The Year of the Bailout

I consider myself the perennial optimist. I always try to view things from a "half full" versus "half empty" perspective. But 2008 was a challenging year. It is a year where it appears that we made a paradigm shift when it comes to the role of government in the economy.

I believe that future history books will call 2009 the year the United States became the "bailout nation." We saw more of such today with GMAC Finance receiving $6 billion from the federal government. Democrats defied the image of being for "the little guy" that they worked so hard to maintain by leading the effort for bailout for major banks and corporations. There was far more reluctance by Republicans to bailout these fat cats, but in the end, I am sure the media will find these bailouts the complete fault of the GOP if they fail and will be seen as an act of courage by Democrats if they are interpreted as successful. The reality is, we already know they have "failed" because we had to abandon the ideas of limited Constitutional government to make them happen and the hangover effect of them may not be felt for years.

What is almost as negative as the Constitutional and policy implications of these bailouts is the view they project of what is important to us a country. In the United States we have a safety net for the poor, we bailout the super rich, and we obliterate the engine that creates more than 80 percent of the jobs in the country through excessive taxation, regulation, and licensure law. The highest income groups are not nearly as influential as those rising up the economic ladder in creating jobs, yet we sacrifice the entrepreneur at the altar of the mega corporation.

Those who have eaten at the trough of bailout are extremely vulnerable in the future. The government never "gives" without demanding more. Many of the task masters in government that have fed these companies, have advocated the nationalizations of industries. The hubris to think they will not be vulnerable is unbelievable.

The United States has been successful because of its long term commitment to economic freedom. This freedom includes the right to succeed and fail. Moral hazard is an important element in economic freedom. There has to be consequences to failure in order to avoid those mistakes in the future. The government is replacing this system with one that will eventually force the failure of many entrepreneurs and create a new welfare class of the mega wealthy. Let's hope 2009 sees a reversal of such a trend.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Caroline Kennedy Does Not Vote Often, But Still Wants to be a Senator

The recent comments by Caroline Kennedy regarding her lack of electoral participation in past political campaigns reminds me of Adam Sadler in the Wedding Singer. The main character, Robbie Hart, decides to pursue serious money by applying for a job at a bank. He tells the interviewer "No, sir, I have no experience, but I'm a big fan of money. I like it, I use it, I have a little. I keep it in a jar on top of my refrigerator. I'd like to put more in that jar. That's where you come in." Those familiar with the movie know that this memorable line didn't help poor Robbie land the job.

Fast forward to reality and you have Caroline Kennedy applying for an even bigger job -- the US Senator representing the state of New York -- and sounding very similar to poor Robbie. You can almost hear her, "I don't really vote, but I like power, and I certainly want more of it by being chosen to the Senate." In fact, she wants the seat held by her late uncle Bobby. After all, it is a family business, she seems like a logical candidate. But then she is haunted by the experience question. Not only does Kennedy lack any substantive policy experience to speak of, she has often decided that voting in elections (including the actual seat she is running for) wasn't worth her time. In retrospect, she has been "dismayed" by her lack of voting.

The New York Times notes that "She did not vote in any of the last four primary elections for New York City mayor. Nor did she vote in the general election of 1994, when Daniel Patrick Moynihan, whose Senate seat Ms. Kennedy now aspires to fill, was elected to his fourth and last term." The article goes on to point out that "a review by The Daily News indicated that Ms. Kennedy, a Democrat, has not voted in about half of the 38 contested elections since 1988, most of them primaries."

Caroline Kennedy is well down the road of being middle age and has little to show for her Kennedy name. Her role has largely been ceremonial. The last surviving member of Camelot, the keeper of the Profiles in Courage award, but little else to show for her efforts. It appears now she has more than a little remorse and is trying to play catch up by pursuing one of the most important positions in the US government. There is, after all, only 100 US Senators. They serve for six years (such a long time is a luxury in politics), their fingers touch every major Presidential appointment and have a profound impact on policy not afforded to many other elected officials. It would seem that a person who wanted to hold such a high office would want to cut their teeth on at least one or two positions before the Senate.

The US Senate is usually the reward for years of works in politics or policy. When it comes to the substance in the case for Caroline Kennedy, there really is not any. But she is, after all, a Kennedy. If she is chosen by Governor David Patterson of New York it will be because he is lost in the legend and romance of Camelot or because of orders from President-Elect Barack Obama (a big Caroline fan). It won't be because she is the best candidate for the job, which is what the Senate and New York needs and deserves.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Strange Sightings in Retail Land

"It was day after Christmas and all through the stores, not a creature was stirring, not even a sales hunter." It wasn't that bad, but I was really surprised by the very small numbers of people I am seeing out in the stores. In recent years, the days immediately following Christmas have been as busy as those immediately before. In my personal experience, that wasn't the case in 08.

On Christmas morning in our huge family, many of our family members had things that didn't fit, didn't work, or wasn't exactly what was wanted. I thought that I would be hauling at least 6 or 7 in the Suburban, but fear of the lines led to trading and making due for most. That lead to only four, with me driving. We had four stops on our list -- Academy (sporting goods), Sports Authority (sporting goods), Kohls, and JC Penny.

