A few days ago I brought your attention to a report that Senator Tom Coburn (R-OK) submitted entitled ‘100 stimulus Projects: A Second Opinion.’ I also said that I would highlight a few of the most ridiculous, and so here is the first installment:

FutureGen

Although President Obama, and Congressional leaders said that the stimulus package would not contain any earmarks, in reality earmarks take on a variety of forms. Take for instance the FutureGen plant in Mattoon, Illinois. This program was an earmark in the past and was lobbied for by then Senator Obama. On June 12, 2009 the Department of Energy announced that FutureGen would receive $1 billion in stimulus funds.

Samuel Bodman, former Secretary of Energy during the Bush Administration concluded that this technology was obsolete, and stated “The likelihood that it would fail, leaving the American people with hundreds of millions of dollars in sunk cost and none of the benefits, is not acceptable.” Accordingly, the Department of Energy terminated funding for the project.

If that doesn’t convince you that this is a poor expenditure of taxpayer dollars, then perhaps this will:

In 2007, the Massachusetts Institute of Technology (MIT) published a report that showed FutureGen’s approach was not the most effective way to go about such experimental new technology. In fact the report specifically states there were “concerns about this particular project” including a “lack of clarity about the project objectives.” MIT concluded “It is important that the U.S. government begin thinking about such a portfolio of demonstration projects and not be singularly focused on any one project, such as FutureGen.”

On top of all of this, FutureGen’s website states that it is a public-private partnership. Obviously it has a public component because it is receiving tax dollars from the federal government, but can you imagine your private company receiving $1 billion of taxpayer’s money without any impetus or necessity to produce a substantive product?

I’ll let you be the judge.

When spending season rolls around on Capitol Hill, Americans cringe, and for good reason. But this season something is different. Yesterday evening when Congress began debate on its spending bills, it was brought to a screeching halt at the first sign of a Republican amendment, 30 minutes in.

It has been a long standing tradition that the spending bills that Congress considers are done using what is called an ‘open rule’ which allows for an unlimited amount of amendments to the bill, but the cabal led by Speaker Pelosi, President Obama, and Senator Reid has squelched the voice of opposition once again. Instead, they have decided to limit the number of Republican amendments, breaking with the open-rule precedent for the first time in as long as anyone can recall.

We’ve seen it in the automotive industry in the abrogation of dealer contracts and moving Americans out of cars, and now we are seeing it in how Congress spends the money of the American people. This is just further indication that if Obama, Pelosi, and Reid can’t coerce you into doing what they want, then they will force it upon you. They are trying to control much of our lives and now they want to silence opposing views.

With this move, Democrats will now be able to spend even more taxpayer money without interference. House Republicans are meeting today on how to fight this, to be sure though, there is a resistance brewing.

Back when the stimulus package was being debated, I was a vocal critic. I penned an op-ed for the Orange County Register, I blogged on it, and I took to the airwaves to discuss potential areas for improvement and why the package wouldn’t provide the impetus for growth as it was being advertized.

Well, while President Obama, and his Capitol Hill cohorts tout the many successes of this so-called stimulus, Senator Tom Coburn (R-OK), a doctor by trade, has issued a second opinion on the matter.

His report provides a look at 100 examples of questionable stimulus projects worth $5.5 billion. Senator Coburn is quick to say that his second opinion is designed to educate taxpayers, policymakers, and the media, on how to prevent these missteps moving forward. The real question is, will the lesson be learned?

Over the next few days I will highlight some of my favorite examples in Sen. Coburn’s report, so stay tuned.

As promised, here are two more proposals House Republicans have offered to President Obama in order to reduce the deficit and save taxpayer’s money.

