Friday, January 30, 2009

Keep your $800 billion, Uncle Sam

Normally I’m not one to turn down free money, but just this once I’d like to tell Uncle Sam to keep his greenbacks.

The $800 billion economic stimulus package currently facing Congress is a recipe for disaster. The new plan would give most working Americans $500 over two years. Free money like that can be hard to resist, but here’s why we should.

Last year an stimulus plan gave $300 or more to most Americans filing a tax return. This plan was supposed to boost our struggling economy. But the economy crashed anyway. The stimulus package didn’t cause the crash, but it sure didn’t prevent it.

Lump sum handouts are a bad idea. Poor economic climates tend to spook Americans into holding onto their money, which leads to fewer major purchases (home repairs, cars, ridiculously large flat screen TVs), fewer dinners out and fewer vacations. When friends and neighbors start losing their jobs or homes, we all tend to spend less money…because we could be next. We frantically try to save our pennies for the rainy day that could strike at any moment.

While it’s easy to think that handing each of us a wad of cash and telling us to go shopping will remedy these fears, it’s not that simple. For starters, the amount would need to be much larger to really encourage us to spent it, say $5,000 instead of $500. A measly $500 is hardly enough for a down payment on a car, never mind a down payment on a new house; and you can barely buy a new refrigerator, forget about a new roof.

Anyone who’s even a little finance-savvy knows the best way to handle a windfall is to put half the money directly into savings and use the rest to splurge on a big purchase. So at best we’ll see 50 percent of the stimulus package flowing back into the market; Americans will hoard the other half. The money won’t be spent in a way that encourages growth either. We’ll stock up on groceries at Cosco or Wal-Mart rather than supporting local restaurants.

The government should keep the cash and instead offer incentives (see: tax deductions) on certain purchases, such as cars or home improvements.

We could take it even further. Allow anyone who buys a new car this year to deduct 50 percent of the cost on their tax returns. Make it 100 percent of the cost for hybrid or other “green” vehicles. Encourage energy efficient home improvements with similar incentives (like deducting the cost of making a heating system more “green” or even the cost of installing solar panels or whatever the latest energy-saving trend is these days). Congress can promote economic growth while reducing America’s carbon footprint, and democrats will be too busy loving the energy savings to realize that they voted for a tax cut.

In addition to the individual rebates, the stimulus plan offers what are sure to be equally ineffective rebates to businesses and hands over scores of cash to state governments in a “Medicare matching rate” plan. The faults in these are easier to see so I won’t go into detail here.

Handing taxpayers checks with a note saying “please spend this on xyz” never pans out. This case is no different. The number of taxpayers who will actually use the funds in a way the government would like pales in comparison to the number who will stuff it under their mattresses.

Friday, January 23, 2009

Oscar Predictions

With the presidential election well in the past and our economy still in the pits, I’ve lately been feeling politically uninspired.

Since this blog was originally intended to be as much about Hollywood gossip as politics, I present my completely non-expert predictions for the 2008 Academy Awards. Some may say I’m unqualified to forecast Oscar wins, having no professional experience in the film business or even in writing about film, but I do watch a lot of movies and I’m good at guessing. I’m also good at being right.

Click here for a full list of nominees.

Best Picture: "Milk"
You may think "Slumdog Millionaire" has this one in the bag after its Golden Globe victory, but the Academy might surprise you. In the past, the Golden Globes were often a good predictor for Oscar wins (think "The English Patient", "Titanic"), but over the past several years that trend has faded. When "The Aviator" won the Golden Globe, "Million Dollar Baby" won the Oscar; when the Golden Globes honored "Brokeback Mountain", the Academy chose "Crash"; last year "Atonement" grabbed the Golden Globe but "No Country for Old Men" reigned victorious at the Oscars.

Best Actress: Kate Winslet for "The Reader"
This was a powerhouse year for actresses and the caliber of nominees is impressive, but the buzz surrounding Winslet’s haunting performance seals her win in this category.

Best Actor: Sean Penn for "Milk"
It could be argued that the honor really should go to Mickey Rourke for “The Wrestler”, but the Academy loves Penn and his performance as Harvey Milk is subtly brilliant.