Even with the small number in our group, I was convinced that this mission would take hours, if not days. In reality, if the wife didn't go, we would have been done in less than two hours. She figured out how to make it last much longer.

The Sports Authority was nearly empty when we got there. There was around twenty in the entire store. At no time there was no more than two or three in the checkout lines. When we were ready to leave, our check out was empty.

Kohls was slightly better, but certainly nothing for management to get excited about, although the sales should have made it quite the attraction. The prices were extremely low on many items and you would think it would have attracted a crowd. We were checked out in no time.

I received a gift card to Academy and was ready to go, and the specials were really impressive. I walked out with a couple of college shirts representing my son's shool and a baseball cap for my Astros for less than $30. I even had dollars to spare. In spite of the low prices, the lines and crowds were typical of pre-Thanksgiving. They were not big at all.

Finally there was JC Penny. The sales weren't as strong and neither were the crowds. Very disappointing indeed!

According to Master Card, which monitors retail sales in general and not merely their own, Christmas sales plunged by at least 2 to 4 percent. In a business environment that demands an annual increase in sales on Christmas, this is unacceptable. This is expected to be a difficult year for retail indeed.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Ominous Signs for Gift Card Tuesday

We all know about Black Friday -- the day after Thanksgiving where people finally buy enough to put businesses in "the black." In recent years we have had Cyber Monday (the Monday following Thanksgiving in which people make most of their holiday online purchases) and I have been talking about Gift Card Tuesday both on the radio and online.

On the first Tuesday of February 2009, retailers will announce how much they made from gift cards sold in November of this year. Companies don't know based on the cards sold, ironically, but from the purchases that comes from the cards. Gift Card Tuesday will not be very pretty this time I am afraid.

This is due to several reasons. The first reason is obvious -- spending has reached a new low for consumers on this holiday season. People are extremely fearful about their finances and are reducing costs at every opportunity.

A second reason is closely associated with the first and that is the concern about the large number of retail businesses that are going under. There is sense that many more will go under right after Christmas and people will be stuck with cards that have little to no value. What could keep these companies in business -- an influx of new customers buying cards -- may not happen because consumers believe these business may become history. One of those interesting paradoxes of business. Because of this paradox, many more businesses may join the ranks of Circuit City (see video above) that are now out of business.

With the many other more urgent and pressing headlines, we haven't seen much about the economic impact of gift cards lately. I am sure we will in February.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Lessons About Taxation Remains the Same

Recently someone sent me a copy of a speech I gave around fifteen years ago in Warsaw, Poland. It appeared in Vital Speeches of the Day. It was funny, "Kevin, did you see this?" Yes, I'm familiar with it, after all I wrote it. His enthusiasm compelled me to sit down and to review to see if there were any lessons garnered then that would be useful now.




The basic thesis of the speech was that freedom works and I pulled many examples from both history and current circumstances (at the time). One lesson that stood out in particular was the miracle story of Japan. At the time I gave that speech in the early 1990s, Japan was the poster child of economic freedom and had one of the fastest growing economies in the world following infrastructural and economic disaster after World War II. The reason for that phenomenon, at the time I gave that speech could be summed up in three things about Japan:

• Japanese management and workers cooperate as a team to succeed in the market place, rather than oppose one another as in the case of labor unions. This is reflected in the fact that the Japanese have company unions rather than labor unions. Company unions are inclusive, when they say "us against them" they mean competitors. When labor unions say "us against them" they mean management. These subtle differences are crucial in the success of Japanese corporations.


• There is great emphasis on savings and investment. The typical Japanese laborer in urban areas saves approximately 20 percent of his income.


• Finally, the tax system encourages economic growth by staying very low. In fact, their taxes are the lowest of any industrialized country in the world.
  

Those who monitor current affairs know that Japan is now known for its economic stagnation and has suffered such for over a decade. Why the change in fortune? One does not need to look any further than point number three. Today, Japan has the highest tax rates of any modern economy. Meanwhile a European economy known for perennial economic weakness -- Ireland -- is one of the fastest growing economies in the world. The reason for its success is due to Ireland reducing its tax rates to among the lowest in the world.

Nothing is more effective in attracting capital and stimulating economic growth than lower tax rates. If the United States is serious about fostering economic growth and prosperity, it will demonstrate such by competing with other countries for businesses and jobs through lower tax rates.


Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

The Most Popular Google Searches of 2008

As each year comes to a close we tend to look back at some of the things that marked the twelve months before. One of my favorite areas is to review what was hot on the Internet and there is no better place to find such information than at Google's Zeitgeist. Here is the list for 2008:

1). Sarah Palin. In one of the worse years for Republicans and conservatives in decades, Sarah Palin came on the scene and showed us that there still may be some reasons to hang around the GOP. Palin was courageous and straight talking. Sure, she had some difficulty navigating the incredible platform given to her of national office. But I believe she served he cause well, in the balance, and I will be very surprised if we don't see her again very soon.

2) Beijing 2008. The historically backward and private China allowed itself to be in a fish bowl in a most profound way. It spent the largest amount of money ever on its opening ceremony and provided a show that few will forget. In spite of the good impression, we still heard stories of secrets kept and lies made (for example, the ages of their gymnists). These Olymics largely dominated the headlines the first of 2008.