Terminating Duplicative Education Programs

The Department of Education currently administers hundreds of separate education programs. Many of these programs are duplicative of other programs. In many cases, schools have the flexibility to use other federal funds for the purposes of some of these targeted programs. Eliminating duplicative education programs will streamline Federal education initiatives and provide savings. The President recognized this when he proposed terminating several duplicative programs in his budget. Building on the President’s recommendations, additional savings can be achieved by eliminating the following programs:

 

Last week House Minority Leader John Boehner & House Minority Whip Eric Cantor submitted a letter to President Obama outlining proposals to reduce the Deficit and provide savings for American Taxpayers. Here are a few highlights of these proposals.  The bottom line is, we’ve got to stop spending money we don’t have, and probably can’t get even if we wanted to. 

Terminate Funding For The National Drug Intelligence Center
 
The National Drug Intelligence Center (NDIC) has been the subject of significant public debate recently because it unnecessarily duplicates the work of other agencies and its justification seems to have more to do with its powerful patron than its benefits to the taxpayer. Terminating NDIC would save taxpayers $44 million next year and $220 million over five years.

Eliminate Unnecessary Federal Offices Such As The Treasurer Of the United States

The office of the Treasurer of the United States was established on September 6, 1777. The Treasurer was originally charged with the receipt and custody of government funds. Over 200 years, the duties of the Treasurer changed significantly.  At different times, the Treasurer managed the government’s balance sheets and the printing of our currency. Many of these duties over time were given over to more specialized offices and officers, including the Financial Management Service and the Bureau of Printing and Engraving – but the office of the Treasurer remained in place. The most recent organizational chart for the Department of Treasury makes clear that none of these or any other offices report to the Treasurer. The job description contained on the Treasury’s website describes the Treasurer as a consultant, advisor, spokesman, and surrogate within the Department.

There are many examples of places the government can save…we’ll do more of these tomorrow.

Yesterday, I offered an amendment on the House floor to the bill that funds all Federal Aviation Administration activities for the next 4 years. The amendment, in the obtuse world of Congressional parlance, is called a “motion to recommit.” Rather than tell you about it, I will let the roughly 8 minutes of debate speak for itself, and I have included the clip below.

The amendment failed by a vote of 263-154. Waste and corruption are alive and well in Washington.

But you already knew that.

One of the primary and fundamental pillars of a society based on capitalism and democracy is the rule of law and respect for contracts. It is hard to imagine any measure of order or fairness when the contractual agreements between two parties can be ignored, changed, or overruled by an omnipotent government force. Yet, that is exactly what the Obama Auto Task Force is doing today with the creditors and dealers of Chrysler and General… pardon me, I mean Government Motors.

Chrysler’s bondholders are secured by the assets and brands of the company. Yet, they are being asked to take a loss amounting to about 70 cents on the dollar with no stock or other ability to regain that loss. However, the United Auto Workers (UAW), whose debt from Chrysler is unsecured, is not being asked to take anywhere near that kind of loss. In reality, the UAW is receiving a significant percentage of equity in the company, which has been bailed out with taxpayer dollars that will ultimately provide the vehicle through which they hope to recoup all of their money.

The GM proposal is just as bad. Bondholders will get 10 percent of the company in exchange for what they are owed in the “deal” put together by the Obama team. The UAW however, will get 39 percent of the company for what they are owed. The problem here is that the bondholders are owed MORE money from GM than UAW is.

These proposals are in blatant disregard of the rights and obligations of contracts, all of which is being forced on these individuals, investors, retirees, and banks by the President and his team. To make matters worse, if you don’t comply with the President’s request, he will use his bully pulpit to condemn your attempts to simply enforce the terms of your contract and the rights comported to you thereby.

But it doesn’t stop there. The Obama team has now turned their insatiable ire and sights on the dealers, and in recent days we have seen the announcement of nearly 1,000 Chrysler dealers and about 1,100 GM dealers, all of whom have investments, contracts, and commitments, to simply go away, without compensation. Make no mistake, the dealers who have been allowed to stay and those who have been forced to go has been decided behind the scenes by the Obama Team, their contracts and commitments now mean nothing.

