Friday, December 19, 2008

A Note from John Stossel Thu., December 18, 2008

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John Stossel: "Give Me a Break!"

Friday I report on the bailout.

It's bad enough that politicians are giving out billions of your tax dollars to banks that made bad decisions -- thereby rewarding failure -- and encouraging yet more failure. But now it's worse: the Fed has put $5 trillion of your dollars at risk, quietly guaranteeing loans to banks. The Fed won't name most of the banks, saying that disclosure might create a panic. The government also will not reveal what collateral they got in return for giving banks your money. Basically, a handful of politicians have unlimited discretion over trillions of your dollars. Give me a break.

Most of "20/20" will be about a mystery in Bloomington, Ill. After three women were raped, police came to suspect that the rapist was one of their own.

Here is some edited feedback on my columns:

"Do Worry About the Deficit":

Dan writes: Isn't deficit spending what got the financial, mortgage and auto industries in trouble? Why should we think the government will have a different result.

Hagar writes: Be Happy the Messiah will take care of all of us. Millions will be put to work on meaningless bound to fail tasks.

Kathy writes: How about bringing back all the jobs that our companies sent overseas? That should help, no?

Rich not Wealthy writes: Kathy, you need to read more Dr. Sowell about outsourcing jobs. The truth is that more Americans are employed now than ever before, even with a rising unemployment. The way to improve everyone's standard of living is to outsource jobs that can be done cheaper somewhere else and create new jobs that can't.

Lon writes: Stossel leaves out that the "depression within a depression" came about precisely when Roosevelt decided to worry about deficits. When Roosevelt cut spending to avoid overly balanced budgets, the economy tanked again.

Since that point is made explicitly in the Krugman articles that he is citing, either Stossel did not understand them, or he is dishonestly pretending to address them while ignoring their key point.

I suspect the economy tanked because the highest income tax rate went from 25 percent in 1929 to 79 percent in 1936. Spending cuts did not worsen the great depression. As Milton Friedman argued, it was mainly the Federal Reserve defaulting on promises they made to banks that caused deflation and worsened the crisis. Government spending on wasteful projects -- instead of giving the money back to the people who earned it -- also made things worse.

Some comments on my most recent Larry King Live appearance:

Jack Ryan writes: I watched the Larry King show of Tuesday, Dec. 9, when you were one of four panelists on the show.

The deck was truly "stacked against you." No one would debate your points, but instead simply gave their global warming "talking points."

The most wrong-headed notion that all three panelists have is that, somehow, millions of "new jobs" are going to be created by a government-mandated energy policy, without realizing that the same millions of jobs will be destroyed by removing the taxed monies from the economy. They either see only one-half of the equation.

Dennis Vanevenhoven writes: John you continue to be a shame on free people all over our country. Your a joke. I have not watched you for years, but from time to time I read some right wing hateful thing you said. Tonight I turned to CNN and there you were on Larry King. Even in just the few seconds I heard you my stomach got upset. You are one of the most hateful people around. Now your saying there is no global warming. ? You appear to have a IQ of about 90. Not many people watch 2020 anymore because of you. Robert Kennedy made you look silly. Go away.

Michael J. Bowers, P.E. writes: Thank you for speaking some common sense against those you appeared with this past evening on CNN. As you so aptly pointed out, if the change they propose was economically viable, much of what they propose would already have happened.

Give Me a Break segment on the auto bailout:

Bizmail writes: You were at your very best this evening! I never went to my banker, hat-in-hand, and gave him a list of concessions about a loan he was going to make me.

Terry Goode writes: You must NOT be aware of all the government help that the foreign auto companies get.

Who cares if foreign car companies are helped by their governments? Just because another country spends their taxpayers' money to help underperforming sectors of their economy ? doesn't that mean we should.