3) Facebook login. I guess people want to know how to get on one of America's most popular social network websites. Where is that page, anyway? I am working on my own page. After all, if it is good enough for Fox News and CNN, it is good enough for me.

4) Tuenti. This "Spanish Facebook" created quite a stir in 2009 and was one of the most searched terms of they year. This was the year for social networks. There are numerous social networks in the United States and in the world and four of them are on the top ten list. One of them is from Spain. That is saying something.

5) Heath Ledger. The Dark Knight was one of my favorite films in 2008, mainly because of Ledger. When he wasn't on, I couldn't wait for him to get back on. He was simply that good. The extent of Ledger's Joker was unreal, but his character was one of the most real I have ever seen. His life appears to have been a mess, unfortunately. Movie watchers will miss a great actor.

6) Obama. What a surprise! The first African American to be elected President was the number one Google searched item.

7) Nasza Klasa. This Polish social network was another part of the search craze of 2008 as was number 8...

8) Wer Kennt Wen. This is a German based social networking website. Almost half of the web searches in 2008 had to do with the Internet. That's certainly saying something.

9) Euro 2008. Showing how ethnocentric (if not business centric) I am, I thought this had something to do with foreign currency. But outside the US the only "football" that matters is played iwth a round ball and with people wearing shorts. This was one of the hot topics of 2008.

10) Jonas Brothers. This is interesting. I have many children of all ages (10-22) and none of them seem very interested in this Disney Phenom. In spite of the fact they have zero traction in my home, they are a hot item on the web.

So that's the top ten of 2008. Of course, it could change in the last few days. Who knows how many will put in "Google searches" between now and Janury 1.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Bush Snubs Constitution, Congress, and Passes the Buck

In one of the most glaring examples of "keeping up appearances" in history, President George Bush has decided to single handily provide a bailout bridge to the "Big Three" automobile companies. It is intended to be a bridge that keeps them alive long enough to get to Barack Obama, who is expected to have a more friendly Congress available to do more. The current Congress and majority of Americans are rightly afraid that this is just another bridge to nowhere.

In a brief speech, the President made the case for going against the Congress and using money that was passed for bailing out Wall Street, to be shifted to assist the automobile industry.

He begins by pointing out that money shouldn't be given to the industry without accountability (as proposed by the automobile companies originally), stating that a "more responsible option is to give the auto companies an incentive to restructure outside of bankruptcy -- and a brief window in which to do it. And that is why my administration worked with Congress on a bill to provide automakers with loans to stave off bankruptcy while they develop plans for viability." This bill was rejected by the United States Senate. Bush notes "this legislation earned bipartisan support from majorities in both houses of Congress." There was not, however, enough "bipartisan support" to get this passed.

Bush goes on to say that "unfortunately, despite extensive debate and agreement that we should prevent disorderly bankruptcies in the American auto industry, Congress was unable to get a bill to my desk before adjourning this year." This is a nice euphemism for stating that the bill didn't pass. Period.

Bush states that "this means the only way to avoid a collapse of the U.S. auto industry is for the executive branch to step in. The American people want the auto companies to succeed, and so do I." Maybe some of the people he knows. Maybe his golfing buddies from Ford or tennis partners at GM. But I couldn't find a single national survey that supported such. Furthermore, the American people overwhelming told Congress to not pass this bill. Most were unhappy with the Wall Street bailout, someone needs to be held accountable for their business acumen (or lack of).

In spite of the political realities, Bush goes on to say that "today, I'm announcing that the federal government will grant loans to auto companies under conditions similar to those Congress considered last week." Remember, Congress "considered," but rejected this legislation. Bush is disregarding the will of the Congress, whose authorization should be necessary (according to Article I of the Constitution), and is making the $800 billion bailout for Wall Street into a giant slush fund for the Executive Branch.

The President stated that "these loans will provide help in two ways. First, they will give automakers three months to put in place plans to restructure into viable companies -- which we believe they are capable of doing." When I left Detroit in the 1970s, the automobile industry in that city was already on the ropes and Chrysler was seeking loans. The automobile industry has wasted decades trying to get its house in order. Now, Bush believes it will restructure itself in 3 months? It would be funny if the money wasn't real and he wasn't serious. Well, at least it is only around $15 billion. The second "way" this bill is to help will be "if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success -- and gives consumers confidence that they can continue to buy American cars." Does Bush honestly believe that Americans will ever have confidence in a company in Chapter 11? President Bush clearly needs a reality check.

Bush states that "because Congress failed to make funds available for these loans, the plan I'm announcing today will be drawn from the financial rescue package Congress approved earlier this fall." Translation: I will take money passed by this Congress meant for one purpse, for purposes that this Congress voted against. This is the arrogance of officialdom and a President behaving like an autocrat.

