| White House refines position |  |  |  |
| Written by admin | | Thursday, 31 July 2008 | With Congress returning Monday to deal with an auto industry in dire financial straits, the Bush White House stressed that it supports help, but not at the expense of the $700 billion Wall Street rescue program.
With the Senate ready to start work on assistance to the industry, press secretary Dana Perino issued a statement saying the administration "does not want U.S. automakers to fail." She complained that reporting on the White House's statements on this issue has involved "attempts to shorthand the administration's position."
Perino's early morning statement also made clear, however, that the administration steadfastly opposes drawing funds from the bailout plan to help Detroit. She said the $25 billion that Democrats favor taking from the rescue plan should come, instead, from a Department of Energy program previously approved to develop fuel-efficient vehicles.
Democrats want to use part of the $700 billion Wall Street bailout for emergency loans to help prop up the Big Three carmakers. General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking an infusion of $25 billion, a figure that several Senate Democrats embraced Sunday.
Senate Democrats plan to introduce legislation Monday attaching an auto bailout to a House-passed bill extending unemployment benefits. A vote was expected as early as Wednesday.
"There's a high degree of urgency" for federal action if GM is going to stave off a financial crisis, Rick Wagoner, GM chairman and chief executive, said Sunday in a joint appearance with United Auto Workers President Ron Gettelfinger on WDIV-TV in Detroit.
"It's really time to move on this," Wagoner said.
In her statement Monday, Perino said, "The auto industry is an important part of our manufacturing base, and we want the industry to succeed and compete in the global economy." But she also said that media reports have erroneously depicted the administration as taking too harsh a stand on financial relief.
Her statement Monday seemed aimed more at elaborating on the administration's position than revising or tweaking it.
"We believe this assistance should come from the program created by Congress that was specifically designed to assist the automakers -- from the $25 billion Department of Energy loan program," Perino said.
She said the $700 billion rescue program "was never intended by Congress to assist automakers or other sectors of the economy. It was solely intended to deal with what is an ongoing credit crisis in our financial sector."
President-elect Barack Obama said he believes aid for the auto industry is needed but that it should be provided as part of a long-term plan -- not simply as a blank check.
"For the auto industry to completely collapse would be a disaster in this kind of environment," Obama said in a "60 Minutes" interview aired Sunday night on CBS. "So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan -- what does a sustainable U.S. auto industry look like?"
House Speaker Nancy Pelosi, D-Calif., has embraced an auto bailout, though she hasn't set a price tag. But passage is less certain in the Senate, where majority Democrats will need at least a dozen GOP votes to prevent opponents from blocking their measure.
On Sunday top Republican senators said using any of the Wall Street bailout money to help carmakers would be a mistake. Sen. Richard Shelby of Alabama called the U.S. auto industry a "dinosaur" whose demise would simply be stalled by a bailout.
"I don't believe the $25 billion they're talking about will make them survive," said Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee. "It's just postponing the inevitable."
Shelby spoke on NBC's "Meet the Press."
Congressional Democrats have some internal power struggles to settle this week.
The House's longest-serving member, 82-year-old John Dingell of Michigan, is fighting to keep the chairmanship of the powerful Energy and Commerce Committee. And in the Senate, Democrats will have their own showdown Tuesday when they decide whether to strip independent Sen. Joe Lieberman of Connecticut of his chairmanship of the Homeland Security and Governmental Affairs Committee.
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| Key Questions From the G-20 Summit | | | |
| Written by admin | | Thursday, 17 July 2008 | There are (at least) five fundamental questions that went unanswered at this past weekend's G-20 summit in Washington. In their attempt to show solidarity, the world leaders skipped over the complicated and contentious questions. But that's no long-term solution. Once they go home to their respective capitals, the finance ministers and other officials who met in Washington are going to be forced to make some tough decisions. Here are five puzzlers that will demand to be sorted out in the months ahead:
1. What is protectionism? The gathered ministers roundly condemned protectionism in all its forms and even agreed to take another stab at reviving the moribund Doha Round of global trade talks—if possible, by the end of this year. But it's hard to see how much progress they will be able to make when many of the efforts to revive national economies could be regarded as protectionism. For example, wouldn't extensive aid to the Big Three Detroit automakers constitute an illegal subsidy under the World Trade Organization's terms? For that matter, don't the massive aid packages flowing to banks, brokerage firms, and insurers in the U.S. and elsewhere constitute subsidies that are prohibited by the free-trade rules?
2. Should we be encouraging consumers to spend more, or not? There are two schools of thought on this central question. Many economists and ordinary people argue that a sharp drop-off in consumer spending is extremely dangerous, so government needs to help consumers find ways to keep spending. That's one of the reasons U.S. Treasury Secretary Henry Paulson revised the government's $700 billion troubled-asset relief program to support credit card borrowing, auto loans, and student loans. Yet other people, including some economists, say that excessive spending and borrowing got us into this mess in the first place—and that cutting back is exactly what Americans must do to restore balance to the global economy.
3. Is it important to put a floor under the prices of homes? There are two sides to this question as well. Treasury's Paulson has repeatedly argued that the financial crisis won't end until the decline in home prices reaches a bottom. So a lot of people want to stop them from falling further by providing financial incentives to buyers and by preventing more foreclosures. But other experts say that trying to prop prices above the level they naturally seek would merely delay the necessary market adjustment—keeping prices unaffordably high and making buyers afraid to step in because they anticipate further declines. It's hard to sort this one out because no one can reliably say what the "correct" level of home prices ought to be.
4. Should world leaders try to ensure that a financial crisis such as this one never occurs again? This seems like a no-brainer, but it's not. Sure, long-term reforms are needed. But there's a risk that clamping down on risky lending practices now could make matters worse in the short term. The G-20's communiqué instructs the various nations to report back by the end of March about the progress they've made on restructuring financial regulation. The danger is that in their zeal to show progress by then, government officials around the world will push lenders to tighten up, offsetting the elaborate efforts to provide fiscal and monetary support.
5. Do we need global coordination? This seems like another obvious yes. In the first paragraph of their declaration, the G-20 leaders said: "We are determined to enhance our cooperation and work together." Some cooperation is a good thing, of course. But notice that the leaders were quite vague about what they would do together in the short run. Most of their agreements were about long-term reform. This vagueness may be healthy. Each country's situation is unique. What the U.S. needs to do (consume less and save more) is precisely the opposite of what China needs to do (consume more and save less).
All in all, it's great that world leaders came together in an atmosphere of relative good will. Their intentions are good. But as someone once said, the road to hell is paved with good intentions. Hard thinking remains to be done.
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