Archive for the ‘GM’ Category

Obama’s Budget Comes As Government’s Ability To Manage Economy in Doubt

March 23, 2009

Democrats had hoped to launch the budget debate on Capitol Hill this week with a focus on their priorities: cleaner energy, healthcare reform, and education. Instead, they’re embroiled in a game-changing debate with Republicans over whether government – the White House, Congress, the bureaucracy, even the Federal Reserve – has what it takes to manage the financial crisis.

Between the AIG bonus debacle and prospects for $1 trillion annual deficits into the next decade, the likelihood is fading that President Obama’s first budget will survive with its key elements intact. The historic deficit numbers, in particular, make a tough sell on the budget even tougher, though some Democratic lawmakers say it’s not out of reach.

“The reality is we are going to have to make adjustments to the president’s budget if we want to keep the deficit on a downward trajectory,” said Sen. Kent Conrad (D) of North Dakota in a statement Friday, after the Congressional Budget Office (CBO) released projections showing federal red ink would total $9.4 trillion over a decade.

Sen. Charles Grassley of Iowa, the top Republican on the Senate Finance Committee, was more blunt.

“People can afford only so much government spending, even for the worthiest-sounding causes,” he said in a statement. “The White House should take a break from the heavy sales job on the budget.”

How much the government should do to try to buttress the weak financial system and spur a flagging economy is the germane question before Congress – and the news from last week may serve to point out the limits of government oversight and financial acumen to date.

Read the rest:
From the Christian Science Monitor
http://features.csmonitor.com/politic
s/2009/03/22/will-deficits-trim-
obamas-agenda/

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How Much Debt Can The Nation Afford?

AP

Congressional Republicans on Sunday predicted a doomsday scenario of crushing debt and eventual federal bankruptcy if President Barack Obama’s massive spending blueprint wins passage.

But a White House adviser dismissed the negative assessments, saying she is “incredibly confident” that the president’s policies will “do the job” for the economy.

In a TV interview, Obama himself laughed when discussing the dire state of parts of the economy — and ascribed his laughter to “gallows humor.”

White House Council of Economic Advisers chairwoman Christina Romer insisted that the nation’s flailing economy will be rebounding by 2010.

Administration officials — and the president himself — have taken a cheerier tone despite economic indicators that are anything but positive.

“I have every expectation, as do private forecasters, that we will bottom out this year and actually be growing again by the end of the year,” Romer said.

The president, in an interview that aired Sunday on CBS News’ “60 Minutes,” talked about the need to spend taxpayer money to save financial firms and the auto industry.

“I just want to say that the only thing less popular than putting money into banks is putting money into the auto industry,” Obama said with a laugh.

Interviewer Steve Kroft asked how that laughter might be perceived, given the economy’s troubles.

“There’s got to be a little gallows humor to get you through the day,” Obama said. “If you had said to us a year ago that the least of my problems would be Iraq, which is still a pretty serious problem, I don’t think anybody would have believed it.”

Read the rest:
http://www.foxnews.com/politics/20
09/03/22/gop-predicts-doomsday-
obama-budget-passed/

Related:
http://nicedeb.wordpress.com/2009/03
/23/video-60-minutes-interviewer-asks-
obama-are-you-punch-drunk/

Can American Capitalism Survive?

March 23, 2009

The story of American capitalism is, among other things, a love-hate relationship. We go through cycles of self-congratulation, revulsion and revision. Just when the latest onset of revulsion and revision began is unclear. Was it when Lehman Brothers collapsed? Or when General Motors pleaded for federal subsidies? Or now, when AIG’s bonuses stir outrage? No matter. Capitalism is under siege, its future unclear.

By Robert J. Samuelson
The Washington Post

Schumpeter, one of the 20th century’s eminent economists, believed that capitalism sowed the seeds of its own destruction. Its chief virtue was long-term — the capacity to increase wealth and living standards. But short-term politics would fixate on its flaws — instability, unemployment, inequality. Capitalist prosperity also created an oppositional class of “intellectuals” who would nurture popular discontents and disparage values (self-enrichment, risk-taking) necessary for economic success.