Manzov Vincent writes: Who do you think you are to voice a negative opinion on national T.V about something that hits home to so many people. You need to give me a break. I hope you too lose your job and your kids go hungry. Your a stupid American. You sure you were not born in China or some Asian country? Did the Automakers not build equipment for WW2? Did they not donate cars and money after Sept 11? . How dare you put that crap on T.V.!!! Ford is a great 105 year old company that deserves to put on a pedestal not kicked when they are down.

WflrW writes: You talk a lot about taxpayer money, I do not remember you objecting to taxpayer funds bailing out Wall Street, or maybe I missed that show, or maybe, just maybe that's OK, because like you these are white collar jobs, therefore, worth salvaging. I also do not remember you turning down the taxpayer money from the Federal Insurance that helped rebuild your ocean front home after a hurricane had damaged it. (I saw that show) This is not the same auto industry of the 70's or 80's, so be fair.

1) I opposed the Wall Street bailout, too:

2) My point is that we need get rid of government programs that give money for someone like me to rebuild in a dangerous place. You can't just assume that people will turn down free money.

3) If the America automakers have reformed so much, why can't it get a loan from private investors?

Stephen Nappa writes: John Stossel, Never in all the years I have watched TV news shows have I seen a more anti-American segment. Your attack on the UAW was disgraceful. What makes America great is a strong middle class.

Myths, Lies, and Downright Stupidity:

Tyler writes: Hi John, I enjoyed watching your Larry King session and I am almost finished reading Myths, Lies, and Downright Stupidity, I find it to be very insightful. Great Book, I am trying to get you to come guest speak at UCF, where I go to school.

To book me for a speaking engagement, contact:

Tori Ueltschi
ABC News, "20/20"

The Big Three Should Stand on Their Own Feet

Pamela writes: Mr. Stossel, you are wrong on this one … The people of the US turned their heads when our other productive industries went under … the steel industry, the textile industry, the furniture industry, etc. We need to keep productive industry in the US. What if we have future defense needs, like in WWII? Foreign car manufacturers report to their home countries. Don't tell me about service-based industries. We need productivity.

F1etch writes: The story goes that if we "lose" the steel industry or the auto industry or the [fill in the blank with whatever the latest companies in crisis might be], then our national security will be at risk. Nonsense.

The thing that has allowed the United States to amass the most powerful and well equipped military on the planet is not any particular industry, but our economic strength. THAT is what is placed in jeopardy by attempts to "save" industries (which, BTW, only contributes to their lack of efficiency).

Fishy writes: With all the plants and infrastructure of the Big 3 automakers, it is inconceivable that should any or all of them go 'bankrupt' some other concern won't be waiting in the wings to purchase these established industries. Whoever takes them over will still need workers, especially workers with experience within the newly purchased plants.

Dan writes: Although I don't like bailouts, cut them a little slack; the government has a punishing tax system that drastically favors foreign cars (which is in fact why Japanese cars can even compete price-wise), and then they back that up with insanely union-backing legislation that has put a boat anchor on productivity, and more compellingly, progress and new ideas. Add to that laws regarding expensive safety features, excessive tests, expensive law suits for even the slightest problem, and the horrible specter of more manipulation of CAFE standards or oil supplies, and I can see how the Big Three feel that they are owed a bailout from the government that tore them down.

Some comments on my column, Government "Fixes" Slow Recovery:

Ralph Park writes: Loved the column.

Listening to the experts these days is a little like sitting in on the "Mad Hatter's Tea Party", or the Grand Academy in Gulliver's Travels, where the blind man is choosing paint colors, the deaf man is composing music.

It looks like bailing a leaking boat by scooping water from the stern and tossing it into the bow.

Charlie writes: No Free Lunch. We never realize that economics is just one part of the real physical world. We don't expect the nature of gravity and light to change because a "Department of Physics" now has jurisdiction over them.

M writes: A truly free market will self-recover. It is designed to flush out the losers and reward hard work and good management. When the government gets in the way, you have no vehicle left to recover. If losers cannot be flushed out, due to bailouts, things cannot correct and move on.