Best Supporting Actress: Penelope Cruz for "Vicky Christina Barcelona"
Woody Allen movies have a history of winning awards for supporting roles.

Best Supporting Actor: Heath Ledger for "The Dark Knight"
No one else has a chance, or deserves it more. Ledger's performance is thrilling.

Best Director: Danny Boyle for "Slumdog Millionaire"

Best Original Screenplay: Dustin Lance Black for "Milk"

Best Adapted Screenplay: Simon Beaufoy for "Slumdog Millionaire"
If you read how bad the original book is, you'd appreciate the genius it took to masterfully recreate this story for film.

Best Foreign Language Film: "Waltz With Bashir"
To be honest, I haven’t seen any of the films nominated in this category. I usually wait until after the Oscars and see the one that wins (reading all those subtitles can be exhausting). But I’m still comfortable predicting this animated gem will win, not just because it won at the Globes. The film is about the 1982 Lebanon War and Hollywood loves foreign movies with messages they can distort and relate indirectly to American politics.

Best Animated Film: "WALL-E"
Almost unfair to anyone else who made an animated feature last year.

Best Art Direction: “The Curious Case of Benjamin Button”
The production design team on this film must have had their hands full but the result is striking.

Best Cinematography: Claudio Miranda for “The Curious Case of Benjamin Button”

Best Film Editing: I would love to see this award to go Daniel P. Hanley and Mike Hill for “Frost/Nixon” but Chris Dickens is more likely to win for “Slumdog Millionaire”.

Best Costume Design: Albert Wolsky for “Revolutionary Road”

Best Original Song: Peter Gabriel’s “Down to Earth” actually has the upper hand here because the two “Slumdog Millionaire” songs may cannibalize each others' votes.

Best Original Score: Thomas Newman for "WALL-E"
Newman's "Finding Nemo" score was true genius and I'm unfairly biased toward his work. But I still think "WALL-E" is the most likely bet here.

Best Makeup: “The Curious Case of Benjamin Button”

Best Sound Editing: "WALL-E"
Most of what you hear in the film is sound effects, and Ben Burtt created each squeak and whistle with poetic artistry. The academy usually gives sound awards to action films, but "WALL-E" earned its stripes on this one.

Best Sound Mixing: "WALL-E" again.
It's possible for films to win for both sound mixing and editing ("The Bourne Ultimatum" won both last year, as did "King Kong" in 2006). If "WALL-E" takes home only one of the two it will be for sound editing, and "The Dark Knight" will win in this category.

Best Visual Effects: “Iron Man”

I was going to select my predictions in the short film categories by throwing into a hat strips of paper with the film titles, but I’ll spare you the process. Don’t forget to make your own predictions and find out who wins on Feb. 22.

Wednesday, November 19, 2008

$25 billion won’t save the auto industry

While Congress mulled over an inevitable, albeit still wildly unpopular, auto bailout yesterday, I practiced helping automakers by flushing some cash down a toilet.

Ford, GM and Chrysler as essentially asking American taxpayers to pay $25 billion for something bankruptcy courts do every day: give them time to reorganize and settle debts.

Ford and GM collectively ran through nearly $15 billion last quarter. So that $25 billion rescue package will last them until, say, May, at which point auto sales will still be in decline, the Big Three will be filing for bankruptcy and American taxpayers will have flushed $25 billion down the crapper for nothing.

I agree with the bailout proponents on one point: something needs to be done. Shutting down the Big Three would be crippling to Michigan’s economy, not to mention the millions of jobs at risk when automotive suppliers start to feel the crunch.

Maybe bankruptcy isn’t what it used to be, but filing Chapter 11 does not mean you have to close your doors and shut down production. Will jobs be lost? Sure, and in no small numbers. But it’s unlikely these cash flow problems will force Ford, GM, Chrysler and their suppliers to turn off the lights and close their doors forever.

A Chapter 11 filing typically allows businesses to maintain control of operations while being subject to court oversight. The debtor can also make their own proposals for reorganization.