President Bush simply can't stomach the thought of the automobile industry going under during his watch. In an incredible attempt to protect his "legacy," this President is suspending his Constitutional responsibility, snubbing the Congress who is required in authorizing such expenditures, and is abandoning the will of the people. In an effort to "save face" he is leaving a very ugly memorial to his administration.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Items That Will Be History

Recently I have noticed examples of companies that will soon be history. Some times these departures are due to obsolescence. Other times they are due to poor management. In the end, it is all part of the "creative destruction" that economist Joseph Schumpeter spoke of decades ago. When the market brings down businesses, it replaces them with better ones. It isn't always pretty, but it is indicative of the progress and prosperity we enjoy today.

So here's a list:

• Polaroid Traditional Instant Film. In my neighborhood few, if any, had this camera. It was simply too expensive on the front end. But it was so cool for those who had one. Remember waiting for a minute as the picture slowly revealed itself? Now we see the picture instantly with a digital camera. The company filed for bankruptcy protection on December 18th.


• Bill Blass. Also on this week we saw the fall of what once was one of the leading names in fashion. In recent years it found itself in mass market and struggling for relevance. Soon it will be a footnote of its industry unless someone simply buys the brand.


• CD Sales at Starbucks. For a while there we were concerned that Starbucks would find itself taking over the world. Starting with our taste buds, working its way to our ears, etc. Well, with declining traffic and shrinking sales, the coffee giant is going back to basics and dropping its ambition of being an entertainment one stop.


• Diet Cherry Dr. Pepper. You have to be kidding. This is one that won't likely be missed.


• Crown Pilot Crackers. This New England staple was also popular in the Midwest where I grew up. They are history in 2008.

The above joins two airlines, a couple dozen banks, and untold number financial advisers and institutions. You can read more about losses here.

When companies disappear they are rarely replaced with other large firms. Rather, there is an up rising of entrepreneurs who will struggle to take their businesses to the next level. Some will make it, others clearly will not. It is interesting to think that virtually all the above names started off as mere ideas that were birthed into major corporations, that eventually found itself in this obituary. The next big list of winners are in the making, even as I write.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Detroit Newspaper Has Sad Event

Increasingly, the idea of going out in your front yard to get a newspaper in a plastic bag that is littering, is outdated before it hits the grass, and you paid for, seems ridiculous. It appears I am not alone as circulation for such publications are decreasing dramatically and advertising revenues shrink. The only ones who seem to be slow at "getting it" are the newspapers themselves. That finally seems to be changing.

I grew up in Michigan at a time in which some of my neighbors received the Detroit Free Press daily, while others got the Detroit News. Some even had the morning or evening edition. My father liked the Free Press in the evening. We even received the Daily Tribune which focused on Oakland County. Now the only real player in Detroit newspaper news is the Free Press (they have had a marketing agreement with the Detroit News for around two decades) and it made an announcement that would have been unheard of a decade ago, but seems long over due today.

Paul Anger, Editor of the Detroit Free Press wrote:

"The newspaper industry can identify with the American auto industry -- we have important products and similar emergencies that demand bold, immediate action. The transformation announced Tuesday by the Detroit Free Press and the Detroit Media Partnership is such an action, unique in the country. Some newspapers have reacted to crushing business realities by not publishing on certain days, or drastically slashing their news-gathering staffs, or exploring outsourcing of local reporting and editing jobs overseas -- or all of the above. The Free Press chooses a path not traveled."

With that eloquent introduction I expected something really big. Anger, unfortunately, disappoints. Their description of the up coming changes are filled with hyperbole, but not much substance and certainly not the paradigm shift that is necessary for tackling the onslaught being brought on by the Internet. Even as Anger details the heart of the changes, it is done in the context of inevitable defeat, stating "we do not make these moves lightly. We know that delivering the Free Press to homes three days a week -- Thursday, Friday and Sunday -- instead of seven will disrupt many breakfast-table routines. Fact is, though, those routines have already changed as many people tune in to the news by laptop or cell phone." In sum, since your not missing the newspaper, why deliver it seven days a week? The likely retort to this is, if that's the case, why deliver it at all?

The new Free Press encourages you to take action, pointing out that they are "offering a digital subscription to the Free Press that combines both worlds -- a way to go online and see the newspaper pages, including ads, exactly as they appear in print. You can sign up at freep.com." Unfortunately, the new Free Press -- like the old -- is anything but free. Unlimited monthly access is $12.50 a month. Unfortunately, that goes against the prevailing trend that has made the Internet so popular. People don't want to pay for such content and because of competition, typically don't have to.

Following these few details, Anger serves up a great deal of information on the research that went into the decision. This includes surveys, consultants, and other methodologies to assure us that this decision is in all of our best interest. In the end, Anger's well written document makes one conclude that the writing is already written on the wall for traditional media. The Free Press' current efforts are only trying to slow down the ink from drying.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Madoff Destroys Himself and Others

Bernard Madoff enjoyed one of the most trusted names on Wall Street. "Enjoyed" is definitely past tense. Madoff has sat on a committee of academics, regulators and executives formed in 2000 by former Securities and Exchange Commission Chairman Arthur Levitt to assist the agency on new stock-market rules in response to the growth of electronic trading. Madoff has led the trading committee at the Securities Industry Association, Wall Street’s biggest trade group, and has served as chairman of the Nasdaq Stock Market. Madoff was the quintessential insider, which is how he was able to go so deep into a far reaching "Ponzi scheme" (to use his own words). Everyone who was someone on both sides of Wall Street -- regulators and investors alike -- knew the 70 year old Madoff as an authority with enormous personal credibility.