….

Successful capitalism presupposes three conditions: first, the legitimacy of the profit motive — the ability to do well, even fabulously; second, widespread markets that mediate success and failure; and finally, a legal and political system that, aside from establishing property and contractual rights, also creates public acceptance. Note that the last condition modifies the first two, because government can — through taxes, laws and regulations — weaken the profit motive and interfere with markets.

….

Still, the present populist backlash may not end well. The parade of big companies to Washington for rescues, as well as the high-profile examples of unvarnished greed, has spawned understandable anger that could veer into destructive retribution. Congressmen love extravagant and televised displays of self-righteous indignation. The AIG hearing last week often seemed a political gang beating.
If companies need to be rescued from “the market,” why shouldn’t Washington permanently run the market? That’s a dangerous mindset. It justifies punitive taxes, widespread corporate mandates, selective subsidies and meddling in firms’ everyday operations (think the present anti-bonus tax bill). Older and politically powerful companies may benefit at the expense of newer firms. Innovation and investment may be funneled into fashionable but economically dubious projects (think ethanol).

Government inevitably expands in times of economic breakdown…..

Read the rest:
http://www.washingtonpost.com/wp-dyn/co
ntent/article/2009/03/22/AR200903220
1507.html?hpid=opinionsbox1

Obama Administration May Not Understand Economy

March 22, 2009

When it comes to our complex economy, President Barack Obama would do well to heed the physician’s ancient commandment to first “do no harm.”

Instead, Obama’s administration has been prescribing all sorts of multibillion-dollar borrowing remedies without any consistent diagnosis of what is exactly wrong with the weak economy or even how bad things actually are.

By Victor Davis Hanson
The Washington Times

Since becoming president, Mr. Obama has offered numerous bleak economic prognoses. He has told Americans: “The situation we face could not be more serious. We have inherited an economic crisis as deep and as dire as any since the Great Depression.” He has also warned, “Recovery will likely be measured in years, not weeks or months” and “If nothing is done, this recession could linger for years.”

But suddenly last week, physician Barack Obama flipped and issued an entirely new prognosis: “I don’t think things are ever as good as they say, or ever as bad as they say.” He added. “[Things] are not as bad as we think they are now.”

What happened to living through hard times akin to the Great Depression?

Maybe it was the unexpected news that Citibank and Bank of America are starting to show a profit – thanks to the past bailouts of 2008 and new profitable loans. Maybe it was General Motors’ recent decision not to (for now) ask for more federal cash. Maybe it was the reports that consumer spending is not down as much as feared.

Or did Mr. Obama’s change in rhetoric reflect a sort of premeditated strategy: talk down the economy to scare everyone into supporting more government spending and borrowing. Then, once the stimulus bill has passed, talk up the economy to reassure us that it will work?

Or, as seems more likely, does the new government simply not know what is going on – much less what to do about it?

It can’t seem to fill slots at the Treasury Department, and strangely talks about fiscal responsibility and the evils of pork-barrel spending while expanding upon the Bush budget deficit and approving more than 8,000 earmarks.

Mr. Obama – and Congress – should take a deep breath before further expanding the budget with ever-more stimulus spending, borrowing and aggregate debt that will plague our children, who will have to pay back the trillions long after this present recession ends.

Read the rest:
http://www.washingtontimes.com/new
s/2009/mar/22/first-of-all-do-no-harm/

Related:
Public Outrage Could Devour Obama Presidency

Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls

Protesters At Homes Of AIG Execs

Wall Street Journal: “Geithner Incapacitated;” President Voices Support

Government To Have Bigger Role in All American Lives; Obama Seeks to Increase Oversight of Executive Pay

Dodd Caper, House Vote on 90% Tax, Highlights Founders Hopes; Modern Reality

Treasury island: Geithner’s lost crew

March 7, 2009

If President Barack Obama wants to boost confidence in his economic recovery plan, he’s going to have to assure the markets that there isn’t just one guy working on it.

