Car Wreck Waiting to Happen: Why Block the Auto Industry Loan

The Senate recently blocked a House bill to bolster the failing US auto industry, where the House passed the measure (H.R.7321) to loan funds to the failing industry. Interestingly the HR bill, unlike the TARP measure (H.R. 1424), required the auto companies to pay back the loan with interest. A measure that favored tax payers. However with the death of HR 7321 in the Senate, the fault of both Democrats and Republicans alike, a new strategy emerges and firmly places the responsibility of rescuing the auto industry in the executive branch.

Curiously, Senate Minority Leader Mitch McConnell cited labor union resistance to concessions as the cause of HR 7321's failure. McConnell and other Senate members wanted the UAW to cut wages in half. Maybe the opposing Senate members rode the false assumption that auto workers make $70+ an hour (see the The New Republic article), and thought that needed cut to a more reasonable level. But more likely, the Senate used the UAW's resistance as an impetus to push for a different direction in the auto industry bailout.

Since the death of the HR 7321 the only option for automakers is to tap into the Wall St. funds, which the current administration controls. If Bush extracts funds from the Wall St. bailout the auto industry will receive the funds under similar stipulations as the financial institutions; that is none. Rather than receive a loan from the bill passed by the House, the auto industry may stand to receive money without any return to tax payers. Congress may block or add contingencies to a new disbursement of the Wall St. bailout, but significant oversight measures are unlikely. Most likely Congress will simply allow distribution of the funds with fewer or no requirements as compared to the Bill passed by the House.

The political wrangling forces the hand of the president to include the auto industry in the long list of recipients of the tax payers money, no questions asked. And in the end the auto industry, like Wall St., will squirrel or squander away the money received from the federal government, making no improvement on the job outlook of autoworkers or the economy at large.

Main St. vs. Wall St.: Not so clear terms.

Most media outlets attempt to boil down complex issues into short, concise turn of phrase. Like in the instance of Main Street versus Wall Street, the big media outlets like to latch onto a consensual vocabulary. Main St. vs. Wall St. is also a convenient dichotomy which suggests a struggle between big business and people, where Obama is for Main St. and Bush supports Wall St. Though such a strong distinction between the current presidential administration and the incoming administration may not exist. The majority of those who campaigned for Obama and Main St. may not see such a progressive plan put into place by their president elect. Certainly while Bush is in power, the US will get a big dose of what support for Wall St. looks like but Obama might not look much different.

The willingness of conservatives and trickle down economists to throw money at banks and business is disturbing. The old yarn that Democrats throw money at failing government programs seems ridiculous astride big business bailouts. Banks accomplished nothing with the financial bailout. The money they received simply went onto the balance sheets to bolster each banks' performance, but did little to free up credit. And TARP enforced little oversight as to how the funds are used (see GAO report).

Bush's administration did attempt to lend a hand to Main St. in an extension of unemployment benefits and increased mortgage relief. However, these are token efforts compared to Bush's main focus. Banks and now US automakers will see additional billions of dollars. Automakers will have to prostrate much more than the banks, but in the end will receive their own bailout.

Robert Scheer pointed out in the KCRW podcast (Left, Right, Center) that the way to aid our failing economy is to increase financial assistance to states (Main St.). Public works projects and government assistance proved invaluable after the Depression by providing jobs and (re)building the US financial infrastructure, from the bottom up. Similarly, Scheer suggested that state financial assistance ensures state employees a stable job. Most states face huge budget deficits that will only result in cuts, both at the state and town level (Main St.). By assisting the states the federal government saves millions of localized jobs, such as police officers, rescue service people, teachers, etc. Unlike businesses who simply squirrel away financial aid, states are obligated to support its own infrastructure.

Obama seems to flirt with the idea of job creation through public works projects. The president elect promises to create 2.5 million jobs whose purpose is to maintain and imporve the US infrastructure. Though Obama's measures may mean more state aid his website only speaks to improving roads, bridges and school reconstruction. The president-elect also intends to increase small business investment, which favors Main St. Even so, Obama's commitment to Main St. will remain vague until he is sworn in. President-elect Obama would be wise to consider a more progressive plan than he has already announced.

Financial Meltdown 101

The financial crisis of today has its roots in the Great Depression. For a history lesson on the topic I recommend going to Truthdig: Financial Meltdown 101. They have a great web based widget to guide users through the build up to the ongoing financial crisis.

Voting for Obama Does Not Make You Politically Wiser.

Obama's victory on November 4th begot much jubliation across the country. The election was a cathartic event finalizing the demise of the Bush administration. Voters seemed to have made a wise decision. Obama's charm and attraction added to the momentum. No doubt, the Obama campaign ran smartly and effectively through the election season, beginning 2 years ago.

Readers, listners or watchers of media would not have guessed the election to be a blow out in favor of Obama. The media consistently gave the impression that the election could have gone either way. Certainly the media heightened the anticipation of the election in their zeal for viewer/readership. With great anticipation will come great expectation for an Obama presidency. For Obama's constituency that will mean holding Obama and his administration to his campaign promises.

If media coverage is any indication of how well voters are informed and can hold the president elect to his words, the election amounted to a shallow popularity contest . Clark Hoyt, the public editor of the New York Times found in an October 12th report that roughly 10% of media coverage discussed the policy of the two presidential candidates. The other 90% focused on the horse race, character assessments (is McCain too old, is Obama too arogant, etc) or how well the campaigns are performing.

The post-election coverage does not seem to stray from this line of discussion. Especially in the case of the latter days of the Bush administration, media coverage has not questioned Bush's impending regulations and pardons. More importantly the media has had more interest in Bush's reaction to the election of Barak Obama and his assurances that the lame duck president will fully cooperate with the president elect, as if he had a choice.

Even more disappointing is the post election coverage of Obama, even though in Hoyt's report, the Times suggests the paper could have done a better job with policy coverage. The media largely focuses on what kind of dog Obama will purchase for his daughters, Mrs. Obama's dress worn during Mr. Obama's victory speech. Once again the media continues to miss the opportunity to scrutinize Obama's policies and analyse their possible consequences.

Barber shop conversations are more revealing as the same headlines are repeated in work places or community gathering points as if human interest headlines reflect on Obama's more important stances, like the economy or the war in Iraq (the president elect does not suggest we pull out completely).

Headlines are a great way to sell news but voters need to look beyond the headlines and ask questions of reporting and of each other. A better approach to political discourse would be to demand that media outlets emphasize policy issues, as suggested in Hoyt's report, in which case a true public discourse and debate can take place. Even better, people can look at official sources for information either about a candidates policy vision or Bush's current executive orders. The debate can be taken to a higher level at the barber shop level if people are better informed.