Now, Bloomberg reports that Madoff is "alleged to be (a central part of) a Ponzi scheme that cost investors $50 billion, after he subjected it to oversight two years ago, people familiar with the case said." Did the regulators dismiss the normal level of due diligence that they would require for such investments because of Madoff's reputation? That, I'm sure is one of many questions that will be asked.

Bloomberg also reports that Madoff is "operating what he told his sons was a long-running Ponzi scheme in the New York-based firm’s business advising rich people, hedge funds and institutions. His ability to avoid detection may fuel debate about the SEC’s effectiveness and the adequacy of its resources for policing money managers. "

Ironically, Madoff was accused of illegal activities in the early 1990s but was found to had been operating legally in the raising of over $400 million in an unregistered securities deal. I wonder if they will want to look at that deal again, considering how far reaching this current scam is and its financial impact. $50 billion is no small amount (yes, you keep seeing BILLION).

Madoff got clean with his sons first and they, in turn, turned him in to authorities. They are completely distancing themselves from him and are declaring their innocence.

Madoff has invested huge amounts of money into the politicians who appoint the regulators. Furthermore, he has been in a regulatory role over the years. On the surface, he appeared to be the kind of person that would require anything but extensive scrutiny. Maybe, in order to protect those who would easily trust such individuals, such financial managers should be under additional scrutiny. I'm sure that will be part of future debates as well. In the mean time...buyer beware!

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Obama and Emmanuel: What Did You Know and When Did You Know It?

For some, discussions about Rahm Emmanuel -- President Elect Obama's choice for White House Chief of Staff -- resigning seems a tad premature. I'm surprised it hasn't already happened.

Rahm Emmanuel, who is one of the most fierce partisans in American politics today has long been a lightning rod of controversy. When word broke of the political scandals that have rocked Illinois Governor Rod Blagojevich, Obama was quick to declare that he and his team had nothing to do with any of the alleged criminal activities being raised. It was similar to walking into a kitchen and the cookie jar being broke on the floor and some declaring "I didn't do it." Those quick to declare their innocence without questioning are the ones I find suspect most. The biggest concern was the apparent effort by the Governor to sale Barack Obama's Senate seat.

At first, most in the media seemed willing to take Obama at face value. Closer scrutiny from FBI investigators and the media indicate that some in Blagojevich's office had in fact been visiting with Obama's people, or at least a person. The person in question was Emmanuel, who was captured on tape discussing the replacement with the Governor's staff after Obama decalred no such discussions took place with his people. When questioned about his involvement, Emmanuel did nothing to help his cause by stating to reporters "I'm not going to say a word to you," ... "I'm going to do this with my children (go to a school play). Don't do that. I'm a father. I have two kids. I'm not going to do it" I understand the sentiment. Every father wants to protect his children. But the lack of denial of involvement is being interpreted in the worse possible way.

What makes matters worse, in my opinion, is that ABC is reporting that "it is unknown who on the Obama transition team had communicated to the governor's office that they wouldn’t engage in any 'pay to play' scheme to pick the Senate replacement." Why does this make matters worse? No where has it been reported that the Obama campaign exposed the Governor's actions to authorities. For not taking the knowledge of such to authorities could be interpreted as "aiding and abetting" a crime. It goes back to the question that besieged those stuck in the Watergate scandal: "What did you know and when did you know it?" The last thing a President who has marketed himself as an agent of change, but has cut his teeth in the most politically corrupt city in the country, wants is this type of cloud to follow him to his inauguration.

I am almost certain that the series of events that have happen will lead to a resignation and maybe more (even criminal charges) in the Obama team. But will they choose a low or mid level staffer as a scapegoat? If Emmanuel was forced to go it would send a message that Obama is serious about providing a truly different Administration.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Blagojevich Epitomizes Obama's Plight

Barack Obama is making it clear when it comes to Rod Blagojevich and his efforts to sell a Senate seat: "I was as appalled and disappointed as anybody by the revelations earlier this week," Obama said. "I have never spoken with the governor on this subject. I am confident that no representative of mine would have any part in any deals related to this seat." However, we have video from a senior Obama staffer that indicated that the President Elect and his staff had been communicating with the Governor. Before Obama even takes the oath of office he is in the middle of a huge scandal in which people have no idea how far reaching the investigation might be.

When Bill Clinton was elected President he declared that he was going to have the most ethical Administration ever. That wasn't the case and is laughable in retrospect. In spite of promises of conducting government differently, Obama knows that both the culture of Washington and of the Chicago political machine he comes from mandates that he should stay away from outrageous claims of excellence in ethics. This Administration will be continuously dogged by ethics issues because he rose to power in one of the least ethical political environments in the country.

The state of Illinois has become notorious in producing criminal politicians. The FBI in charge of the Blagojevich case has said that if Illinois isn't the nation's "most corrupt state," it certainly is a major competitor for the title. Three former Illinois governors since the early 1960s have gone to prison. Who knows, maybe Blagojevich can become roommates to the governor who proceeded him, George Ryan.