First of all, this action reflects the fact that the Auto Task Force team has no one on it with any experience whatsoever in the car business. Disposing of these dealers makes no sense at this moment. Sure, GM and Chrysler probably have too many dealers for the long term, but they are not in a long-term mode right now, they are in survival mode. If they have a market with ten dealers and reduce it to five, they will lose volume for at least the next year. But it should be recognized that dealers provide their own capital and marketing. The cost to GM and Chrysler to service a dealer is not exorbitant, and it is certainly less than the marginal profit from the incremental sales they provide day in and day out right now. About 100 dealers a month are closing their doors; attrition will naturally take care of the problem without the need for external action.

This plan also has failed to account for the employees of the 2,100 dealerships being discussed. These dealerships employ over 100,000 people, all of whom will soon join the rolls of the unemployed when these dealerships are finally closed. For an administration that claims to care about jobs, this action is a startling indication to the contrary.

There is no question that this is about cars and the car business, but it is also about the validity of contracts, the rule of law, and simple fairness. The bondholders and dealers should in no way receive any special deal or treatment, but they shouldn’t have their legal rights yanked out from under them by an overpowering administration either. This doctrine of simple fairness should be extended to all parties involved, from the bondholders to the unions; unfortunately the President’s auto task force has failed to do that.

This year, the government will borrow 46 cents of every dollar it spends.  I don't even need to say another word.

House Cafeteria: Prices in the government-run cafeterias in the basement of the House Office Buildings have gone up recently, at the alarming rate of 31% between 2007 and the end of 2008.  According to House Chief Administrative Officer Dan Beard, who oversees the House cafeterias; since 2007, when Democrats took control of the House, they have instituted requirements for organically grown food and required all workers to be union members in order to serve or cook in the cafeterias, and these steps have in turn caused the price increase. But, House staffers do not like paying for all this, so your tax dollars are being considered to subsidize this too!

Cuts: The President announced, with great fanfare, his proposals to cut $17 billion of spending from 121 programs in the upcoming fiscal year. This is after he increased spending by over $1 trillion dollars in just two bills in his first couple months in office. So, he is proposing to cut an amount that is less than 2% of what he just increased, and his proposal is half of what President Bush had proposed to cut from the same programs last year, but Congress summarily rejected.

War Spending: This week, we will vote on President Obama's $92 billion proposal for new and additional spending not included in the stimulus bill, or the omnibus bill, or the budget, or any of the already passed additional spending bills. $81.6 billion of this amount is more funding for the wars in Iraq and Afghanistan and the balance is a grab-bag of unrelated spending items such as swine flu response, and $665 million for the West bank and Gaza.  This madness must stop and as such I intend to oppose this bill.

I found this cartoon eerily appropriate...

Unions do not run companies well because they have an inherent conflict of interest with the company's objectives. This exact strategy was tried in the 1970s in Britain with the then failing British Leland under the most socialist of recent British Prime ministers, Harold Wilson. It didn't work and British Leland failed and was liquidated. Many of British Leland's brands were picked up by foreign makers in liquidation and live on today (Jaguar, Mini Cooper, Range Rover, MG) in new ownership. If I had to make a prediction, that is where I think this may all end up in the US.

In the Chrysler plan, the bondholders (who by the way are completely secured by assets) get to keep about 20 cents on the dollar and have no upside since they get no stock. The union, however, whose liabilities are not secured, gets about 80 cents on the dollar and all the upside since they would have a controlling interest (55%) in the company all by themselves. Is that really "shared sacrifice?” But yet in a press conference last week, the President scolded the "investment firms and hedge funds” for not accepting his proposal on how much of a haircut they should take and praised the UAW for their "painful sacrifice." Like much of what the President says, it is the opposite of the truth. I think the "investment firms and hedge funds” (many of which are actually mutual funds) did the right thing. They are secured creditors and should do much better in bankruptcy than this deal. I also applaud them for standing up to this President, who is consistent in demonizing anyone who does not gleefully worship his every move. Notice that all of the bondholders who are controlled by the government (Citibank) or have taken TARP funds (JP Morgan, Morgan Stanley, Goldman, etc.) all supported the President 's plan undoubtedly because they didn't have a choice since the government is on both sides of the table. But the "non-TARP" banks (that's what they are calling themselves) all opposed the deal.

