Elvis (the Horse) Has Left the Building

Yahoo! today carried an AP news article about President Obama imposing new caps on executive pay for any financial firm yet to receive part of the $700B Troubled Asset Relief Program (TARP), better known as the first of many federal bailout programs. TARP specifically targeted the financial services sector of the economy, and caused much of the Wall Street vs. Main Street hand-wringing when it was proposed and approved last fall.

Since the approval of using federal funds to bail out huge mistakes on bad bets by investment bankers, hedge funds, and virtually any bank dealing in securitized subprime mortgage loans, many commentators rightly pointed out that C-level executives of those same firms were still clearing huge amounts of money in annual bonuses. The AP article pegged the bonus figure at $18B last year alone.

Those of us living on Main Street had every right to be angry at the payment of these huge bonuses, since we're familiar with the model of rewarding good performance with a bonus. If one of us made the bad bets and mistakes the leaders of these financial institutions made, we'd be fired, not enticed to stay with a handsome year-end bonus. Gregg Easterbrook even railed against the 2008 bonuses in several of his most recent Tuesday Morning Quarterback (TMQ) columns on ESPN's Page 2.

So, this action by Obama, stepping into a leadership void left by the collective members of the U.S. Congress, is a good thing, right? Right?!

I think the key paragraph to note is this one:

The pay cap would apply to institutions that negotiate agreements with the Treasury Department for "exceptional assistance" in the future. The restriction would not apply to such firms as American International Group Inc., Bank of America Corp., and Citigroup Inc., that already have received such help.

Sadly, the analogy that applies here is closing the barn door after the horse is already gone. The article does not mention just how much of the taxpayers' $700B remains unclaimed at this point, but I dare say not many banks will line up to take the bailout funding after today.

While this was a nice gesture by Obama, I don't think it will have a great impact on the TARP program (brought to you by the Department of Redundancy Department), on other federally-funded bailouts of the auto industry, on the upcoming "stimulus" package (really just a pork-laden spending bill by Congress; it's now up to $900B in additional spending not offset in any way by cuts elsewhere or higher taxes -- the shame!), or on other federal legislation.

He does get to look like he's providing leadership and make headlines, though. For whatever that's worth.

One thing I had to note, though: the POTUS makes an annual salary of $400,000. Plus such benefits as a $50K expense account, a $100K nontaxable travel account, and $19K just for entertaining or entertainment. Does he pay taxes on all the income other than the travel account?

I also had to laugh at the past salaries of U.S. Presidents table found on Wikipedia, under the Salary section of the page. I can appreciate they want to state what the equivalent "Salary in 2008 Dollars" is for the salaries established so many years ago. But there is an error in the math here. If you're talking about what something costs, adjusted for inflation, then something that cost $400K in 2001 would cost $471K in 2008 terms (using just the numbers on the Wikipedia page).

However, since the salary of the President has remained the same since 2001, the equivalent purchasing power of $400K is actually less than what it was in 2001, not more. The official Bureau of Labor Statistics' (BLS) own inflation calculator seems to provide the same type of analysis as what is found on the Wikipedia page. If the salary of the President were adjusted to account for rises in the Consumer Price Index (CPI) every year, then Obama would be earning $479K in 2009. But he's only making $400K. Put it this way, if you reverse the numbers in the BLS calculator, Obama's $400K salary in 2008 could purchase only the equivalent of $333,482 of 2001 goods.

That's still more than the vast majority of us living on Main Street earn, so I don't feel sorry for his diminished purchasing power. I just wish Obama could bring real change to Washington. It hasn't happened yet.

Are We the Car We Drive?

In the time of $4 per gallon gasoline, many people are seeking ways of reducing their fuel costs, period. People who have the option and can afford to move closer to public transportation are doing so, even in car-crazy LA. More and more people are bicycling to work, a mode of transportation I try to use whenever possible. Even Texans (who live in The Land of Big Trucks, and everything is bigger in Texas, haven't you heard?) are buying hybrids and even those golf-cart looking electric vehicles for short trips. People eagerly await the roll-out of the new Chevy Volt, signing up on even unofficial wait lists.

