by Deb Cupples | An article in yesterday's The Hill begins with two very disconcerting paragraphs:
"Banking lobbyists are eyeing their own savings accounts, oil companies are pushing back on House and Senate energy plans and automakers are revving up their push for billions of dollars in a federal loan program."
"Lehman Brothers declared bankruptcy after the federal government refused to provide another bailout and Merrill Lynch agreed to be sold to Bank of America for $50 billion in stock. Wall Street reeled Monday from “the worst series of shocks it has faced in decades,” according to The Wall Street Journal." (The Hill)
In short, while our nation faces massive financial crises, influential lobbyists will be pushing for very costly and very public-unfriendly spending decisions on Congress' part. And if our congressmen allow their decision-making to be plagued by panic, they'll likely go along with the lobbyists' plans.
As I mentioned last month, it would be unwise for Congress give $50 billion in loans to automakers without some heavy requirements aimed at benefiting our economy.
First, U.S. automakers have had two decades to reverse engineer the Honda Civic and build cars that are both fuel efficient and reliable: the people running those companies failed or refused to do so -- which is why those companies are now scrambling to play catch-up with the Japanese automakers. Why should we taxpayers clean up their mess?
Second, the only good reason for Congress to financially aid the U.S. auto industry is to protect and/or create jobs, which would pump more consumer dollars into our ailing economy.
If our automaker executives' past performance is any indication -- and if Congress fails to attach strings to the loans -- the folks running our nation's car companies will likely just find ways to divert large portions of the loans to enriching themselves personally (as opposed to creating good jobs).
Consider Ford, a company in which just five executives personally pocketed $60 million in 2007, a mere year after the company suffered record losses of more than $12 billion. How many jobs could that $60 million have paid for?
If major personal enrichment is the top executives' goals, can you imagine how many millions Ford's hundreds of lower execs and managers personally pocketed?
The upshot: Congress absolutely should impose requirements on the automakers who take taxpayer-backed loans -- such as, you can have this money if you create X-number of jobs paying at least X-number of dollars.
Otherwise, the loans would amount to welfare for the unworthy.
The Hill also reports:
"Democrats, meanwhile, made clear on Monday their intent to use the financial crisis to push through a second economic stimulus package that could be valued at up to $50 billion. It would likely include additional money for unemployment benefits, food stamps, state assistance for healthcare, and some business tax breaks."
Increased unemployment benefits and food stamps make sense: that would put more consumer dollars into the economy, which would help support many businesses (i.e., prevent them from firing people, which tends to take more consumer dollars out of our economy).
Even the business tax breaks could work -- but only if the tax breaks come with strings attached.
We've already seen real-live examples of how tax breaks purportedly meant to create jobs have miserably failed to actually do so. Remember President Bush's virtually string-free tax cuts for corporations?
Corporate managers and some shareholders might have personally benefited from the tax breaks, but tens-of-thousands of U.S. jobs flew overseas (causing tons of consumer dollars to be removed from our economy).
I understand that Congress needs to do something. I just hope that our politicians refrain from knee-jerk "solutions" that only appear to be solutions but actually end up harming our economy even more.
Other Buck Naked Politics Posts:
* Many Big Corps. Don't Pay Taxes (including Big Contractors)
* Car Companies Want Bigger Handout but Fewer Strings
* SEC Charges 2 Wallstreet Brokers
* Palin's Troopergate: Yet Another Truth-Stretching Session?
* Lehman Brothers Declares Bankruptcy: What it Might Mean
.
Comments