Now, I know you are saying to yourself, didn’t he support the TARP? Yes, I did, because our financial system was on the verge of absolute collapse and drastic action was needed, but now, we are beyond that. The government was never supposed to be anything more than a lender or passive investor with no voting rights.

In the GM plan, the bondholders are not secured. But still, the UAW gets 39% of the stock in GM and the bondholders get 10% even though the bondholders actually are owed billions of dollars MORE than the UAW is owed. Note that this is not the employees owning the company. It is the union. There is a huge difference.

Chrysler will get about another $8 billion from taxpayers to get them through bankruptcy. This is basically a subsidy to preserve the union's majority interest.

You see what is going on here. Labor takes very little loss and gets controlling ownership (with the government) in the companies going forward so they can, in theory, get all their money back and more. Capital gets almost completely wiped out. In the age old balance between capital and labor which Adam Smith and others have analyzed for centuries, the Obama administration has declared labor the winner and capital out. Of course the fact is, both are necessary. So where does the administration get the capital to support labor? From the government. From taxpayers. From you and I.

Given my 25 years in the car dealership business, of which most of you are aware, I can't let this week go by without commenting on last week's Chapter 11 bankruptcy filing by Chrysler Corporation. What the Obama Administration is doing with the American car industry saddens me. No, it actually angers me. In fact, I am fired up big time. It has become abundantly clear that the only objective of the Obama task force is to put control of GM and Chrysler in the hands of the UAW union and wipe out anyone who had invested any capital in either of these companies. What’s more, he is using taxpayer money to subsidize the union's takeover of these companies. Here are some of my observations on what it going on:

Under the Obama plan; the government, UAW, and government-controlled banks will own 95% of GM. They will own 80% of Chrysler. The existing stockholders get 1% of GM and 0% of Chrysler. The bondholders (who are not government controlled banks) get 4% of GM and 0% of Chrysler. The remaining 20% of Chrysler will be owned by Fiat, more on this topic tommorrow...

You probably weren’t aware, but Friday was a big day on Capitol Hill, even though Members rushed out of town on the eve of the April recess.  But the filing deadline for Member earmark requests was upon them, or so they thought.  Last year the Appropriations Committee extended the deadline (A Quiet Recess? 3/20/2008) because of an overload of requests, and this year didn’t disappoint.  On Friday evening, Anne Schroeder Mullins from Politico posted a blog titled “There are so many earmarks in the House that…”
 
Here is an excerpt:

“Who says Members are opposed to earmarks? We hear that the earmark computer in the Appropriations Committee - the earmark database member request system, to be exact -- broke down today. Again. This after it was revamped after last year's overwhelming earmarking.”
 

That’s right, there were so many earmark requests that the computer that stores all of the information broke down…AGAIN!  So the Appropriations Committee, for the second year in a row, extended the filing deadline.
 
Earmarks are a corrupting and abusive practice in Congress. You’d think that the ear markers would get the message, it’s not just the American people protesting the pork, it’s their office equipment now too!

Today, President Obama’s first tax hike took effect.  Yes, that’s right on April Fool’s day, but it’s no joke.

When President Obama first took office, he pushed through Congress, and signed a bill increasing taxes on tobacco.  This increase amounts to 62 cents per pack of cigarettes, and 40 cents per individual cigar. 

This came as part of the so-called State Children’s Health Insurance Program (SCHIP), unfortunately, it is not nearly as strong a program as its title implies.  It is nothing more than the first step in the short march towards socialized healthcare. 

President Obama pledged that he wouldn’t raise taxes on Americans making less than $250,000/year, but this tax will fall most heavily on those making significantly less than that. 

Just exactly what are the President and Congressional Democrats trying to accomplish here?