Tuesday, November 11, 2008

To Bail or Not to Bail?


General Motors, the century-old American corporation is careening toward collapse. On Tuesday, shares slid to a 65-year low of $2.76. Shares have plummeted almost 90% since the beginning of the year.

Ford and Chrysler are spending cash at unsustainable rates. At stake, according to the Center for Automotive Research (supported by the auto industry), are at least three million jobs and lost taxes to local, state and federal governments totaling $156.4 billion over three years. Some fear the current recession tipping toward a depression.

What caused this problem? Industry insiders attribute it to the unavailability of credit and lackluster sales due to high gasoline prices. Others point to GM’s history of losing market share to foreign competition or perhaps the cost of premium retirement and health care benefits.


GM, Ford and Chrysler are requesting $50 billion in assistance in order to withstand the worst auto market in 17 years. That is on top of the $25 billion Congress already approved in September to help retool plants to manufacture vehicles with greater fuel-efficiency.


Democratic lawmakers have urged the Bush Administration to assist automakers using funds from the $700 billion dollar bailout package passed by Congress. Bush has so far refused and Treasury Secretary Henry Paulson believes he lacks authority to do so.

Due to the administration’s refusal, Speaker Nancy Pelosi has announced a special session for next week to support emergency assistance to the auto industry. Democrats are on the brink of proposing another stimulus package that includes aid to the automakers. President-elect Obama supports making assistance conditional on automakers agreeing to produce cleaner, more energy-efficient vehicles thus supporting his goals of reducing reliance on foreign oil and addressing climate change. At the very least, Obama has urged Bush officials to hasten the granting of $25 billion in federal loans previously approved by law.


Two of Obama's key constituents - unions and environmentalists - are at odds.

Environmentalists insist that aid be conditional on the auto industry adopting higher fuel-efficiency standards and greater investment in new technology. Unions however oppose any restrictions. Democrats will be forced to reconcile these divergent views.


Currently the White House has expressed openness to speeding up existing federal loans to automakers but is against additional funding via the $700 billion bailout package.

While Republicans traditionally support free-market principles, the recent bail out of the financial industry has called that belief into question for those who backed it. Whether Republicans and Bush draw the line at automakers is yet to be seen. Some conservative economists support stimulus spending of up to $300 billion, which may give Republicans cover in supporting additional aid.

On Monday, President-elect Barack Obama met with President George W. Bush to push for the bailout. Leaked sources reported that Bush would support aid to the automakers if Obama and congressional Democrats dropped their opposition to a free-trade agreement with Colombia and pending trade agreements with Panama and South Korea. However, Bush has denied that such a deal was proposed. In either case, it is unlikely that Democrats would agree to it.

Will Bush veto a new measure if enacted by Congress next week? At this point, it is not clear.

So what do you think? If you were in Congress would you:

1. Support speeding up access to the existing loans of $25 billion dollars?

Yes or No

2. Support an additional $50 billion on top of the existing $25 billion?

Yes or No

3. Agree to a free-trade agreement with Colombia in exchange for the President’s support of an additional $50 billion loan for automakers?

Yes or No

4. Make aid conditional on automakers agreeing to produce cleaner, more energy-efficient vehicles?

Yes or No

Scrol up and look to the right to cast your vote and click here to leave a comment.

Monday, November 3, 2008

The Day After Tomorrow

When you first date someone, you tell them what they want to hear. After a few months, the real you comes out and a breakup ensues. Get ready America because that's what will happen if Obama wins.History reveals that leaders viewed as Saviors always fall back down to earth and the people become disillusioned.

I still think the race is closer than the polls say but ... McCain may lose because of the old cliché "Republicans are out of touch with the economy." In fairness, Democrats are supposedly clueless about foreign policy but the "war on terror" is not what's in the news this election cycle. Elections are won on perception, not reality, and it looks like that may be the case tomorrow.

First let me say that I don't think Obama is an amazing speaker like Clinton or Reagan. In my opinion he lacks heart and his words sound scripted and empty. Judging by the crowds at his rallies however, I know many people disagree.Now with that said - let's discuss McCain. He did a poor job communicating his ideas to America. He did not present a convincing message why he should be President. Contrast this with Gingrich'sContract with America over a decade ago in support of Congressional candidates. Whether you agreed with it or not, it was a very effective national strategy that worked in motivating the electorate to vote Republican.

Joe voter is asking how McCain's economic policies differ from Bush's? The reality is that the economy will recover but McCain tried saying that and he was painted as out of touch. Whether Obama's policies are good for the country doesn't matter to Joe Voter because he is hurting and when people hurt they want "hope" and "change."