Thursday, January 28, 2010

Business is Business

cross posted at Right Michigan

"It's not personal, it's business."

That is not an unfamiliar phrase to anyone who has spent much time around the television or the conference room. It was how, for instance, Tony Soprano could show genuine remorse for the death of someone that he just had whacked.

It was how Ford Motor Company, getting the jump on its domestic competitors, could axe thousands of workers from the payroll in anticipation of even rougher waters ahead.

It is why manufacturers are wont to shut down factories that employ familiar faces so that they can outsource their production to more exotic locales such as Indiana and Alabama.

There is always a time for emotion, but it is best left expressed until after the pink slips have been passed out and the "for sale" sign has been posted on the front door. This is not because emotions are bad or unnecessary, but because viable businesses have to survive profitably. If they lose their ability to make a profit they lose their ability to survive--and emotions can get in the way of that ever existing truth.

Business is business.

One needs only skim the "Economic Recovery Report" mailed to many voters in Bart Stupak's district to discover why an emotions driven economy has one foot in a financial grave. The report contains quite a bit of feel-good information that Mr. Stupak wants his constituents to celebrate with him.

It is not possible to give every item contained within the report its proper attention. I will briefly talk about three.

First, the report lauds the creation or retainment of 1,950 jobs in Michigan's 1st district and the $461 million dollars earmarked for his area. This is an investment of $236,400 per job saved or retained. (I'm rounding down.)

Now, I know that construction projects requiring asphalt, steel, and equipment are going to come with higher price tags than jobs that require a fancy name tag and a clipboard. Yet, nearly one third of the jobs (610) "created or retained" were retained in K-12 schools in Michigan. I know one of these retained workers and she took no asphalt with her into the classroom. To make matters worse, her job as funded by the stimulus, will cease to exist at the end of the school year.

I wonder if Mr. Stupak will be issuing an updated report with only 1,949 saved or retained jobs once the school year ends.

The fact of the matter is, the stimulus package was promoted as a means to create jobs and it wasn't until well after the stimulus bill was passed that we began to hear the magic modifiers "saved" or "retained" added to the sales pitch.

As the process unfolded, a saved job became every bit as important as a created job. Emotionally this may very well be acceptable, but from the standpoint of economic growth or its stimulating effect, it is mere obfuscation.

Growth is growth and stimulus is stimulus. The retaining of a job is not growth, the retaining of a short term job is less than growth, and the borrowing of money to retain a temporary job is an all-liquid diet.

When it comes to claiming created jobs even beyond those only saved, Bart Stupak is no slouch either. The largest benefactor indicated (outside of public schools) is in Alpena where 210 jobs will be created with the building and operation of American Process Inc.'s new biofuels and bioproducts plant. (Industry reports say the project itself will create 10 new jobs while 160 spin off jobs might result.) The government's ante for the project is $18 million or, $1.8 million per directly created job.

Here we see a prime example of a benevolent government becoming directly involved in private industry. It is entering into a commercial market where private companies see the potential results as not worth the investment of their own money. If private companies are not willing to spend their own money on what they deem is an unworthy investment, why should emotional bureaucrats spend borrowed money to keep the ball rolling?

We need to look no farther than the corn ethanol industry to see the sad results this sort of venture can create. Because of well-intentioned bureaucrats with wallets stuffed with money borrowed from the Chinese, we have created an industry that arguably uses more energy than it creates, needs strict tariffs and subsidies to stay afloat, uses 1,700 gallons of water to produce one gallon of a fuel that is fifteen percent less efficient than gasoline, and helps to starve countless people each year.

Would it have been so wrong so wrong yesterday to expect corporations like Archer Daniels Midland to stick its own neck out on corn ethanol? Is it wrong today to think that American Process should put its own money on the line? At a time when people need jobs and the planet needs saving, who can seriously be bothered to answer such questions?

The report also mentioned that 21 jobs would be created or retained by

"the Alcona Health Center for an Increased Demand for Services program to retrain staff who were in danger of losing their positions due to implementation of electronic medical records."
Any business trying to maintain a profit has to look for opportunities to add efficiencies to the operation. There are many ways to do this including mergers in the marketplace, better trained personnel, and new equipment. In a textbook example of how a private business must work to stay afloat, the Alcona Health Center has implemented a new system that is providing it with the opportunity to work more efficiently.

I have no doubt that the Alcona Health Center is a business worthy of patronage and a fine provider of medical care to a broad range of clients. Yet, after the Center takes the initiative to provide itself with an added efficiency, why should it be destitute taxpayers who have to cough up the extra cash to retrain displaced workers for other in-house jobs, especially when the necessary cash should have been made available by the added efficiency?

By any objective measurement, the economic stimulus plan has been worse than ineffective, it has been damaging. By just glancing at a few of the best examples provided by one of its greatest supporters, the numbers are easy to dismantle and the claimed benefits are just as easy to refute.

Our governments must begin to tackle our economic problems logically. We can no longer afford to deal with daunting economic difficulties by churning out short term emotional fixes.

Otherwise we all get whacked.


Anonymous said...
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Matt said...

Most of our biggest boondogles and finacial disasters come from the point where business interests and statist politics come to seeming agreement and become partners.

The Rougman said...

That is why insurance and pharmaceutical lobbyists should not be allowed to help write health care reform legislation, why the government should not have representatives sitting on the boards of Chrysler and GM, why ADM should not be receiving huge corporate welfare checks in the form of ethanol subsidies, and why the Michigan governor should not be granting monopolies to utility companies for a tentative promise to maybe provide more green energy in the future.

Our government has become so entangled with all areas of the private sector that it might take a neurosurgeon to extricate them.