Treasury Secretary Timothy Geithner is trying to stabilize the nation’s banking industry, implement a housing rescue plan and prop up a plunging stock market – all with about 18 vacant senior positions, virtually the entire upper echelon of his department.

The staff is so faceless that lobbyists have begun trading jokes about a “ghost” bureaucracy, given the many empty picture frames hanging on the department’s walls.

Administration officials told POLITICO they will soon submit to the Senate a slate of candidates for the posts, including replacements for two who bowed out Thursday, one of whom was Geithner’s pick for his top deputy.

Most of the people who have been tapped to fill the top positions are already working in the building; they just don’t have their titles, their offices and their portraits yet.

But without those particulars, Geithner’s quiet colleagues can’t publicly represent the administration, robbing Obama of the opportunity to work multiple media outlets to pitch the program or to flood Capitol Hill with a show of force – and action – that could impress lawmakers, investors and the public.

By Jeanne Cummings, Lisa Lerer
Politico

Read the rest:
http://news.yahoo.com/s/politico
/20090306/pl_politico/19723

Related:
NYT: After March 6 Economic News, “2009 is Probably a Lost Cause”

Obama’s First Weeks: Economic Disaster, Socialist Agenda, Congressional Pork, Limbaugh Attacked, and “We Won”

Dow’s Decline Is Fastest for a New President in Nearly a Century

Geithner’s Top Two Treasury Assistants Withdraw; 17 Unfilled Top Jobs At U.S. Treasury

Most Obama “Economic Advisors” Raised Money for Democrats

 Obama’s Economic Strategy Akin To LBJ’s Vietnam Fiasco: “Pour In More”

Obama’s Brazen Deception: Why The Stock Market Won’t Recover Soon

March 6, 2009

Forget the pork. Forget the waste. Forget the 8,570 earmarks in a bill supported by a president who poses as the scourge of earmarks. Forget the “2 trillion dollars in savings” that “we have already identified,” $1.6 trillion of which President Obama’s budget director later admits is the “savings” of not continuing the surge in Iraq until 2019 — 11 years after George Bush ended it, and eight years after even Bush would have had us out of Iraq completely.

By Charles Krauthanmmer
The Washington Post
.
Forget all of this. This is run-of-the-mill budget trickery. True, Obama’s tricks come festooned with strings of zeros tacked onto the end. But that’s a matter of scale, not principle.

All presidents do that. But few undertake the kind of brazen deception at the heart of Obama’s radically transformative economic plan, a rhetorical sleight of hand so smoothly offered that few noticed.

The logic of Obama’s address to Congress went like this:

“Our economy did not fall into decline overnight,” he averred. Indeed, it all began before the housing crisis. What did we do wrong? We are paying for past sins in three principal areas: energy, health care and education — importing too much oil and not finding new sources of energy (as in the Arctic National Wildlife Refuge and the Outer Continental Shelf?), not reforming health care, and tolerating too many bad schools.

Read the rest:
http://www.washingtonpost.com/wp-dyn/co
ntent/article/2009/03/05/AR200903050
2951.html?hpid=opinionsbox1

Realted:
Stock Markets: When Will the Bull Return?

 Households, Businesses Have Stopped Spending; Now It’s Congressional Responsibility Time

Senate Halts Obama Spending; At Least For The Week End

March 6, 2009

The United States Senate came to its senses Thursday and refused a $410 billion measure that would have funded U.S. government operations until the end of this fiscal year in September.  The “omnibus” bill, containing some 9,000 “earmarks” that critics call pork-laden, could not get enough votes in the Senate to pass.

This means a special continuing resolution will have to be passed today to keep the U.S. government operating at last year’s levels.

The omnibus will be considered again starting Monday.

