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?

In my opinion, the best and most articulate Member of Congress, present company included, is Paul Ryan (R-WI). He is the Ranking Member of the Budget Committee, and a guest blogger here at the Greeneyeshade. Here is a 4 minute clip of his very powerful closing argument in last Wednesday’s debate.  Right below the video, I have included a link to his Op-Ed in today's edition of the Wall Street Journal.

President Obama's Budget passed through the House Committee on the Budget, of which I am a member, late Wednesday night on a party line vote. It will come to the House floor late next week, and I expect it to pass. Like the ‘non-stimulus package,’ I expect that not a single Republican will vote for it, and a few moderate Democrats will also likely oppose it. This budget quickly moves America to the sort of place that Pastor Rogers described in yesterday's quote.

I usually give you lots to read, but today I'll give you a few things to watch. Here is my opening statement on the budget debate.  It explains some of the reasons why I oppose this budget with such vigor. It is 3 minutes long.

If you want to see what a 30% tax increase looks like, take your paycheck and multiply the total taxes deducted by 1.3.  Then, subtract that from your gross income and that will be close to your new net income. So, if you made $3,000 gross and $2,000 net, you will now only net $1,700. Oh, and that won't include the cuts your employer has to make in order to pay for their tax increases. By the way, this budget includes all kinds of things that are minor in the grand scheme of things, but big to certain people. For instance, it would repeal the use of the ‘Last In, First Out’ (LIFO) inventory accounting method.  This will dramatically raise taxes on all retail businesses who carry inventory.

"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does not good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it."

- Adrian Rogers - American pastor (1931-2005)

"…We're very serious about working on a bipartisan basis to reduce those deficits or reduce those costs.” – 3/24/2009:

Frankly, had the stimulus bill been anything remotely close to something Republicans could support, we would have had met the President way farther than half way, due to the severity of the current economic situation and his popularity at the time (which is now falling quickly). But he didn't. The stimulus was so far to the left that not one Republican voted for it, and some of the more centrist Democrats voted against it too. But he hasn't stopped there. He has since declared that his "cap and trade" energy proposal (which will double the cost of electric and heating bills nationwide) is "non-negotiable." Yeah, way to gain consensus. Now, he is proposing to use a "nuclear option" in the Senate for “cap and trade,” and socialized medicine plans so that he will not need any Republican votes, and can afford to lose some centrist Democrats as well. His agenda is left of center of the Democratic Party, not to mention the nation.

"…we invest in reform that will bring down the cost of health care for families, businesses, and government... And in this budget, we have ..." 3/24/2009

He included an extra $600 billion in his budget to cover the extra costs of his healthcare plan. How is that bringing down costs?

"We are in the worst financial crisis since the Great Depression…" 10/07/2008

"We are beginning to see signs of recovery." -  3/24/2009: 

When he wants to spend money, he overstates the state of the crisis. Then, if people start to lose confidence, he understates it.

"I will make a firm pledge: I pledge under my plan, no one making less than $250,000 a year will see any type of tax increase, not income tax, not capital gains taxes, not any kind of taxes," - 11/12/2008: 

First of all, this is completely inaccurate on its face. The president's budget straight up limits tax deductions for incomes over $208,000 joint and $104,000 single.  Furthermore, it imposes an energy tax (cap and trade) which is expected to double utility rates for everyone regardless of income.  Additionally, the president is guilty by omission.  There is no way he can spend the money he wants to without raising taxes on everyone at some point. You can confiscate all income over $250,000 (a more plausible idea after the bonus vote last week) and you would not balance the Democrat budget over the next 10 years. It would require a 30% increase in EVERY federal tax on EVERBODY, at EVERY level, in order to pay for the spending they want.  That's 30% more social security tax, Medicare tax, income tax, corporate tax, capital gains tax, alternative minimum tax, etc. That's the real message in his budget.

President Obama likes to speak. He likes to speak a lot. At one point while I was recovering from my surgery, I remember seeing him give 3 separate televised speeches on the same day!  Whether it's Leno or a prime time press conference, he's on TV saying something pretty much every day.

But is he doing what he is saying? A couple of weeks ago an editorial appeared in none other than the Washington Post (not exactly a conservative publication) suggesting that he is saying one thing and doing another. I agree. Here are some specific examples:

"…I've pledged to slash earmarks by more than half when I am President" Candidate Obama - 11/22/08: 

But one of his very first acts was to sign a massive spending bill with nearly 9,000 earmarks costing over $7.7 billion. Heck, he didn't even ask, or try to ask, that the earmarks be removed.  He appears to have no intention of following through on this popular campaign pledge.

"…I pledged to cut the deficit in half by the end of my first term in office" Address to Joint Session of Congress - 2/24/09:

This statement is so far from the truth that I hardly know where to start. The budget, as computed by the non-partisan Congressional Budget Office, does cut the budget in half in 5 years, but only because the first year deficit has been enlarged so much (to $1.8 trillion) by the stimulus package and omnibus spending bill.  It's like pledging to lose 10 pounds, but then gaining 20 pounds first. Secondly, after the 5th year, it rises again dramatically every year thereafter, even under his own numbers!  His 5 year number is only a brief moment in time. His budget averages over $1 trillion in deficit a year for as far as the eye can see. He will add more debt in 6 years than was accumulated by every president from George Washington to George W Bush. But, more on the budget tomorrow.

"So if you look at our budget, what you have is a very disciplined, fiscally responsible budget…” - 3/06/2009: 

Give me a break. This is clearly the least responsible budget ever proposed, for the reasons I have laid out above.

Below is my statement at today's Budget Hearing: