The UAW Agreement

I remember when I was in high school, I wrote a paper about how the United Auo Workers Union was ruining the American Auto Industry by demanding too much. At the time, the Big Three were losing billions of dollars and jobs were fleeing the rust belt, where the UAW has a stronghold, as a result.

The time around, the UAW has less ground to stand on in that they cannot strike against Chrysler or General Motors. This was part of the agreement when the US bailed out those two companies in light of the financial crisis. Ford did not take the money, so they do have to worry about a potential strike. Additionally, Ford appears to be the healthiest of the three companies.

In these recent negotiations, there are signs that the UAW and the Big Three are on better terms:

Not many decades ago, contract expirations used to be firm deadlines for the UAW. Agreements, or strike notification, usually came around the midnight deadline when the negotiators were groggy from several nights of very little sleep.

This year it helped that the union had agreed not to strike General Motors and Chrysler over wages.

This shows a pleasant change between the two parties. It's funny how a few lean years can do to a relationship. I think it's always important that the interests of a union and the companies it is negotiating with are aligned. So often, the interests are not aligned and this is not good for either party.

The UAW seems happy:

“They’re all new jobs, and quite a few of those jobs were located in Mexico,” UAW Vice President Joe Ashton said. “What we said going into negotiations is one of our major objectives is jobs, and we think we met that objective.”

“I am really proud of our whole team,” King said at the press conference. “We really came into negotiations to create jobs in America.”

Perhaps the most important result of this good news is that it is good for Michigan, a state that has been hit hard by the automakers' struggles:

Although the details will not be confirmed until today, early word suggests that workers will get a nice array of one-time rewards, in the form of a signing bonus and increased profit-sharing. That keeps the company's day-to-day costs fixed going forward, a boon in this still all-too-uncertain economy, while recognizing that workers deserve recognition for the role they continue to play in keeping the company and its products strong.

As a fan of the American Auto Industry, it was important for an amicable deal to get done. Hopefully, this deal will signal a new era of better relationships between the UAW and the automakers. Hopefully, it will lead to a more successful Michigan.

The Other Side

Quite recently, in the eye of this debt deal, President Obama has been lambasting oil companies and other corporations for avoiding taxes through loop holes:

He also goes after corporate jet owners. It's been going on like a broken record. I get why he wants them to be burdened with more taxes, considering they can probably afford it, but I don't know if it's "fair" or "equitable."

Nobody wants to pay taxes because they have no say into what the way that government is going to spend it. Government is inefficient both with layers of bureaucracy and wasteful programs such as Medicare, Welfare, and now ObamaCare. I'm not saying these programs aren't necessary, but rather that these programs aren't efficient.

On the other end of the spectrum, you have Republicans like Paul Ryan, who have consistently criticized the Democrats' irresponsible spending habits. Ryan was extremely pleased with the spending caps put on by the new debt deal:

But that did not stop him from writing a scathing op-ed in the WSJ regarding Obama's budget inadequacies:

Since then he has offered a lot of rhetoric but no real plan to avoid a spending-driven debt crisis. His speeches and press conferences are no substitutes for actual budgets with specific numbers and independently verified projections of future deficits and debt. Meanwhile, it has been over two years since the Democrat-controlled Senate passed any budget at all. This is a historic failure to fulfill one of the most basic responsibilities of governing.

The necessity of controlling federal spending is better illustrated by these graphs:

Needless to say, this problem isn't going to go away. In fact, it's only going to get worse unless we find a solution to this problem. ObamaCare was unnecessary bloated program that compounds the already horrible spending practices of our government.

When you have government handouts with lax rules, people are going to take them. Why wouldn't you want free money? If you can get it, why not? It's costing governments millions of dollars as a result.

To illustrate this problem, I'll use the Michigan Bridge Card program as an example. This program had very lax rules, so many people, in particular, students took advantage of this program. Although their parents were paying for their school and housing, they used the fact that they had zero income to get these cards and to get free groceries. As a result, the state had to make tighter regulations (From MLive):

"We're ready to extend a helping hand to any citizen who is truly in need — including college students who care for young children and are taking the right steps toward becoming self-sufficient," said Maura D. Corrigan, Michigan Department of Human Services director. "Those who don't meet federal guidelines won't be able to take advantage of what is meant to be a temporary safety net program."

It turns out that certain government programs have the same type of loopholes as the corporate tax loopholes that Obama has so vehemently argued to close. The whole system is creating a sort of reverse incentivization to work less and get more for the government. That's not a driver for growth, that's not a driver for productivity, that's not a driver for innovation. You have to wonder whether part of the reason the unemployment rate is so high is because the benefits of being on unemployment is so good. Now Obama wants to lengthen unemployment benefits again:

A top goal for Obama and congressional Democrats is to extend both unemployment insurance and a payroll tax break. These measures were enacted at the beginning of the year. Obama could not achieve those extensions in the budget deal with Congress.

I understand why we have unemployment insurance, but at what point are we going to cut this off? If we keep extending these benefits, why should anyone try to get employment? Where is the incentive to work?

Right now, we have more benefits offered to people than ever before, yet we sit at 9.2% unemployment. It's hard to say the economy is struggling when companies' earnings are generally beating estimates. Part of this might be from job cuts, but even with these stronger earnings, companies like Cisco and Merck are still cutting jobs.

Closing corporate loopholes are just going to cut into these companies' profits. The time honored solution to increasing costs is job cuts. This will only serve to exacerbate the problem. I'm not saying that these loop holes should not be closed, but closing them now might not be the best solution.

The first response for these companies will be to protect their profits and margins in their shareholders' best interests. You have a difference between what Obama thinks sounds reasonable and what will actually happen. We are already in risk of another economic recession. It is important to wait until the economy shows real signs of health before taking constrictive measures like increased taxes.

In the meantime, you should incentivize people to get back in the work force. The extension of unemployment allows people to take their time getting back into the field and pick and choose jobs. Jobs should not be something that people should be picky about right now. The government is shouldering a burden of costs that it needs to pass on to the private sector. As a result, they need to push people to get jobs and remove the uncertainty of future taxes.

In doing so, the government will alleviate the pressure of future costs on companies, while providing a sense of urgency at the bottom of the work force to be more aggressive in the labor markets.

Whereas the threat of taxes casts uncertainties over the overall economy, incentivizing the job market has the opposite effect. With more people employed and less people claiming benefits, you're automatically going to see a shift in revenues and costs. If you tighten up the loopholes or the ease with which people can get other government benefits in order to reduce unnecessary government handouts, you will see savings there too.

The best way to economic recovery and solving this debt crisis is not through taxes, but the other side. We are spending way too much on all of these programs. We need tighten up the restrictions of these programs and provide incentives for growth. The government isn't going to spend its way out of this recession, but rather, they are going to stunt a potential recovery with these backwards measures.

I would urge President Obama to take measures that actually work rather than to get into the weary debate on revenues versus spending cuts. His best path to reelection in 2012 is not by playing party lines, but rather by making a strong effort to right this country's economy and to make positive strides on the issue of debt.

Thank You Puxtasawney Phil!

More snow on the way:

This storm is a confluence of two big low-pressure systems that are on track to collide off the North Carolina coast and then turn north, bringing heavy snowfall that will continue into Wednesday. Samenow said Virginia and the District might get 6 to 10 inches, while Maryland could receive as much as 14. High winds -- perhaps gusting to 50 mph -- might topple trees and take down power lines just as service was being restored to tens of thousands of customers.

The National Weather Service predicted late Monday that 12 to 16 inches of snow would fall in the District and its nearby suburbs by Wednesday. The prediction was expanded early Tuesday to 10 to 20 inches. A little less snow was expected in Fairfax County, the weather service said. Snow was expected to start falling Tuesday afternoon and become heavy overnight, amid fierce winds.

Even parts of the Midwest appear to be targets of this storm:

The National Weather Service has issued a winter storm warning for northern Illinois, and is forecasting accumulations of from 12 to 14 inches of snow by Wednesday morning.

I am not looking forward to when this snow gets to Michigan. We seem to have avoided all big snow storms thus far this year. This would be the biggest.

New AD At The University Of Michigan

It officially announced yesterday that David Brandon, CEO of Dominos has been named the new athletic director pending Board of Regents approval:

“This is a new era, and I think David Brandon really is positioned well for the challenges that we’re going to face in the future,” Coleman said.

Coleman said though there were many candidates vying for the position and others were nominated for it, she felt Brandon’s experience made him the right person for the job.

“Times are different now than they were when Bill took over,” Coleman said of Martin. “I think (Brandon) has a lot of management skills that, as the department has grown and it’s become more complicated, we’ll need to pull on.”

President Coleman goes on to say:

“One of the things that David talked about during his interviews was really quite intriguing — how to enhance our fan experience,” Coleman said.

“There are all sorts of things we need to be looking at for the future because people are going to have choices about what they do with their leisure time and we want to keep people connected to the University,” Coleman said, adding that athletics is a key way to keep people active in the University community.

I will add more about my take on the new athletic director later today, but this is exciting news.

Donavon's Choke and Michigan's Unemployment

Landon Donavon is supposed to lead the US National Team next year in the World Cup. However, he was unable to lead LA Galaxy to triumph in the MLS Cup. He had a great opportunity as he took the fourth penalty which would have put LA on top after their keeper had made a tremendous effort to keep them in it. However, he shanked the kick, pushing it over the net.

He's not the first captain to miss a pivotal kick, but it got me thinking about what we should expect for next year's World Cup. With Charlie Davies out and Oguchi Onyewu looking like he has a 50-50 chance of being available, how will the US do? I can't really say. It depends on the group. We saw that them overcome a heavily favorited Spanish side in the Confederations Cup, but we also saw them blow a 2-0 lead. Can the US outwork their way through the group stage and into the knockout round? Who will step up for them now that Davies is out? I don't know if this one play can make us question Donavon's leadership and reliability, but he's going to have to perform on the pitch. He will be the most talented US player on the squad no matter what.

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In other news, I found out today that Michigan's unemployment rate has increased above 15 percent. I always love reading about unemployment numbers. It fascinates me that a place that was once such a catalyst for American industry is struggling so much with the economy. I wonder how Michigan can stop the bleeding of jobs. I think we're already seeing the effect of the poor economy as I'm seeing more people pleading for change and more robberies around campus. I'd like to see how the unemployment rate breaks down as well. Ann Arbor seems alright.

I also found it interesting that Massachusetts, my home state, decreased its unemployment rate. What is Massachusetts doing right that other states are failing at? It wouldn't hurt to find out. States like Massachusetts can provide a model for the others to right their economies. Until then states like Michigan might struggle with nearly 1 in 6 persons in the job market jobless.