I am afraid that the Chicago political machine is going to continuously haunt Obama. The media may currently love him, but they love a good scandal even more. Individuals often become known for the people that surrounds them. That does not bode well for the President Elect from Chicago.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Christopher Dodd Has to Go

I am not at all sympathetic of the plight of the automobile industry. The Big Three of Detroit have largely brought their terrible situation upon themselves through decades of bad decision making. In spite of this reality, I was offended when Senate Banking Committee Chairman Christopher Dodd (D-CT) informed the CEOs of Ford, Chrysler, and GM that if they wanted money for their companies, they needed to go. This is the same Christopher Dodd who has been on the Senate Banking Committee for years and oversaw the financial debacle of Wall Street that led to an $800 billion bailout at taxpayers expense. This is the same Dodd who has fueled record government spending for years that has led to our debt of trillions of dollars.

As chairman of the Senate Banking Committee, Dodd proposed a housing bailout on the Senate floor in June 2008 that would assist troubled mortgage lenders such as Countrywide Financial. Condé Nast Portfolio reported that in 2003 Dodd had refinanced the mortgages on his homes in Washington, D.C. and Connecticut through Countrywide and had received favorable terms due to being placed in what was later called the "Friends of Angelo" (Countrywide's CEO) program. Dodd received mortgages from Countrywide at allegedly below-market rates on his Washington, D.C. and Connecticut homes. Dodd has not disclosed the below-market mortgages in any of six financial disclosure statements he filed with the Senate or Office of Government Ethics since obtaining the mortgages in 2003. The Senator's home state Hartford Courant reported Dodd had taken "a major credibility hit" from the scandal.

If direct payment has influence, the problem is even more widespread. Countrywide has also contributed a $21,000 total to Dodd’s campaigns since 1997. Dodd has also received $70,000 in campaign contributions from Bank of America, which is buying Countrywide, in the last year-and-a-half before the Countrywide Financial loan scandal surfaced. Senators Barack Obama and Hillary Clinton are the only other Senators who have received more money from Bank of America than Dodd. However, no politician has received more contributions from Fannie Mae and Freddie Mac than Dodd's combined $133,900.

Marcus Cicero, when discussing the Roman Empire, said "the arrogance of officialdom should be tempered and controlled..." Dodd's throwing stones in a glass house and maintaining a straight face in the process, is arrogance at its height. Senator Dodd needs to go and should be a part of a serious "house cleaning" that should be seen in both the US House and Senate. It is true that, in the end, many familiar faces like Dodd would disappear. That would be a face lift the US could afford.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Conditions for an Auto Bailout

It appears that the US Government IS going to give the "big three" their long desired loan, but at a smaller level. Until this past weekend, Congress had been unimpressed. But as if an oracle of God himself, President-Elect Obama has declared that a bailout is necessary and the Congress now seems willing to comply, although with a lighter than expected package. The new package looks like it will be around $16 billion (versus the $25-$35 billion we have heard earlier).

With this bailout, there should be certain conditions that must be complied or there should be no such hand outs (which is my preference). Here are a few of the conditions that should be required:

• End the controversial UAW "Job Bank" program until the loans are completely paid off. This program has paid tens of thousands to be idle at 90 percent of salary. Although the UAW has agreed to make concessions about the program, their current situation could have the practice back in full force within days of the bailout becoming law.


• Bring auto worker wages back to the real world. According to the Heritage Foundation, when it comes to salary and benefits, the average wage of all private sector employees is $25.36 and for American based Japanese auto plants (Honda, Nissan, Toyota) is $42.95 to $47.60 on average. The big three pays $70.51 (Ford), $73.26(GM), and $75.86 (Chrysler) per hour, per employee. These six digit wages for blue collar work should be brought into the real world.


• End the "30 and out" practice. The Detroit auto companies allow employees to retire with very lucrative packages at the young age of 30. If you start working at a plant at 20, you can retire at fifty. You can see where that can be costly. 60 or 65 should have to be the standard retirement age with taxpayers involvement.


• Seven week vacations need to be history. Detroit auto workers receive almost two months off a year. This is another pounding cost on a very weak industry that needs to change.


• Finally, they should require the companies to relocate to a right to work state. This would empower these companies to lower wages and make the other reforms listed above.

I am sure you are saying that such reforms will not be happening knowing the temperament of the auto industry and the lack of courage in Congress. You are, of course, exactly correct, which is among the reasons why the companies shouldn't receive the bailout.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Traditional Media Continues to Shrink

Recently I was at one of my son's college football games visiting with him and his friends. In spite of our continued yelling for our side, they lost by a pretty significant margin and I had that sense that the game was over by the third quarter. So I focused more on conversation and talked to a bright and polite young man about his career future. "So, what are you planning on doing after graduation?" "A journalist," he said, quite innocently. Whenever people tell me this, I instantly want to laugh because I assume they are joking. Unfortunately, this was a very nice kid and he was ever so serious.

Being in radio and involved in a media news website, I meet young people virtually every day who are interested in journalism and are getting degrees in such. Where are their parents when they need them? Getting a degree in journalism today is like getting a degree in computer science when I went to college in the early 1980s. The only difference is that journalism majors should know better and so should their parents.