As of this posting, the automakers have failed to outline any changes they would make to help pull their companies out of trouble. Just borrowing more money is not going to help, guys. Your cash flow crisis indicates you’ll need significant structural and administrative changes. Luckily, a bankruptcy court will be happy to take care of that for you. Chapter 11 would force the automakers to come up with their own proposals, or let creditors bring their ideas to the table in court.

Recently, some have called for the resignation or ousting of CEOs at the Big Three. I don’t think ousting the CEOs is the answer, but it’s also a bad idea to hand over cash to drowning businesses, not matter how many strings are attached.

If I had the ear of the auto CEOs for five minutes, I would offer this golden nugget of advice courtesy of Jim/Dad: shut down your excess car dealerships. Auto sales among the Big Three are comparable to those of foreign cars, but the foreign companies own roughly half as many dealerships. Those things are expensive to maintain. If I were an executive at Ford, GM or Chrysler the first thing I would look at as I prepare my Chapter 11 proposal would be how many of those dealerships we could shut down (hint: it’s probably half of them). I mean, I can buy a car on the Internet these days; we don’t need to have dealerships scattered about like McDonald’s drive-thrus. The Big Three’s problems are probably less related to fuel efficiency and safety ratings (all three manufacture models on par with foreign cars) and more a result of careless business practices.

Chapter 11 bankruptcy is not a death sentence. It’s a second chance. The Big Three haven’t engaged in any sketchy or illegal activity (a-la-Enron), so they have a good chance of surviving reorganization.

When it’s done right, Chapter 11 save jobs, maintains the engine of profitability (i.e. the business) and reconciles the company’s debt with creditors, the very reasons automakers argue we need the bailout. So let’s save ourselves $25 billion dollars and let the market work her magic.

Thursday, November 6, 2008

How Sarah Palin short-changed herself out of the White House

The set up looked great, but follow-through fell short.

If Senator John McCain is kicking himself this morning, it should not be for choosing Alaska Governor Sarah Palin as his running mate. I will say the same thing about Palin that I wrote about Mike Huckabee in January ("Iowa Caucus Ruckus"): my plumber has more foreign policy experience (a statement that is perhaps even more appropriate now than it was ten months ago given Joe the Plumber's recent rise to fame).

But I also stand behind my earlier statement that Palin was a smart VP pick. Politically, she was a great counter to McCain’s socially liberal policies and she energized the republican base. The ticket was well-balanced. The campaign fell apart in the strategy.

Rather than focusing on Palin’s real assets the campaign spent most of its time defending strengths she doesn’t actually posses, ridiculously clinging to their claim that Alaska’s proximity to Russia makes her a foreign policy buff.

Palin is no political lightweight. She has battled corruption in Alaska, been an advocate for families with special needs children, and her experience on the Alaska Oil and Gas Conservation Commission is particularly relevant as our nation vies for fuel independence. These are all strengths that would have helped create a well-rounded administration. Twenty years in the senate have given McCain enough experience in foreign and economic policy for the both of them. We should look for vice presidential candidates to posses skills or experience that the presidential candidate lacks.

I could blame the liberal media for unfairly attacking and haranguing Palin, but ultimately that just feels like a cop out. The campaign failed to refocus attention on Palin’s strengths, and that’s really too bad.

McCain will be 76 by the next election, and it’s unlikely he’ll run again. As for Palin, I wouldn’t support a bid for the presidency in 2012, but as Vice President she’d have done alright. If not, Mac could always send her on a peacekeeping mission to Africa.

Tuesday, November 4, 2008

McCain needs a major upset

My normally perky cup of coffee this morning turned into a big downer as I glanced over a red and blue map of the country. The numbers are not exactly in McCain’s favor.

McCain should easily secure 118 electoral votes from 14 states, according to Real Clear Politics’ count. Another 14 electoral votes are leaning his way. Assuming McCain wins those 132 votes and the 128 toss ups, that’s 260 electoral votes. Candidates need 270 to win. Ouch. Even in this best case scenario (Obama may steal some of those toss up votes), McCain’s campaign will fall short by ten votes. Obama, on the other hand, could win with the 278 votes that are either solid or leaning democrat. No toss ups needed.

