Toyota Republicans

 

Recently on the McLaughlin Group, Pat Buchanan coined a new term for a faction of the Republican party: Toyota Republicans. The phrase is an odd one because it is far more subtle and complicated than it seems. Under the watch of the Bush administration we saw outsourcing become the norm. We didn’t slowly lose a difficult battle to China, we eagerly gave them the plans and asked them to take over our manufacturing. The Alabama foreign car manufacturers Pat referred to are an interesting case. When we can’t even lead in our own industry in our own country selling to our own people, we have failed. It isn’t about patriotism and buying American. I’ll buy American when faced with a tough choice, but in the end I’m going with the better product, as should we all. We don’t need to bail out the failures, we need to create successes. These foreign plants on U.S. soil aren’t entirely a bad thing, although they are still sending our money overseas.

An interesting point has been made about who pays the cost of medical care. If the American auto makers are saddled with responsibility for the health care of their workers, and the foreign competitors aren’t, because the government takes care of that, then we didn’t fire the first shot in the coming Cold War Race to Socialism, they did.

As Pat puts it: “America faces nationalistic trade rivals who manipulate currencies, employ nontariff barriers, subsidize their manufacturers, rebate value-added taxes on exports to us and impose value-added taxes on imports from us, all to capture our markets and kill our great companies.“

How should we respond? Pat wants us to “produce ourselves the guns and ships to defend the republic and the necessities of our national life so we could stand alone against the world.“ He suggests we do this by putting tariffs on imports in order to level the playing field. This isn’t a wise step forward in the new global economy; it leads to foreign retaliation, reducing our exports.  When you are only selling things to yourself, you don’t earn any money. It would work well here in the U.S. Until the industries got lazy and corrupt. We already can see the results of such tactics in the corn industry. The reason everything we eat is packed with corn syrup is that we tax the import of sugar and subsidize the growing of corn. What we need is to be lighter on our feet. We need small specialized manufacturers.

Pat Buchanan puts the blame on neocons for removing tariffs imposed by Reagan:

“When an icon of American industry, Harley-Davidson, was being run out of business by cutthroat Japanese dumping of big bikes to kill the “Harley Hog,” Reagan slapped 50 percent tariffs on their motorcycles and imposed quotas on imported Japanese cars. Message to Tokyo. If you folks want to keep selling cars here, start building them here.“

Alabama is now home to several automotive plants:

• Mercedes-Benz: Headquarted in Germany
• Honda: Headquartered in Japan
• Hyundai: Headquartered in South Korea
• Toyota: headquartered in Japan

These U.S. plants make a total of more than 700,000 vehicles a year and employ over 11,000 workers.  This would all be a good thing if these vehicles were being shipped out, but they are built here to be sold here. To follow the money: You buy a Toyota. Part of that money goes to the workers in the Toyota plants in Alabama and elsewhere in the US; another part goes to Japan. To some extent it is nice to have foreign industry in our country; it gives them incentive to be nice to us so they can retain their factory. On the other hand, if we are making the product in our country with our labor and selling it to our people, we could do without sending the profits to Japan.

Pat is afraid that if we don’t do whatever it takes to keep the big three in business, that these foreign owned manufacturers will take over their market share.

Agreements like NAFTA aren’t really free trade, they are managed trade. In the end, under NAFTA, manufactuuring and agriculture find advantage in moving to Mexico. This includes companies like Toyota. The question is, are these Toyota republicans opposing the bailout on strong free trade principles, or are southern politicians trying to remove the competing U.S. manufacturers in Detroit to better their own foreign owned manufacturing?

From here on I will be using the term ‘Toyota Republican’ to describe the NAFTA loving portion of the party that is partially responsible for outsourcing and the exodus of  industry.

 

Update: Leo Gerard, the president of the United Steelworkers Union, went on Bill Moyers Joural with his take on the auto bailout and the Toyota Republicans.

The Most Basic of Economic Principles

If you can solve this brain teaser from a 1932 issue of Modern Mechanics, you may just be a step ahead of your average congressman when it comes to fixing the economy.