From the information I received in a recent Revolving Door Newsletter, it appears the traffic is going in one direction when it comes to media, and that is the exit door. The newsletter reports that "the axe fell at NBC Universal with 500 layoffs underway, including 30 from its sales staff. Elsewhere, CNBC laid off as many as 55 staffers and "The Big Idea with Donny Deutsch on hiatus." We also learn that "long-anticipated cuts finally came to Viacom, with 850 losing their jobs. Some 300 of those were from MTV, and top managers won't receive salary increases... Veteran CNN correspondent Miles O'Brien will leave the network, which is shuttering its science, space, and tech unit..."

In the book publishing world, Revolving Door reports numerous senior staffers at leading publications have left and "Simon & Schuster let go 35 people, including Rick Richter, president of the publishing company's children's book division... Thomas Nelson, the world's largest Christian publisher, laid off 10 percent of its workforce. "

From the magazine sector we learn that "Time Inc. is having trouble finding volunteers to take buyouts at its New York-based magazines. People completed its layoffs, while Sports Illustrated needs to hand out 20 pink slips. Elsewhere, seven staffers at Coastal Living, part of the company's hard-hit Southern Progress Group, will be let go. Time Out New York's investors put the magazine up for auction, hoping to get $40 million. Giving the timing -- terribly economy, advertising slumping, etc. -- you have to wonder just how bad things have gotten at New York's listings bible.

The list goes on. Traditional media is in huge trouble and is not only the victim of the Internet, but of its own inherent weaknesses. Solid journalism based on information and not opinion is hard to fine. If you want someone to tell you how they think about something, ask your next door neighbor. That is exactly what millions of people are doing by reviewing the 133 million blogs available on the Internet which operate on virtually no overhead. Another challenge of the journalism profession is that those who cover the stories of the day in every genre often have no idea what they are writing about. Journalism should be a double major accompanied with something of something so that they know how to cover that issue.

Unfortunately I don't see the industry changing. Instead, I see it continuously seeking scapegoats for its demise. Instead of being a worthy profession, I am afraid it is going to continue to slide down the track of being the butt of a bad joke.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Remember when You Use to Shop at...

We have those stores we remember shopping at in times past. When I was a kid I use to visit Santa at the Federal's Store in the Detroit, Michigan area. One year these stores started to spontaneously combust and they had to close them all. Later it was discovered that the owner of the store was behind these fires in an insurance fraud scheme. I also remember Cunninghams Drug Store, Woolworth's, and Kresge's. I loved spending my birthdays at Farrells Ice Cream Parlor with its old fashion charm (there are one or two of these left in California, but it use to be nationwide). Each of these stores were victims of economic hard times, but I still have fond memories of them.

Well, we are about to add to our list of stores and businesses that we will say, "remember when you use to go to...?"

• Mervyns. This poor department store always seems to struggle in differentiating itself from others.


• Steve & Barry's. This store had a fantastic marketing concept of providing college attire at a really low price. It appears the prices may have been too low.


• Linens and Things. This store seemed to reach its pinnacle in the 1980s and has been in decline ever since.


• Sharper Image. A cultural icon of the 1980s, this cutting edge store was found in movies. If you saw a news story about the "next big thing," you would likely find it first at Sharper Image.


• Tweeter, Circuit City and CompUSA. Yes, even electronics and IT stores are vulnerable in this economy.


• Whitehall Jewelers. Not all that glitters is profitable.

I don't believe the list will end here. This economy is extremely soft and it appears that only the major volume businesses might survive (this is a little over dramatic, but I am sure you get my point).

Stories such as these are a little scary. They are very scary if you actually work for one of these businesses. But businesses failing such as this are part of the natural business process and as they fall, they will be replaced with smarter and more efficient companies. Businesses fail because they did not respond to the demands of the market. It is, as Adam Smith described in his Wealth of Nations, the "invisible hand" that fuels economic progress. Some times it is painful, but it is also always effective, as long as government doesn't intervene.

So will a future article I write be "remember when you use to drive a...?" We will have to wait and see.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Conservatives Should Stop Defending Brats

I cannot stand it when I am in a store and there is a bratty kid pulling cans off the shelf while mom is chasing him. "I'm sorry, he is just a bright boy and so full of energy." The parent is actually so "full" of it. We roll our eyes and try to navigate around the mobile disaster area in tennis shoes. I want to get away from that aisle as quickly as possible.

I believe conservative media has suffered a terrible blow this past election cycle. It wasn't by the Democrats who simply articulated the same dangerous ideas that haven't worked nor were well received in the past. We expect Democrats to behave like Democrats. The problem was with Republicans who often tried to "out socialize" the Democrats and proved electorate cynicism about the GOP as the party of the rich as they voted for a bailout.

Many, if not most, elected Republicans have become Democrat copy cats and I am convinced that most Americans will simply vote for the real thing. Why vote for a Democrat impersonator when there is an actual Democrat available? These poorly behaving Republicans have talked about wealth redistribution (bailouts), have promoted the myth of Global Warming, and have disregarded the need of defending our borders. These are the same positions supported by the Democrats' Standard Bearers.