After the more than $700 billion stimulus, the debate on health care, foreclosure bailout, bank bailout, the troubles of such giants as AIG and GM, lawmakers can apparently see that spending money we don’t have will now be the legacy of this administration and this Congress…

Add in a revolution in the energy sector, “cap and trade,” new taxes, and a tanking stock market and well, maybe the Senate is waking up….

Related:
http://news.yahoo.com/s/ap/20090306
/ap_on_go_co/congress_spending

Related:
Obama Urged Investors to “Buy,” But Stocks Dive Again Thursday

NYT Urges Obama To “Bail Out” Third World Too

 Most Americans Now Say America Could Go Bankrupt

 Obama Can’t Revive Economy With Socialism

American Workers, Businesses Cut Back; Obama Launches Spending Spree

Presidency of Fear

Obama’s Brazen Deception: Why The Stock Market Won’t Recover Soon

 Obama plan to prevent foreclosures won’t help many California homeowners

Michelle:
http://michellemalkin.com/2009/03/05/fi
nally-a-show-of-cojones-senate-gop-forces-
delay-on-omni-pork-bill/

Senator John McCain, Republican of Arizona, has criticized a $410 billion omnibus spending bill as being bloated with earmarks.  Brendan Smialowski for The New York Times

We note that the New York Times blamed the lack of a vote on the omnibus on Republicans in their headline and first paragraph; admitting later that Republicans are joined by some Democrats who oppose this bill…..

http://www.nytimes.com/2009/03/0
6/us/politics/06spend.html?hp

Obama Urged Investors to “Buy,” But Stocks Dive Again Thursday

March 5, 2009

Trying to pump up the nation’s confidence, President Barack Obama said Tuesday that Wall Street has been hammered so hard that “buying stocks is a potentially good deal,” and he dispatched top aides to Capitol Hill to defend his plans for pulling the economy out of its deep recession. But the stock market slipped ever lower, as investors exhibited a total lack of confidence….

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NEW YORK (AP) — March 5: Investors fled Wall Street as fear grew about the stability of the nation’s largest banks and worries mounted about General Motors Corp. The major market indicators resumed their slide Thursday after a one-day rally, falling to levels not seen in more than a decade as investors contended with more disheartening economic data, new concerns about the stability of GM and ongoing uncertainty about the financial system.

Read the rest:
http://finance.yahoo.com/news/S
tocks-tumble-as-investors-apf-145
57845.html

China May Have Mafia View of Obama Stimulus: “Someday We Break Your Legs”

January 18, 2009

We can learn simple truths from the way the mob or Mafia view things.

That is probably why Las Vegas Mayor Oscar Goodman proposed a $60 million mob museum be included in the Obama stimulus plan.

School economics is one thing.  Street economics is sometimes the same and sometimes different.

The New President and the Congress are now talking about the biggest “rescue” or “stimulus” or “bailout” of the economy in the history of the world.  The deal is financed by “government spending” which is really borrowed money which is debt.

Or we just print more money which means inflation and the money is worthless.

A bank employee counts US dollar bank notes. The euro fell sharply ...

When America borrows, who pays?  First, I guess, and correct me if I’m wrong, China lends the money to the U.S.

China already “owns” as of October, 652.9 billion dollars in US Treasury bonds.

Now President-elect Barack Obama has proposed a stimulus bill expected to total at least 775 billion dollars that he has acknowledged would drive the US deficit significantly higher — and require financing from overseas.

Actually, as  David Gregory said on NBC’s “Meet the Press” on Sunday, the total “bailout” is going to be $2 Trillion from late 2008 until the end of 2009.

And China has already signaled that is may slow the rate of funding U.S. debt, stimulus, rescue and other shenanigans by any name.

Why?  China wants to solve its own economic problems first and China is starting to doubt that American can repay.

Why?  To repay the debt, the average U.S. worker, at some time in the future, will have to earn a lot more and pay a lot more in taxes.  The tax debt per family will exceed $20,000.

But what will Americans DO to earn more?  Make cars at GM?  Hardly. About 70% of our American economy is consumer spending.  So we tax store clerks more?

