An article in the Washington Post announced today that democrats have put plans for a full scale stimulus package on hold, at least until after Barack Obama is inaugurated in January.
Congressional Democrats yesterday abandoned plans to offer a wide-ranging economic stimulus plan next week, putting off any chance that the federal government would provide a major jolt to the economy until after President-elect Barack Obama is sworn in Jan. 20.
A smaller package that would include an expansion of unemployment benefits and aid to struggling auto manufacturers has been proposed, and will be brought to the floor this week.
Democrats have scaled back their proposal to a package that will include a $6 billion expansion of unemployment benefits and a $25 billion cash infusion for the struggling auto industry, setting up a confrontation with Senate Republicans over whether the government should expand its rescue program beyond the financial sector.
Senate Majority Leader Harry M. Reid (D-Nev.) plans to offer that package Monday, the first day of what is slated to be a week-long lame duck session of Congress. A key vote could come Wednesday and if that fails, Democrats may have to settle for the 13-week extension of unemployment benefits as the only economic measure approved before they close until January.
Sounds like not a lot of useful measures are going to get passed in this last session. In some respects that may be a good thing, the less that congress does, the better off we’ll be.
When it comes to the cash infusion for Detroit automakers, a lot of legislators are opposed to such a measure.
A growing number of Republicans — upset that the TARP program has resulted in the largest intrusion of the federal government into the private marketplace since the Great Depression — are opposed to an auto bailout or the inclusion of other industries in the rescue plan originally designed for the financial services sector.
“When is enough enough?” said Sen. John Cornyn (Tex.), who is slated to take over the GOP’s campaign committee next year. ” . . . With the very first vote after the election, Democratic leaders in Congress want to pass a $25 billion handout to Detroit with no promises of reform, accountability or transparency by the automakers and their union base.”
“You’ve got to let them fail,” Gov. Mark Sanford (R-S.C.), the incoming chairman of the Republican Governors Association, said at the group’s annual meeting in Florida. “They made some bad bets, and there ought to be a marketplace consequence.”
To a degree I have to agree with this sentiment. When companies make bad decisions, they ought to feel the consequence of those decisions when their companies go through hard times. Bailing out all of these companies in the financial sector, automakers, etc just results in companies feeling like they can make bad decisions without too much consequence. If they get in trouble, the government will just bail them out.
What are your thoughts on a proposed bailout of struggling automakers? Do you think that a stimulus package not being passed this year will have ill effects – or in the long run be a good thing?
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Larry Jones says
Even though my father was a GM employee for over 40 years, I totally agree with your post. A better “bailout” program for the Big 3 would be to bust up all the unions and drop most of the government standards and restrictions to help get these companies competitve, again.
Larry Joness last blog post..Investment #2 – Invest in the Kingdom
I do feel for the GM employees, but as you say, the unions have really crippled what the companies can do. The salaries that many of them are paid for the work are out of line with what they should be paid.
As far as government standards, I agree that many of them have hamstrung the companies. Relaxing standards and restrictions would be a good place to start.
Checked out and enjoyed your blog – keep up the great work!
I have heard this so many times. “The employees are paid too much.” I am still trying to figure out what “too much” is being compared to. Foreign car makers? I bet you own a foreign car huh? People just aren’t buying cars…you know the economy is all bad and everything.
I have heard so many people talk about how the American manufacturers made cars no one wants (yet Ford has the number one selling car in North America); consumers buy these cars to improve their status; and now the employees make $80/hour! So, first of all these magic numbers that are put out there probably include the employees benefits. Propoganda spewers seem to stretch the truth to make others agree with them. Secondly, I am a proud owner of a beautiful Chrysler Aspen. I buy suvs because I like big, safe cars. AND my car has a lifetime warranty……yes….LIFETIME! who can offer that? I do not buy big, gas guzzlers for improved status. I want to be able to protect my precious cargo. I am a “brother’s” (union member) wife and we try tp buy everything American but we can’t even find the products anymore!!
One of the biggest things I have noticed, aside from people being mis-informed about unions, is that those that are complaining the most buy foreign cars. How about taking pride in our american made products? How about buying American made cars, thus contributing to the solution not the problem.
Oh, and the foreign auto industry is struggling too. Not as bad as the American, yet. If people don’t have the money to buy cars they can’t buy cars. But, what will the reasoning be when the Foreign manufacturers are going under? -Oh, it’ll probably be that they were not as educated as those over-paid American auto workers. That would be the day.
for the record – I do own a GM vehicle – a Chevrolet Impala. However, I think it was made in Canada, while my wife’s Honda was made in the good old U.S.A. Go figure.
I want to reiterate that I don’t think the workers are bad, or that American car companies are worse than foreign automakers. I wouldn’t have bought one if i thought that. I just happen to think that some of the things that unions have done have hamstrung what the car companies can do, and mean that they can’t be as competitive as foreign automakers.
I’ve been a union member at one time in my life, and I can’t say I was very impressed with them. I think they were necessary at one point in our history, but for many workers nowadays they aren’t really out for the best interests of the workers – but for the interests of the union officials. They help to bankrupt companies – which in the end isn’t good for anybody cause no one has jobs.
Should the benefits that the workers get be factored into what they make? For sure. The rest of us have to pay for those benefits, or have it factored into our pay as well.
I also think the companies are largely to blame when they are compensating executives for poor performance, and not doing things that are fiscally responsible.
So there you go, there’s enough blame to go around. The unions, the car companies, and Washington. Did I leave anyone out?
In regards to the US automakers bailout, which I also recently wrote on, my view is that the bailout of the Big three US automakers will happen (from the TARP) and the proposed additional $25 billion package will be approved by year end. Despite critics on both sides, the US automakers bailout proposal has strong bipartisan support and the President-Elect has publicly stated his backing of a constructive bailout plan. It is just too important (perceived and actual) to the nation’s economic recovery. The key will be how the bailout package is structured for short term and long term reform. For it to be successful the US automakers will have to undergo a radical make-over in terms of labor rates and union structures, past and current worker benefits and accelerating the move to cleaner energy vehicles. Further their executives, need to be replaced by new talent whose focus will be on making the companies as efficient as possible to compete in the 21st century and to eventually repay (with interest) the taxpayer funded bailout
Andys last blog post..US Automakers Bailout – A Bridge to Bankruptcy or a Road to Salvation
I don’t agree the government should bail them out. Why should they? Where does this end? What if Google goes bankrupt, will the gov’t bail them out? Companies need to be responsible for themselves and like history shows, a new company will develop and compete. Companies should be smarter and clearly the quality of their products lack. They should be more focused on cars gaining better gas mileage than these huge SUVs with loads of features.
Daniel James says
Rather than bail out the companies, why don’t we enable them to be more competitive? Larry touched on this; lift the government restrictions that are making it impossible for American automakers to compete.
We can’t sell GM/Ford/Chrysler vehicles oversees. The foreign governments prohibit it. Yet they can come over here and sell their vehicles to us.
Our corporate taxes and restrictions are making it difficult to for Detroit to compete on quality AND cost. But both aspects must be in place to sell cars.
This is needed in ADDITION to resolving the issues with the unions, as described above.
We restrict our own companies, and reduce them to mediocrity. When they start to stumble as a result, we punish them for it, and the government swoops in to “save the day” with MORE rules and regulations. Does this sound like a bad plan to anyone else?
I say get the government OUT of the auto industry. Let them be competitive on their own.
Long live capitalism!
I do not think this for the GM employees, but the unions have seriously creeped what the companies can do. The salaries that many of them are paid for the work are now for what they should be paid.
The government restrictions that are making it impossible for American automakers to compete has really to put up.