Smart conservatives in media have distanced themselves from such politicians. All four or five of them. The vast majority have joined the ranks of the mom in the store with the child out of control and the voters are distancing themselves from the brats and may soon do the same to their apologists.

As I have said, most conservative pundits are guilty. I sounded almost schizophrenic near the end of the campaign because I am disgusted by McCain's positions, but felt Obama was so much worse. Fear about the Fairness Doctrine (which should be called the Censure Doctrine), the extreme positions Obama took on the war and the economy, and the simple lack of choices made conservatives get in line behind the GOP. We have nothing to show for it and I am not convinced that we would have if McCain had won. Maybe the shock of Obama is what America and the Republican Party needs.

Conservative pundits need to hold candidates to task and stop being satisfied with the "lessor of two evils." If we held those who are dishonest about their philosophy to the same standards of admitted liberals, we would have a much more honest political process and would find conservative pundits held in higher regard, with greater credibility, and would force the Republican party to the roots that made it once so successful.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

When the Internet Acts Like TV

The convergence of media -- TV, radio, Internet, and print -- is one of my favorite subjects. It isfascinating to see how the various media compliment each other and how the lines between each of them continue to become more blurry. For quite some time the move has been towards making the Internet "more legitimate." In the history of the World Wide Web, sites have evolved from print, slowly added audio, and now has video. The "on demand" power of the Internet makes it the rising star of all media.

How great the influence of the Internet was recently demonstrated when I was watching my TV and turned the channel to CNN. As I watched the network a "button" popped up that reminded me of something you would see online. The blue image on the screen said "Press Select for CNN Enhance." Of course, I quickly succumbed to temptation.


I hit select and a minute or so later (it seemed rather slow), my TV became even more like the Internet. It is interesting that media sees a web page as a more "enhanced" media than a television set. So much for its self-esteem. The site (I am not sure what else to call it) has CNN wallpaper in the background, the CNN logo in the corner, video on another top corner, images lined across the bottom that reflect a category you are on that goes from top to bottom. You can see the top stories, review US and world news, get the latest in business content, find out about technology and science, and more. As you hit these major categories, you find images of numerous subcategories, and when you hit them you find multi-page articles.


To get you more involved in the CNN experience, you can see how people are voting today on a policy issue under "Quick Vote." In order to participate, you are encouraged to go to CNN.com to state your opinion.


I view the enhanced features of CNN to be a significant win for the Internet and only further demonstrates how that media continues to grow. I have been to websites who offer the type of features on CNN Enhanced and it begs the question, do we actually need TV? Only time will answer that question.





Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

The Squeeze on Entrepreneurs

Over 80 percent of all businesses in this country are created by small business and over 90 percent of all jobs are created by such entrepreneurs, according to the Small Business Administration. It seems that this important engine of economic growth is under a constant state of siege by the government that continually taxes these companies without limits in order to subsidize those in poverty on the one end extreme and to bailout some of America's wealthiest businesses on the other. I cannot recall a time in this nation's recent history where small businesses have been under such pressure and yet have also been more important to the economy's future.

How important are small businesses? According to the SBA, entrepreneurs:

• Represent 99.7 percent of all employer firms.


• Employ about half of all private sector employees.
  
• Pay nearly 45 percent of total U.S. private payroll.
  
• Have generated 60 to 80 percent of net new jobs annually
  over the last decade.


• Create more than half of non farm private gross domestic
  product (GDP).


• Hire 40 percent of high tech workers (such as scientists,
  engineers, and computer workers).


• Are 52 percent home-based and 2 percent franchises.


• Made up 97.3 percent of all identified exporters and produced 28.9 percent of the known export value in FY 2006.


• Produce 13 times more patents per employee than large
  patenting firms; these patents are twice as likely as large
  firm patents to be among the one percent most cited.

The logic behind bailing out failed auto companies and financial institutions is because these type of companies individually employ large numbers of people. If a Ford or a GM go under, tens of thousands (or even hundreds of thousands) will be instantly unemployed and the ripple effect will be more like a tidal wave. However, if the local movie rental place, the convenience store, and sandwich restaurant go under, that only translates into a dozen or so positions. However, thousands of these small businesses going down, on the other hand, paints a much different picture.

The lessons we are learning from government is that obsolescence and a lack of competitiveness are only a problem if your business is small. The larger a company is, the more resistant it can afford to be to necessary change, the less important it is too make tough decisions, and the more likely that company will receive a free pass for poor performance. What type of companies are we going to have if they are not allowed to fail? Companies that are destined to fail at a huge cost to taxpayers who keep them up for years. The biggest victims will be the huge entrepreneurial class who more than carries its own in job creation, but also has among the biggest tax burden.

The government control, subsidy, and even ownership of large businesses has historically been known as fascism. We don't like the term because we think of our enemies during World War II. Unfortunately, if the shoe fits, we are destined to wear it. What is most striking is that this desire to accommodate the most massive of businesses at the expense of small ones seems to transcends party lines. Both McCain and Obama joined George Bush in propping up many big businesses begging to fail. I wonder, at what point, will these small businesses that have a big impact will simply declare "enough!"

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.