So, to put this in the most basic terms: the U.S. is borrowing huge amounts of dough from the mafia.  There is some doubt that it can be paid back.  If it doesn’t get paid back the pay-back price will increase.  Finally, if it doesn’t get paid back, “they own you” or “they break your legs.”

So China will own the U.S.

Or break our legs.  Or balls.

Someday, maybe, America will have to make a concession.  Give up some oil?  A chunk of land?  Taiwan?  Guam? Something we really think is important….

Read the rest:
Obama, Congress, Stimulus Mix Overlooks: China’s Slowing US Bond Appetite
.
 U.S. “Bailout” Results Uncertain; But China Says Its Stimulus is Working Already
.
Can The U.S. Pay Back This Huge Debt?
.
 Europeans Deplore Huge Debts, Spending to Solve Current Economic Crisis
.
 Obama Offered Republicans ‘Input’ On Stimulus: But “Oh My God” Is Response To Pelosi Bill
.
Obama’s Stimulus: Routine Repairs; Lacks “Power to stir men’s souls”

China’s “Grand Strategy”: U.S. Out Of Asia?

 Will China Play By Global Rules? Maybe Not….

Don’t forget the “toxic bank assets.”

Addressing these assets was the original purpose of the Troubled Asset Relief Program, the formal name of the $700 billion bailout plan the Bush administration unveiled as the credit crunch spun out of control. It was later abandoned in favor of taking equity stakes in banks, which was seen as a more direct and rapid way to help.

But as the economy worsens and banks continue to rack up multi-billion dollar losses, the incoming Obama administration will face tough choices in deciding what to do with the $350 billion remaining in the bailout plan. There are many who want a piece of the pie, and there may not be enough money to go around.

From CNN:
http://money.cnn.com/2009/01/16/news/econo
my/Tarp_take2/index.htm?postversion=2009011716

*************

One critic of the stimulus is Rep. Jerry Lewis from California.
.
“We have serious concerns about its size, scope, and astronomical cost,” said Representative Jerry Lewis, the top Republican on the Appropriations Committee. “This legislation appears to blanket government programs in spending with little thought toward real economic results, job creation, or respect for the taxpayer.”

The spending plan would add to the $1.2 trillion deficit the government was already projected to run this year.

See:
http://news.yahoo.com/s/bloomberg/2009
0115/pl_bloomberg/atvv00bkoyg

Marlon Brando as Don Vito Corleone, the Godfather.

*********

From the Associated Press

Barack Obama and his congressional allies are gambling that the largest public spending program since World War II and a new round of tax cuts will pry the economy from the recession’s iron grip and avert another Depression.

But what if they’re wrong?

Some conservative economists say the additional stimulus might only prolong the grief at best, triggering runaway inflation down the road and resulting in an even more bloated bureaucracy.

“I think the economy will recover regardless of what Washington does. But the long-term effect here will be to reduce the standard of living of the next generation because they will be saddled with all this debt,” said Chris Edwards of the libertarian-leaning Cato Institute.

Even without the new spending proposed by Mr. Obama, the U.S. has a $1.2 trillion budget deficit this year, he noted. “If that isn’t already enough of a Keynesian stimulus, what is?”

Early 20th-century British economist John Maynard Keynes argued that government should intervene to avoid depressions by increasing its spending and controlling interest rates. President Franklin D. Roosevelt based many of his New Deal spending initiatives on Keynesian theory.

The skeptics offer this as Exhibit A: The trillions hurled at the problem last year by Congress, the Bush administration and the Federal Reserve have yet to yield many tangible results.

In short order last week, Congress cleared the way for a new $350 billion installment of bailout cash for the financial industry while House Democrats rolled out details of a $825 billion two-year stimulus package.

Allen Sinai, the president of Decision Economics, a financial consulting firm, said even with Mr. Obama’s aggressive spending program, the economy seems unlikely to show a true recovery this year in terms of sustainable gains by consumers and businesses.