If the polls are correct, McCain’s best hope is for an upset in Minnesota, which has ten electoral votes leaning toward Obama.

Monday, November 3, 2008

Why John McCain was screwed before he even got out of bed this morning

The presidential race between O-Bom and Mac was all but decided before either announced his candidacy. And it has little to do with the economy or the war on terror.

It’s no secret that I’m a fan of Senator John McCain and would like to see the election swing his way, but if history is any indication (and she usually is) I won’t be breaking out the cigars and champagne on Wednesday. The incumbent party has little chance of retaining control over the White House. President George W. Bush’s term has seen some of the lowest approval ratings since the 1940s, and low approval ratings often forecast a shift in political power.

Harry Truman frittered away political capital like it grew on trees and in 1952, Dwight Eisenhower dominated the electorate over democratic candidate Adlai Stevenson. (Truman began his term following FDR’s death with approval ratings in the 80s; by 1951 his ratings were at 22 points, according to Wall Street Journal reports).

Jimmy Carter’s approval ratings were just starting to recover from the disastrous Iranian hostage crisis in 1979 when the economy took a downturn, sliding his approval ratings back into the 30s. Ronald Regan’s victory in 1980 was nothing short of a landslide.

Bush’s approval ratings are currently hovering in the 30s, just a few points lower than his father’s were when Bill Clinton unseated him during the 1992 election. At the time, unemployment and poverty had climbed to their highest in nearly ten years.

I’m not suggesting that approval ratings alone will make or break an election. Each of these examples had other contributing factors. Eisenhower’s victory came in the midst of the Cold War, and Bush’s 1990 tax hike left room for Clinton to secure a victory. Regardless of the issues, when the president’s approval ratings sink below 50 percent the party is in trouble. As a candidate, even if you do everything right (which no candidate has in this, or probably any, election) you’ll still face an uphill battle through a blizzard.

Of course Republicans should not be deterred from voting tomorrow, our votes still count. We also need to be realistic about our expectations for the election’s outcome: a McCain victory is unlikely.

So for now, tuck those Cubans back in their box and leave your Tattinger on ice. The political climate could look much more favorable for conservatives once Obama’s had four years in the White House.

Wednesday, October 8, 2008

McCain's resurgence policy beats Obamanomics

Economic policy will make or break this election…and the next presidency.

It’s clear that our next president will have to do some heavy lifting to pull the U.S. economy back on its feet, and the steps to recovery have been hotly contested. During last night’s presidential debate, the candidates addressed our struggling economy and their plans for remedy.

Obama spewed more standard democratic slogans, insisting that tax breaks for middle-class Americans will help us avoid economic ruin.

Really? How will a tax cut help someone who is already upside down on their mortgage and in immediate danger of losing their home? Are we talking like tens of thousands of dollars in tax cuts for every person? Can we get that money like next month? That’s how fast Americans are foreclosing. For some, it has already happened. How will a tax cut help those who have already lost their homes?

One of the problems snowballing this crisis is that many homeowners are upside-down on their mortgages (sometimes called “negative equity”). Even if they could sell their house at fair market value they’d still owe more money than they’d receive on the sale.

McCain highlighted a plan to help families restructure mortgages. His plan isn’t perfect (and I’m still not a fan of his vote on the $700 billion “rescue” plan). I don’t think forgiving debts, which this plan would in some cases, is the best solution. It’s giving a man a fish versus teaching him to fish. Struggling homeowners would be better served by a plan that allows them to opt for interest-only payments for a few years, at least until they have some positive equity in their homes again. That would provide much needed relief without giving the false impression that we can continue to dig ourselves into financial holes and expect the federal government to pull us out.

I would also alter McCain’s plan to include homeowners with zero down payment mortgages, which his current plan expressly excludes. Was it stupid to buy a house without any down payment at all? Yes. If you can’t afford a down payment you should be renting. But this stipulation would exclude from McCain’s resurgence plan a significant number of families who urgently need help restructuring their mortgages. Without help they will surely lose their homes, regardless of how swiftly Wall Street is recovering.

P.S. So good to see Rach writing again. I missed your acerbic wit and pointed observations.