domestic automakers can match the cost structures of their foreign rivals if they are committed to efficiency - a commitment that was simply too little to late from GM. And second, all American companies, especially in the manufacturing sector, have a lot to gain from less rigid union contracts; if we want workers to be protected in the areas of health care and retirement pensions then the government needs to incur the burden, not corporations that are being asked to compete internationally.

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Three of Obama’s Broken Campaign Promises – How Egregious are They Really?

Alex Bowers — Sun, 31 May 2009 19:02:21 +0000

Before we delve into the particulars of Obama’s broken promises, something must first be said about assessing the relative “badness” of a broken presidential campaign promise in the first place. Clearly all skilled candidates (even those without Obama’s incredible rhetoric) need to paint a glossy picture of the future they’ll be able to provide us as President.

However, not surprisingly, candidates often find it difficult to follow through 100% of the time – even when they want to. Sometimes political expediency and/or the realities of a new day get in the way. Determining the relative “badness” of a broken campaign promise, then, has to do with how blatant, outrageous and unfathomable the betrayal - did the candidate lie, foolishly over-promise, or simply make a mistake? Perhaps a situation changed rendering the execution of a particular promise impossible.

So, four months into his Presidency, Obama is bound to have either forgotten, lost interest in, or even just plain shelved some of the things he vowed to change while he was out stumping for change. Here are a noteworthy few - but check out Politfact for a complete list.

Recognizing the Armenian Genocide: Obama criticized Condoleeza Rice for firing John Evans, the U.S. Ambassador to Armenia, for using the term “genocide” in reference to Turkey’s slaughter of 1.5 million Armenians and vowed that as President, he would recognize the event as such. While Obama did make a statement about the event on April 24^th, Armenia’s day of memorial, he has not in fact used the word “genocide” and appeared to take great pains to avoid it during his visit there when asked specifically by a reporter from the Chicago Tribune.

Egregiousness Scale: 5

Assessment: While it does seem diffident for Obama to skirt around the very word he admonished Condy for avoiding, we have to respect the fact that this President needs to re- establish and then maintain respectful diplomacy with countries around the world, including Turkey. The fact is, the word ‘genocide’ makes everyone a little uncomfortable, especially when most of Turkey’s genocide perpetrators are dead. Obama will have future opportunities to drop the “g” word, once he’s good and chummy with Turkey’s President. And don’t think for a minute that Obama doesn’t personally recognize the genocide, he’s merely bending his promise a little bit for practical diplomatic reasons.

Ending Income Tax for Seniors Making Less than $50,000: Obama’s comprehensive pre- election tax plan proposed to “eliminate all income taxation of seniors making less than $50,000 per year. This will eliminate taxes for 7 million seniors, saving them an average of $1,400 a year.” So far, this promise hasn’t made it into either the stimulus bill (American Recovery and Reinvestment Act) or Obama’s February budget outline.

Egregiousness Scale: 6

Assessment: Simply put, Obama made this promise before the economic crisis landed in our laps. Nevertheless, it’s still disappointing to leave low-income seniors sitting, waiting, wishing for a chance to buy food and meds in the same month. But, as we admit that as income tax remains a vital guaranteed revenue stream for the government, this promise might need to be put on hold until we turn the ship around.

Tougher Rules Against Revolving Door for Lobbyists and Former Officials: Obama promised that “No political appointee will be able to lobby the executive branch after leaving government service during the remainder of the administration.” The President signed an executive order with similarly specific language on his first full day in office, ostensibly symbolizing his earnest commitment to the issue. However, a loophole came in the form of a waiver attached to the executive order which allows the administration to employ former lobbyists, and to date, the waiver has been used at least three times.

Egregiousness Scale: 8.5

Assessment: Clearly the most controversial of Obama’s promises, as wresting control of Washington away from the corporate lobby was one of the President’s most popular and resounding talking points last year. This one is going to be tough to come back from, assuming the administration continues to let former lobbyists and officials serve in spite of the order. While many Americans are still granting Obama generous license to add the best and brightest people to his team no matter their industry affiliations, he’ll be walking a very thin line if lobbyists start to pop up again and again.

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New Band-aids Replacing the Old: The Real Effect of Federal Bailout Money on Education

Keenan Pontoni — Sun, 31 May 2009 05:35:06 +0000

The federal bailout allocated $150 billion for education – a 2-year commitment that should have doubled the current funding for local schools. While it would certainly be too early to notice significant gains in education, as new hirings and new investments would likely occur this summer, one might expect to see, at the very least, a static picture in light of the recent funding boost. But we see the opposite: schools are in a frenzy to keep their doors open, teachers are losing their jobs, and special projects are being eliminated.

So why, then, does the education system seem anything but static if there is so much money being graciously pumped into the system by the federal government? Why have California, New York, Pennsylvania, and Arizona announced profound decreases in education spending, despite receiving education funding relief from the bailout? Many states are following suit. In the midst of the boldest federal commitment to education since World War II, educators are running for the hills instead of celebrating.

The answer is as clear as it is upsetting: local funding for education is gone. The economic crisis has decimated state finances, rendering state budgets for education closer and closer to zero. The result is that the bailout money is unable to bolster education funding, and must be used instead to temporarily stop the bleeding. Pennsylvania’s newest budget proposals are the most extreme, calling to replace all local education funding with federal bailout funding. Sadly, however, such proposals should not come as a surprise: local governments have more immediate needs, and any money available will be used to fill those needs. The old education funding is being reallocated to many other state programs that are not getting bailout assistance, including infrastructure initiatives, justice departments, and a myriad of specialty programs.

It’s hard to be too upset about this seemingly unjust usage of education bailout money in light of these ‘more pressing’ needs. The real problem is what is happening to the power structure in American education: as local funding is replaced by federal funding, state governments are conceding control of their education policies to the federal government, a power shift that could strip local schools of their control of curriculum, mapping, and resource allocation. Whether or not such a power shift is desirable is a debate open to talking heads and casual readers alike, but its implications should not be ignored. Are we ready for a more centralized education system? Are we prepared for the federal government to dictate more education policy? Should we be alright with a more far-reaching national bureaucracy involved in our schools? Fire away.

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