“There are forces going on that are 1930s-like,” he said. “There is incredible asset deflation, a huge loss in wealth by households. In the ’30s, even when funds became available from the financial system to borrow, the pessimism by consumers and businesses was so great that no one wanted to spend.” He wouldn’t rule out a repeat of that mind-set.

Some economists who are not fans of Keynesian economics or stimulus packages argue that FDR’s New Deal, highly touted today as a model for job creation, did little to spur a U.S. recovery.

“It was finally World War II that finally ended the Great Depression,” said Bruce Bartlett, a White House economist in the Reagan administration and a top Treasury official in the first Bush administration. He is the author of a study that says nearly all postwar stimulus packages passed by Congress came too late to be of much help, and just increased the deficit and fueled inflation

Mr. Obama shrugs off the skepticism and casts his stimulus package as the right formula for creating long-lasting, well-paying jobs, despite its big cost.

America Must Rebuild To Thrive; Obama Must Deliver Real, Lasting Goodies

December 25, 2008

America needs to reboot and re-invent itself.

Internationally, Israel wants a smackdown on Iran.  Medvedev and Putin want U.S. Missile Defense out of Europe.  And others are lining up too.

Americans want prosperity and jobs.  GM and Chryler want all the auto bailout they can get and the UAW wants a raise.

President-elect Obama, blissfully in the Hawaiian nirvana as we write, faces a long line of seekers looking for goodies this Christmas and next year.

Can he possibly deliver? 

***********************

From Thomas Friedman
The New York Times

We’ve indulged ourselves for too long with tax cuts that we can’t afford, bailouts of auto companies that have become giant wealth-destruction machines, energy prices that do not encourage investment in 21st-century renewable power systems or efficient cars, public schools with no national standards to prevent illiterates from graduating and immigration policies that have our colleges educating the world’s best scientists and engineers and then, when these foreigners graduate, instead of stapling green cards to their diplomas, we order them to go home and start companies to compete against ours.

….

America still has the right stuff to thrive. We still have the most creative, diverse, innovative culture and open society — in a world where the ability to imagine and generate new ideas with speed and to implement them through global collaboration is the most important competitive advantage. China may have great airports, but last week it went back to censoring The New York Times and other Western news sites. Censorship restricts your people’s imaginations. That’s really, really dumb. And that’s why for all our missteps, the 21st century is still up for grabs.

John Kennedy led us on a journey to discover the moon. Obama needs to lead us on a journey to rediscover, rebuild and reinvent our own backyard.

Read it all:
http://www.nytimes.com/2008/12/24
/opinion/24friedman.html?em

Art Below by Steve Broder in the New York Times

Saving Capitalism No Sure Thing If “Cure” Undermines Economy

December 22, 2008

What’s good for General Motors may not ultimately be best for the global economy.

The Bush administration’s $13.4 billion rescue of GM and Chrysler is a fitting finish to a year in which governments around the world expanded their role in the economy and markets after three decades of retreat.

The intervention comes at what may prove to be a steep price. Future investment may be allocated less efficiently as risk-averse politicians make business decisions. Whenever banks decide to lend again, they are likely to find new capital requirements that will curb how freely they can do it. Interest rates may be pushed up by government borrowing to finance trillions of dollars of bailouts.

“We’re seeing a more statist world economy,” says Ken Rogoff, former chief economist at the International Monetary Fund and now a professor at Harvard University in Cambridge, Massachusetts. “That’s not good for growth in the longer run.”

It’s not good for stocks either, says Paola Sapienza, associate professor of finance at Northwestern University’s Kellogg School of Management. Slower economic growth means lower profits. Shares might also be hurt by investor uncertainty about the scope and timing of government intervention in the corporate sector.

“If the rules of the game are changing, people are reluctant to invest in the stock market,” Sapienza says.

From Bloomberg
By Simon Kennedy, Matthew Benjamin and Rich Miller

Read the rest:
http://www.bloomberg.com/apps/news?pi
d=washingtonstory&sid=aDjmuEpDoctc