Financially, it makes sense for the government to look for a way to save GM and prevent GM from going bankrupt. If GM goes bankrupt, the costs to the federal and state governments will be huge. The Pension Benefit Guaranty Corporation would have to pay for the pensions of retired GM employees, the state and federal would pay for extended unemployment benefits, medical bills of laid off employees would be picked up by the state or Medicaid, property taxes on GM facilities would not be paid and more people would default on their mortgages and other debts.
However, it only makes sense for the Federal government to finance the resurrection of GM if there is a plan that makes it probable that the resurrection of GM will be successful and that the cost to the government of resurrecting GM is less than the cost of a GM bankruptcy to the government.
The UAW has not made any significant contract concessions in the recent contract modifications which have actually increased pay for UAW members in some cases. GM has also agreed to reopen and retool one or 2 US plants to make up to 160,000 small cars per year which were to be imported from a GM facility in China. GM has also agreed to severance packages for UAW employees that would make a Bank CEO blush. UAW employees with less than 10 years of service are being offered $45,000 in addition to a $25,000 car voucher.
Especially in the current economic environment, UAW employees should not receive benefit protection and severance pay made possible by the US taxpayer that are so much more generous than what the vast majority of other Americans are getting.
So, after about $50 billion already spent or expected to be committed in the near future from the US government to resurrect GM, we will end up with a GM with the same bloated cost structure that caused GM to fail in the 1st place. I think it likely that after the bankruptcy and restructuring, GM will return to Congress on an annual basis asking for more financial assistance much like Amtrak has done.
President Obama is a smart guy and must realize that the current plan will not save GM. I'm hoping that his support of the UAW is political window dressing and that he is planning to let the bankruptcy courts make the significant cuts to the UAW and dealer contracts that need to be made to make GM a viable business.
Sunday, May 31, 2009
Policy Alternative - Teenage Pregnancy Reduction
Most people agree that there are too many teen pregnancies and that these pregnancies carry a tremendous cost to the taxpayer and to the teen mother. In 2000, in the 15-19 year old age group, there were 821,810 pregnancies and 468,990 births in the US .
Numerous programs most of which involve education, availability of birth control or promotion of abstinence have been tried and all of these programs have failed to make any significant, national reduction in teen pregnancy.
In addition to the direct costs of teen pregnancy such as maternity care for young girls who frequently don't have medical insurance and support costs including welfare and food stamps, there are significant indirect costs. A teen mother who is often a single parent, is usually not equipped to raise a child with the guidance and support necessary to make the child a success in life. All too often, the children of teenage parents become teenage parents themselves, fail to achieve a good eduction and frequently have trouble with the law thereby increasing costs to society for police, courts and jails.
So, what might work? One method that has consistently been proven to modify behavior is to pay for the desired behavior. For instance, this has worked to increase the grades for students in inner city schools. So, why not pay teenage girls to not get pregnant? Perhaps a monthly stipend of $200 to each female between the ages of 15 and 19 inclusive. If you have become pregnant even if the pregnancy is terminated then you are no longer eligible. Perhaps there would be a family income cutoff.
As of 7/1/2008, there were 10.5 million girls between the ages of 15 and 19 inclusive. At $200 per month, assuming that all 10.5 million girls were eligible, the annual cost would be $2.5B in stipends plus administrative costs.
With an average cost of a normal delivery at $7,000, an average 1st year medical cost of $49K for a premature birth, an average of 12.1% of all deliveries a premature birth in 2002, a 10% reduction in birth rates for 15 to 19 year olds would save over $566 million per year just in birth costs. These savings do not include savings in food stamps, welfare, education and other related costs.
This stipend would put additional money in the hands of some of the most needy people in the US. For as little as $200 per month, I expect that most mothers would make sure that their daughters kept their legs crossed. For $200 a month, a teenage girl would easily be able to understand the cost of risky sexual behavior and the money provided by a stipend might enable her to pursue and education.
Any reduction in teen pregnancy would also result in a reduced number of abortions. The CDC tracks the number of abortions and in 2005 there were 118,131 abortions (table 4) performed on girls between 15 and 19 years of age in the US in the 46 states and the District of Columbia. Note that the CDC number of reported abortions did not include abortions performed for residents from Alaska, California, New Hampshire and Oklahoma due to reporting issues. In 1997, 23% of total US reported abortions were performed in California so the number of legal abortions performed in 2005 on girls between the ages of 15 and 19 would be closer to 145,000.
Update 12SEP09 - A recent OECD study reported that public spending on each US child through the age of 18, not including spending on health, is $140.0K. A 10% reduction in births in one year would result in a savings of $6.6 billion over 18 years not including public spending on health care.
Numerous programs most of which involve education, availability of birth control or promotion of abstinence have been tried and all of these programs have failed to make any significant, national reduction in teen pregnancy.