And yet, car manufacturers continue to resist one of the clearest means of increasing fuel efficiency in current-model cars: reducing the horsepower produced by the engine. The prescient Gregg Easterbrook (who is a visiting Brookings Fellow and contributing editor at The Atlantic Monthly, The New Republic and The Washington Monthly, in addition to writing several books, including the fascinating "The Progress Paradox") described this fuel mileage vs. horsepower battle in his two most recent Tuesday Morning Quarterback (TMQ) columns on ESPN.com, the archive of which is here. If you like to get insights into the game of football you can't find anywhere else, plus much more (he often delves into science fiction, TV and movies, and things related to Congress), his column is well worth the time it takes to wade through it. Plus, he posts pics of cheerleader babe professionalism. W00t!

Easterbrook already covered the issue better than I could replicate here, but it did get me thinking of reasons why automakers have all progressively expanded both the size and horsepower of their cars. The Honda Civic, for example, is now about the same size or larger as the Accord used to be, way back when. It's not just Detroit. For crying out loud, the 1979 Accord had a whopping 72 horsepower! 72!!! Which was up 4 hp from the previous year. The current Accord, with available 3.5L V6, puts out a max of 268 hp. So, it is easy to see why (some, not all) car manufacturers are protesting the rise in Corporate Average Fuel Economy (CAFE) standards.

Speaking of which, there was a recent WSJ opinion piece that tried to link the CAFE standards to Detroit's poor showing in recent automobile sales. That's like saying NAFTA is the reason for agricultural subsidies in California. They might be tangentially related, but there's not a causal relationship there. The author of that opinion piece remarked how GM and Ford actually did quite well selling smaller, Euro-style vehicles in places like Europe and South America. So, why are they unable to sell such cars here in America?

My own hunch is that we, as Americans, still attach significant unspoken tags to the cars we drive. If we drive a Porsche, it means we have lots of money and are pricks. If we drive a Prius, obviously, we care more about the environment than we want to look cool. If we drive a big truck, then we're manly men! (Honh! Honh! More Power!!!) I think this explains why people drive big monster SUVs for ferrying around the kiddos much more so than just needing the space for hauling more stuff. If we just needed the space, then why don't people still buy wood-paneled station wagons? This also helps explain why my wife's brother, who lives in Austin, TX (The Land of Big Trucks, and everything is Bigger in Texas, haven't you heard?) not too long ago traded his BMW Mini for a Ford F-250, even though he doesn't have a 10,000 lb boat to haul on a regular basis. Why buy the F-250 if you have no boat?

For the longest time, Americans could get away with driving whatever they wanted because gas was so cheap. Having lived overseas in Europe and Japan, I wondered when America would be forced to pay as much (roughly $4 per gallon) as they were paying back in 1996. That time has now come, although I haven't been over there since we started paying $4 per gallon to see if their prices rose along with ours.

Maybe peoples' perceptions will change as everyone gets used to buying $4 gasoline. Maybe a guy who buys a Toyota Yaris will be seen as smart and more desirable for dating, rather than as a wimpy nerd. Seriously, have you ever seen a guy driving a Honda Fit? I haven't, even though the slogan (The Fit is GO!) is catchy. No guy would be caught dead driving a new VW Beetle, unless his truck was in the shop. Speaking of VW, their Cabriolets have always been known as a "chick car." End of discussion. Someone recently completed a study in which women listened to different vehicle sounds, and the ones they felt were most sexy belonged to the exotic supercars. I'm not making this up. So, the previous question about the Yaris is most likely an overwhelming NO.

I know we Americans often define ourselves by what we do, a topic that was used to great effect in the ***John Cusack movie reference alert!*** movie "Grosse Pointe Blank." If you've seen it, you know he played an assassin who goes back to his high school reunion and tried to relate to his classmates, who had settled into "normal" jobs like BMW dealer, radio DJ, realtor, and security guard. Are we what we do for a living? Are we the car we drive? Are we defined by our hobbies? Can we be known for the assistance we provide to others?

For now, I'll go back to driving my 1999 Mazda 626 and dreaming about that Acura TL I've always wanted. Best car for the money, I say. I just wish I could trade some of its 286 hp for better gas mileage.