It's a sad thing to watch America melt away from what made us great...

F1etch writes: The markets (including the liquidity markets) are reacting to the same sort of uncertainty that fed the "Roosevelt Recession" of 1937-1938 when FDR arbitrarily changed the price of gold on nearly a daily basis and came up with another anti-business or economically disastrous program almost as frequently ?

Other comments:

Tom Hengel writes: In reading your columns it appears that you believe that government action somehow hinders prosperity. How then do you explain the world-wide economic impact of the following expensive US government programs?

1. The original GI Bill.

2. Putting a man on the moon.

3. Darpanet.

These three government programs are responsible for three of the largest economic booms the world has ever seen. Private enterprise did not take these actions, but the benefits to the private sector have been overwhelming. Government action, even very expensive action, can be a tremendous catalyst. Don't be so negative about what the government can accomplish.

I should hope that the federal government would accomplish something by spending around 20 percent of GDP since the 60s. We'll never know what the private sector would have done with those trillions.

1 The G.I. Bill certainly did a lot of good. But that's because -- unlike our K-12 public education system -- it allowed veterans to use their vouchers at whatever college they wanted. That created choice and competition. But we still won't know what other productive uses the money would have gone to in the free market.

2. Is it a great thing that government put a man on the moon? What has been the return on that investment? The private sector has been much more efficient in space ventures than NASA, as was shown by the Google Ansari X Prize, which offered $10 million to the first private company that could take a manned shuttle into space and back twice. The private developer who won the prize spent $30 million than NASA's operating budget. NASA spent 4 million last year on launch celebrations alone, among other activities that have been criticized as unnecessary.

And while just about everything else in the economy has becoming more efficient -- from computers to cars -- it still costs the same amount for NASA to send something into space as it did in 1981.

3. The private sector did a pretty good job creating the internet out of technology from ARPAnet, which was designed only as an internal military communication system. The private sector used it in ways ARPAnet's creators never could have envisioned, from online auctions to user-generated video to social networking sites.

When governments got involved in the internet, it was a fiasco. The French government produced a computer called Minitel in 1982, which allowed people to use the internet for online shopping. The press cheered the "advanced" French government when it gave every phone owner a Minetel computer to replace their phone book. But Minitel remained nearly unchanged over the decades, while the private sector kept innovating and produced the internet as we know it today. Minitel is now all but extinct .

As the French classical economist Frederic Bastiat would have pointed out , it is easy to see the benefits of spending but hard to see the hidden cost - the uses that money would have been put to instead.

Haley Wester writes: I'm a huge fan! I work as an economist at a major insurance company and teach an intro macroeconomics course at a local college (where I have been known to use some Stossel in the Classroom resources!). Over the last few years I have become more interested in the media as reporting seems to be less and less credible; however, I can always count on your research and reporting to be accurate and though provoking. I offer incentives (extra credit) to my students to encourage them to watch your segments on 20/20 and encourage the journalism students to study your style (truth vs. fear mongering).

Brandon writes: I am extremely interested in all of your 20/20 specials even the early ones I think they are great. I have looked all over for the videos and can not find them. I really want to get a hold of them to show my friends at school. Could you provide me with a website or any other outlet where they might be available?

Thanks for your interest. You can buy all our shows here:

Chris Dunn writes: You were able to open my eyes a few years back when I read your first book "Give Me a Break.". You, along with people like Milton Friedman, Ron Paul, Ayn Rand and Ludwig von Mises have played an important part of shaping how I view the government, economy and politics. I am a 24 year old minor league baseball player, and baseball has always been the focal point of my life. But, now, along with baseball, a second love has began creeping into my life. Thanks for watching.

Until next week,
John Stossel

Bring John to speak to your community, business, organization, school or other group!

To book John for a speaking engagement, contact:

Tori Ueltschi
ABC News, "20/20"

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