In addition to the direct costs of teen pregnancy such as maternity care for young girls who frequently don't have medical insurance and support costs including welfare and food stamps, there are significant indirect costs. A teen mother who is often a single parent, is usually not equipped to raise a child with the guidance and support necessary to make the child a success in life. All too often, the children of teenage parents become teenage parents themselves, fail to achieve a good eduction and frequently have trouble with the law thereby increasing costs to society for police, courts and jails.
So, what might work? One method that has consistently been proven to modify behavior is to pay for the desired behavior. For instance, this has worked to increase the grades for students in inner city schools. So, why not pay teenage girls to not get pregnant? Perhaps a monthly stipend of $200 to each female between the ages of 15 and 19 inclusive. If you have become pregnant even if the pregnancy is terminated then you are no longer eligible. Perhaps there would be a family income cutoff.
As of 7/1/2008, there were 10.5 million girls between the ages of 15 and 19 inclusive. At $200 per month, assuming that all 10.5 million girls were eligible, the annual cost would be $2.5B in stipends plus administrative costs.
With an average cost of a normal delivery at $7,000, an average 1st year medical cost of $49K for a premature birth, an average of 12.1% of all deliveries a premature birth in 2002, a 10% reduction in birth rates for 15 to 19 year olds would save over $566 million per year just in birth costs. These savings do not include savings in food stamps, welfare, education and other related costs.
This stipend would put additional money in the hands of some of the most needy people in the US. For as little as $200 per month, I expect that most mothers would make sure that their daughters kept their legs crossed. For $200 a month, a teenage girl would easily be able to understand the cost of risky sexual behavior and the money provided by a stipend might enable her to pursue and education.
Any reduction in teen pregnancy would also result in a reduced number of abortions. The CDC tracks the number of abortions and in 2005 there were 118,131 abortions (table 4) performed on girls between 15 and 19 years of age in the US in the 46 states and the District of Columbia. Note that the CDC number of reported abortions did not include abortions performed for residents from Alaska, California, New Hampshire and Oklahoma due to reporting issues. In 1997, 23% of total US reported abortions were performed in California so the number of legal abortions performed in 2005 on girls between the ages of 15 and 19 would be closer to 145,000.
Update 12SEP09 - A recent OECD study reported that public spending on each US child through the age of 18, not including spending on health, is $140.0K. A 10% reduction in births in one year would result in a savings of $6.6 billion over 18 years not including public spending on health care.
Policy Alternative - Education Financing
This posting relates to financial assistance, primarily government assistance, for higher education.
In part due to the recession, we hear that universities are being forced to cut costs and reduce financial assistance to students. The federal and state governments are also being forced to cut education budgets and raise tuition and other fees for students at state universities.
We frequently hear that we don't have enough medical doctors, not enough software engineers so more foreign software engineers are being admitted with H1B visas or that various jobs are being sent overseas because we don't have enough qualified people here. It strikes me as odd, given that we have a shortage of engineers and doctors, that financial assistance is generally available equally to all university students regardless of their area of study. When money is short, should we really be assisting aspiring interior decorators when we need more doctors and engineers?
Certainly until the recession is over but I would also argue that it makes sense in the long term, the majority of financial assistance for at least 3rd and 4th year university under graduate students and for graduate students should be targeted to students in selected degree programs such as engineering and medicine. If a music history student decides to pursue engineering as a 2nd major in order to be eligible for financial assistance I expect that we would all be better off. Perhaps with more engineers and scientists, there would be more vaccines developed and more jobs created here in which case we would all be better off.
Administering a program to support the above would not be that difficult or that expensive.
In part due to the recession, we hear that universities are being forced to cut costs and reduce financial assistance to students. The federal and state governments are also being forced to cut education budgets and raise tuition and other fees for students at state universities.
We frequently hear that we don't have enough medical doctors, not enough software engineers so more foreign software engineers are being admitted with H1B visas or that various jobs are being sent overseas because we don't have enough qualified people here. It strikes me as odd, given that we have a shortage of engineers and doctors, that financial assistance is generally available equally to all university students regardless of their area of study. When money is short, should we really be assisting aspiring interior decorators when we need more doctors and engineers?
Certainly until the recession is over but I would also argue that it makes sense in the long term, the majority of financial assistance for at least 3rd and 4th year university under graduate students and for graduate students should be targeted to students in selected degree programs such as engineering and medicine. If a music history student decides to pursue engineering as a 2nd major in order to be eligible for financial assistance I expect that we would all be better off. Perhaps with more engineers and scientists, there would be more vaccines developed and more jobs created here in which case we would all be better off.
Administering a program to support the above would not be that difficult or that expensive.
Patriotism
Especially during national elections, I hear all too often the view that some candidate's position, comments or style is unpatriotic. What is patriotism and can patriotism really be reduced to wearing a US flag pin or setting off red, white and blue fireworks on Independence Day? For some, patriotism is supporting the President's position on any issue or taking offense if anyone, especially a foreigner, disagrees with US policy.
For me, patriotism means being a good citizen. A good citizen is an educated voter, someone who adheres to the laws and rules, someone who shows respect and consideration for others even in the little details of life such as driving and someone who acts in the nest interest of the country rather than the individual's best interest.