John McCain’s mortgage bailout

“Government does not solve problems; it subsidizes them.” – Ronald Reagan

In the second presidential debate, John McCain proposed that the government buy up people’s mortgages and reevaluate the value of their homes and renegotiate their loan terms to the new value. Obviously the mere concept disturbs fiscal conservatives such as myself, but it appeals to many of the moderates who don’t make politics a regular part of their lives. Why did he propose this? Is it just a political gimmick, or does he really believe it would be helpful? Lets take a closer look…

First let’s look at the scale of the plan; We need to know who will it help in order to know how much will it cost us. According to his website, “No taxpayer money should bail out real estate speculators or financial market participants who failed to perform due diligence in assessing credit risks.” “Eligibility: Holders of a sub-prime mortgage taken after 2005 who live in their home (primary residence only); can prove creditworthiness at the time of the original loan; are either delinquent, in arrears on payments, facing a reset or otherwise demonstrate that they will be unable to continue to meet their mortgage obligations; and can meet the terms of a new 30 year fixed-rate mortgage on the existing home.” Well, that pretty much rules out everyone. How many people are there in the country who bought their home in the last three years, are living in it, put down a good down payment, proved they could afford it, then couldn’t afford it, then went delinquent, weren’t kicked out, but could afford it if it were reevaluated to the current cost? I’m calling gimmick on this one, but just for the sake of argument, lets say a good size portion of the country qualify and decide to take advantage of this. What effect would it have on the rest of us?

Most people when selling a house make some efforts to clean it up and cover any defects in order to get a higher appraisal. In this situation we would see a reversal. People would let their weeds grow, throw some dirt on the wall, point out water stains and rot, and generally try to get the house appraised as low as possible in order to owe less. This difference in appraisal value comes directly out of our pockets, not in the form of taxes, since politicians no longer have the balls to raise taxes to pay for their programs, but out of devaluation of the money in your pocket. Adding to this, property taxes are calculated based on the value of your home. This would further reduce the income of the government and add to the deficit. The very same homeowners would then clean up their house and sell it at the real value, or they would, if there were anyone to buy it. Potentially even worse, if this plan were put into action, it would send a message to homeowners that if they wanted in on the bailout, they should just stop paying their mortgage. This has the potential for a catastrophic cascade that would only make things worse. None of this has served to make people more likely to be able to get a home loan and buy a house, so the housing market hasn’t really improved. All we have really accomplished is lower taxes while we  increased spending.

Traffic cameras

It must have seemed like a good idea at the time – using ticket revenue to help pay for government. It would seem to fall right in with the views of this site; Tax the problem to pay for the solution, right? The problem arises when you mix the government’s inability to shrink with the conflict of interest of needing to feed itself by creating the very problem it was designed to fix.

I know someone who was recently ticketed by one of those traffic cameras they put at intersections. They snap a picture of your license plate, your face, and take a video (displayed big screen in court) of your violation. They never sleep or decide to let you go with a warning. There is a huge amount of data online about these cameras, and after some research I came to the conclusion that this particular camera was making around a thousand dollars an hour. Obviously a lot of cities saw dollar signs and started installing the cameras all over, and seeing immediate revenue boosts. The cameras are so effective in fact, that people have actually quit breaking the traffic laws they police. According to dallasnews. Dallas has seen a 50% drop in camera revenue due to lack of crime. Great, we can reduce our traffic patrol now that the cameras have reduced violations, right? Unfortunately, once government creates a job and gains a source of revenue, it is reluctant to let go. It doesn’t want to lay off employees, it just wants its revenue back. The city is starting to turn off the cameras on a rotating basis. Since the infallibility of the cameras is such a key to their success, I expect this will put people back in a gambling mood and increase violations again. I suspect the city knows this. The cameras are run by a company called Redflex. Redflex receives 80% of the ticket price for the first 95 tickets each month, after that they split the revenue with the city. Where does that money go? It is an Australian company.

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