Thomas Geisel, chief executive of New Jersey’s Sun Bancorp Inc., says the bank paid back its federal money in June because of legislation that imposed limits on bankers’ pay, among other areas. “Lawmakers let emotion and ego get in the way of making good business decisions,” he says.

“I was elected to represent the interests of Montana, not General Motors, which is something that GM should have considered before letting the federal government assume control of their company,” Rep. Rehberg said recently.

The best way to repay taxpayers is to run the business as efficiently and cost-effectively as possible,” Mr. Socia wrote. “Uncompetitive supplier agreements do not support this priority.” [In response to Montana senators' insistence that GM source supplies from a Montana mine].

I am not sure how much of GM’s ‘decision’ to let the federal government assume control was ultimately GM’s decisions, but regardless they now do have control and it will be interesting to see how what will happen with GM. Hopefully we’ll continue to have some transparency around the whole issue, so that we can tell if the government is able to run GM well. But from the sounds of it the federal government pushing GM around to chose certain suppliers who are constituents or reinstate a constituent’s contract for a dealership is putting the odds in favor of those libertarians who think the government has no role in running a business.

My interpretation is that for some reason it is believed that government officials, be it representatives, appointees, or career bureaucrats, are somehow better suited to run things than a private market (think all of our social institutions not just companies). Milton Friedman in the below quote said it well, by asking, in an interview with Phil Donahue, why is it believed that politicians have a nobler self-interest than the self-interest of market participants (think, you and I).

“Do American Presidents reward virtue? Do they choose their appointees on the basis of the virtue of the people appointed or on the basis of their political clout? Is it really true that political self-interest is nobler, somehow, than economic self-interest? You know, I think you’re taking a lot of things for granted. And just tell me where in the world do you find these angels who are going to organize society for us? I don’t even trust you to do that.”

And F.A. Hayek sums up the concept that people in power like to exercise their power.

“The probability of the people in power being individuals who would dislike the possession and exercise of power is on a level with the probability that an extremely tender-hearted person would get the job of whipping master in a slave plantation.”

In fact the United Steelworkers couldn’t get any trade complaints passed through the Bush administration so their hoping for some traction with Obama (particular since he pledged to increase trade enforcement). They are currently trying to get ‘trade enforcement’ considerations by Obama on imported Chinese tires.

Well Obama ended up signing a 35-percent tariff on imported tires (a tariff acts like an additional tax on tires from China, read more about tariffs via wiki). The action provides a 35-percent tariff the first year, beginning September 26; 30 percent the second year; and 25 the third. That’s on top of the four-percent tariff that the U.S. already imposes. Then the statute expires completely at the end of 2013. The reason for the increased tariff is that current trade laws have a anti-dumping law which in this case has been investigated by the US International Trade Commission which has determined that (see their report),

On the basis of information developed in the subject investigation, the United States International Trade Commission (Commission) determines, pursuant to section 421(b)(1) of the Trade Act of 1974,1 that certain passenger vehicle and light truck tires2 from the People’s Republic of China are being imported into the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products.

So basically the Chinese are able to import tires that are less expensive and that this causes market disruption. I wonder if saddle makers made similar complaints to their US representatives in the advent of the automobile, claiming that automobiles will subject their industry to market disruptions.

I thought a quick overview of why this hurts all of us would be beneficial. China can produce tires with less expenses than a US company. They can do this because of differences that exist within their economy, like lower wages and lower costs of production. This provides the US market with less expensive tires. When a tariff is enacted it increases the price of imported tires and limits the number of imported tires that come into the US market (this later point is because Chinese firms profit margin decreases because the demand for their tires decreases due other additional costs imposed by the tariff and they produce less tires for export).

In fact, I just purchased a set myself, and was happy to buy a reliable well made tire from China that costs less money. If these tires were more expensive due to a tariff or not available because the Chinese companies can no longer remain profitable, then I would have to purchase more expensive US made tires, or pay for more expensive tires from China. That would leave less money in my pocket, and every other consumer who picked out less expensive Chinese tires. This makes me less well-off, there is less money to spend on other things like donations to universities or going out to dinner in my neighborhood.

Well, one my ask, why would a President want to hurt all of the consumers of tires in the US. Its not that the President wants to hurt consumers, but rather the US Steelmakers and a few other special interest have convinced the President that they are worth helping. Too bad US consumers can’t get the attention of the White House like special interest do.

I agree with a WSJ blog that this shouldn’t be viewed as a beginning of a Trade War, as it may just be a warning shot, but it still is unnecessary and doesn’t allow me to freely contract with a company providing me a more favorable alternative to US made tires.

To quote the president in a speech given Aug. 2, 2008,

When special interests put their thumb on the scale, and distort the free market, the people who compete by the rules come in last.

Well I’m following the rules as is every other consumer who wants to purchase less expensive tires, and we are coming in after the special interest. Hopefully people will start to learn that politicians manipulate public sentiments to get elected (i.e., they tell us what we want to hear which does not follow what they end up doing).

Why Should One Get Support While the Other is Hurt

There is a smoke stack on the back of every government program. That is to say that every government programs impose a cost on third parties where the third parties are not receiving compensation.

This came out of the context of discussing when government may need to intervene in the market. Milton Friedman and some other classical liberals (libertarians) think that the only case for government is when it is not feasible for market arrangements to make individuals pay another individual when harm is imposed on the that second individual. Requiring contractual parties to pay third parties, outside of the contractual agreement, who are harmed by the agreement, compensation for that harm.

After Milton Friedman made this point he brought up the concept of a smoke stack on the backs of every government program. That while it is important to consider these situations where government may intervene, it is also important be realistic about the ’smoke stacks’ that will be turned on as a result of utilizing the government.

He also mentioned Terry Anderson and PERC who has shown that often private arrangements are better for the environment than ‘command and control’ government regulation.

Watch the interview yourself.