Voting is a privilege, OK a right, but also a responsibility. A responsible voter makes sure that they understand the issues and candidates' positions before they vote. Voting based on rumor (McCain had an out of wedlock mixed race daughter)), based on a headline without understanding the issue (green policies will cost jobs), personal biases (Obama is black) or primarily based on the benefit of the candidate's position to the voter rather than benefit to the country seems to me to be a perversion of the Democratic process and unpatriotic.
Our system depends on the rule of law which provides mechanisms (elections and courts) which can be used to change the laws when needed. A good citizen obeys the rules and laws even when they disagree with them or find the consequences of the rule or law a disadvantage to them. Too many Americans cheat on their taxes, claim unwarranted benefits such as disability or arrange for a handicap parking permit due to convenience rather than need and still say that they are patriotic. If you don't like the rules then try to change them but respect them until they are changed.
As far as voting based on what is best for the country rather than what is best for the individual voter, consider the following quote:
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the Public Treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the Public Treasury with the result that a democracy always collapses over loose fiscal policy always followed by dictatorship." From: The Decline and Fall of the Athenian Republic, by Alexander Fraser Tyler.
It is not easy being an educated voter but it is necessary and beneficial to the country and the individual. Consider the debate about the need of going to war with Iraq prior to the invasion. People who disagreed with the policy advocated by President Bush's administration were called unpatriotic or worse. Too many people based their decision on the headlines such as Iraq was working with the people responsible for 9/11 or that Iraq had or was trying to acquire weapons of mass destruction. If more people had taken the time to read and objectively consider the dissenting information published by many including the NY TIMES and then written their elected representatives, it is possible that we would never have gone to war with Iraq. The majority of Americans now believe that invading Iraq was a mistake although in early 2003 the majority supported the war. After thousands of US casualties and huge expenditures that could have been used for more benefit, what has changed to cause this change in support for the war? Basically, the knowledge relating to Iraq has changed and more people now believe that Iraq wasn't working with the 9/11 terrorists, didn't have nuclear bombs and Iraqi oil couldn't pay for the cost of the war. All of this knowledge was available before the war if only more patriotic Americans would have taken the time to read about the issue rather than watching another reality TV show. All of us share the blame for the casualties and cost incurred in Iraq because we didn't do our job as citizens.
Next time you attend a Memorial Day parade, consider what it means to be patriotic.
For me, patriotism means being a good citizen. A good citizen is an educated voter, someone who adheres to the laws and rules, someone who shows respect and consideration for others even in the little details of life such as driving and someone who acts in the nest interest of the country rather than the individual's best interest.
Voting is a privilege, OK a right, but also a responsibility. A responsible voter makes sure that they understand the issues and candidates' positions before they vote. Voting based on rumor (McCain had an out of wedlock mixed race daughter)), based on a headline without understanding the issue (green policies will cost jobs), personal biases (Obama is black) or primarily based on the benefit of the candidate's position to the voter rather than benefit to the country seems to me to be a perversion of the Democratic process and unpatriotic.
Our system depends on the rule of law which provides mechanisms (elections and courts) which can be used to change the laws when needed. A good citizen obeys the rules and laws even when they disagree with them or find the consequences of the rule or law a disadvantage to them. Too many Americans cheat on their taxes, claim unwarranted benefits such as disability or arrange for a handicap parking permit due to convenience rather than need and still say that they are patriotic. If you don't like the rules then try to change them but respect them until they are changed.
As far as voting based on what is best for the country rather than what is best for the individual voter, consider the following quote:
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the Public Treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the Public Treasury with the result that a democracy always collapses over loose fiscal policy always followed by dictatorship." From: The Decline and Fall of the Athenian Republic, by Alexander Fraser Tyler.
It is not easy being an educated voter but it is necessary and beneficial to the country and the individual. Consider the debate about the need of going to war with Iraq prior to the invasion. People who disagreed with the policy advocated by President Bush's administration were called unpatriotic or worse. Too many people based their decision on the headlines such as Iraq was working with the people responsible for 9/11 or that Iraq had or was trying to acquire weapons of mass destruction. If more people had taken the time to read and objectively consider the dissenting information published by many including the NY TIMES and then written their elected representatives, it is possible that we would never have gone to war with Iraq. The majority of Americans now believe that invading Iraq was a mistake although in early 2003 the majority supported the war. After thousands of US casualties and huge expenditures that could have been used for more benefit, what has changed to cause this change in support for the war? Basically, the knowledge relating to Iraq has changed and more people now believe that Iraq wasn't working with the 9/11 terrorists, didn't have nuclear bombs and Iraqi oil couldn't pay for the cost of the war. All of this knowledge was available before the war if only more patriotic Americans would have taken the time to read about the issue rather than watching another reality TV show. All of us share the blame for the casualties and cost incurred in Iraq because we didn't do our job as citizens.
Next time you attend a Memorial Day parade, consider what it means to be patriotic.
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