Ken
Harwood is the editor of
WisconsinDevelopment.com and founder of FutureWisconsin.com
a site selection tool for Wisconsin business.
The former mayor of Neenah,
Ken is currently an alderman in Verona, WI and sits on The Madison Area
Transportation Planning Board.
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April 3, 2009 Available for immediate release Once you break it, you are going to own it “Once you break it, you are going to own it.” The phrase is attributed to Colin Powell and was a reference to the invasion of Iraq, but I believe the quote is as appropriate today as it was then and it may very well apply to General Motors and AIG. The federal heart is in the right place as it tries to preserve jobs and guarantee the pensions of millions of Americans, but if we get too involved in the operation of these and other giant corporations we are, as a nation, going to be perceived as the invaders that have broken the vary companies we tried to preserve - regardless of our best intentions. Lets look at each of these companies, the problems, and potential outcomes. In the case of AIG the main issue is the pension funds and assets the company insures or manages. Simply, if AIG fails millions of Americans will not have the pension they have counted on and planned for. To date we have agreed to lend up to 85 billion dollars to AIG in exchange for a 79.9% equity stake in the insurer. If the company survives we could actually profit from the investment. If the company fails my guess is that we will still try to support the pensions and insurance accounts. This effort could cost the taxpayer even more and it would be very difficult to walk away at that point. In the case of GM, it is the jobs that we are most worried about with 250,000 to 300,000 employees and many more who are dependent on the company, we fear the devastating impact of a failure of this magnitude on an already depressed economy. We are now asking for a more aggressive recovery plan in exchange for an investment in the company. We can assume that the new CEO will agree to a rigorous restructuring plans and the government will assume an equity share of the company in exchange for operating capital. Again in the case of success we could actually benefit economically while failure suggests a more personal stake in the lives and future of the employees. In both cases I agree that we had to do something. My concern is that we may have failed to focus on the real problems (pensions and jobs) and have instead suggested that we can run the companies better that those currently in charge. If we fail we “own” the results. I believe that many of the real solutions will come from smaller companies who have adapted a more conservative approach or from entrepreneurial companies that are developing new solutions for tomorrows problems. Unfortunately success and innovation may be the very things that keeps you for getting noticed in a failing marketplace. The real casualty of this economy may be may be very similar Secretary Powell's now famous quote. Specifically, if we fail to focus on the outcomes, we may have spent more than we should have, we may have “broken” the economy with no plan for what to do next, and we may “own” the failed effort including the new problems that come with it. |
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Editorial Comment March 9, 2009 May be reprinted without permission until April 1, 2009
Four Things We failed
To Stimulate
Retirement Funds Baby boomer's are now in their 60's. They were ready to retire and return to their hippie, free spirit lives of the past creating 10's of millions of jobs for the generations replacing them, and millions more jobs for those who cater to their dreams of beaches, travel and multiple homes. They woke up this year to IRAs, pensions, and investments reduced by as much as half. They now have no faith in a social security system that now must be on the very bottom of the legislative to do list. Finally there last remaining perk, subsidized health care, will soon be shared by everyone. Where are the tax incentives for those who want to retire but lost huge sums in the markets?
Their solution I'll
work a few more years. No new jobs, no spending, no investment and we can't
really blame em.
Mortgages Our stimulus was quick to come to the aid of lenders who made less than brilliant loans to consumers they convinced to buy more home than they could afford. Now we guarantee or forgive their debt and make even more low cost capital available to them. Why then did we not ask these same lenders to show the same compassion to the same people they made the loans to in the first place? Where are the laws asking these institutions to allow people to stay in the homes, they said they could afford, at least until there is some hope on the horizon?
Their solution
foreclosure foreclosure
foreclosure. Screw em, they are the problem not us. We'll take their home
sell it for pennies on the dollar, and mess up the housing market. Oh and don't
come to us asking for a loan unless you already have money. The wounded - shoot
em.
Employment
Our government has
poured billions into automotive companies seeking to stay afloat and promising
to “tighten their belts”. These companies then immediately, same press release
in fact, laid off tens of thousands of workers. Belt tightening is a 20% across
the board pay reduction, you know, every employee. Firing tens of thousands is
taking off your belt and throwing it
over a tree branch. Where is the federal carrot that says keep your workers
employed and we'll help build an economy that needs new cars again?
Their solution,
small and lean means return to profit and less mouths to feed means more food
for the rest of us. The reality is unemployed workers fan the fire of economic
chaos. New cars – who needs em.
Consumer Debt
Our government has
said banking officials receiving stimulus monies must cap their salaries at
$500,000. Yet our government turned a blind eye to the same banks charging the
$37,000 dollar a year health care worker 28% interest on her credit card debt
and $39 late fees because she gets paid on the first and they want their money
on the 27th and that date is a moving target. Where was the provision
in the laws restricting penalties and interest charged to the consumer?
Their solution, we
need the 28% because so many people default on their debt. Well duh, you were
unable to make payment on loans with interest rates in the sub 3% range. Not to
get scriptural here but “do unto others”. Consumer stimulus – not our problem.
I am not against
revitalizing our economy, but to do it we need to put politics aside and look at
the problem from the bottom up. Consumers and employment comes first companies
and institutions second. We need to stop worrying about Rick's corporate jet and
start worrying about Tom's '97 Malibu.
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