Monday, March 30, 2009

The Auto Bailout

Yesterday wasn’t a particular bad day, but it did rain just about all day. It would appear from the forecast that we’re in for some more stormy weather over the next couple of weeks. Morning showers today will give way to sunshine and nice weather for a couple of days before the water flow begins again. It will be warm, at least warmer than Sunday, and the weather people hint of getting into the 50s through next weekend. I’m not positive, but both I think I heard a couple claps of thunder last night.

Because of the predicted rain, we didn’t expect Gator Daughter to be here yesterday, and she wasn’t. In fact, Gator Wife and I just spent a very lazy day doing very little. She read for most of the day and once the afternoon arrived, I was glued to the NCAA men’s and women’s basketball tourneys. I picked up quite a lot of the Sprint NASCAR race at Martinsville.

I also found myself checking in occasionally toward the end of the golf tournament to see how Tiger Woods was doing. He won with a birdie on the 18th (72nd of the tourney) hole, his first victory since returning to the tour a few weeks ago following last season’s surgery.

This could be a pivotal week for America’s auto makers, especially General Motors and Chrysler Corp. Both are seeking billions of dollars in loans in addition to the billions they’ve already received. The auto makers say they face bankruptcy unless they get the money. President Obama said on CBS’s Face the Nation yesterday that the auto makers must go a much longer way toward restructuring before any more loans will be approved.

He insists the labor unions, management, credit holders, shareholders, and others must all be included in the restructuring. The company has participated by announced several thousand job cuts worldwide. But the President says that’s simply not enough. The CEO of GM has resigned under pressure from the President. And that, my friends, I think is the beginning of a slippery slope for American business.

Auto makers in several other companies have also asked their governments for bailout money, but have been rejected. They also face bankruptcy. Unlike the United States leaders who believe creating more deficits can lead to prosperity, other countries realize that probably isn’t the best course.

Way back when America’s companies began their quest for government money or face bankruptcy, I was on the side that said bankruptcy might be the best solution. It still might be. One thing bankruptcy might succeed in doing is getting those concessions from the various entities that feed the auto industry. President Obama wants American automakers to get their costs more in line with foreign companies to make them more competitive. Of course government requirements on the autos being created by American companies have no effect on that competitiveness.

The President departs tomorrow on an eight-day, five-country European trip where he hopes he’ll demonstrate that his style is more effective in producing world peace, economic recovery, and environmental changes. Early indications are he may run into more resistance than he expects.

Money will be on the minds of state legislators this week. The group that forecasts revenues for the state will be meeting this week with its revised predictions expected later this month. It could be a crucial forecast when it does come out because the legislature is now working on the state budget for the next biennium. A huge deficit is already projected and many who follow such things are saying that the projection will grow dramatically when the new forecast is released.

The committee looking into the new budget will also meet this week. The Democrats have put forth a plan to reduce the highest rate of state income tax but increase the number of items covered by the sales tax and other taxes. The Democrats say the changes will be revenue neutral but Mainers will have more money to spend. Of course we won’t, but I’m always amazed at how many people will accept the explanation. If their plan wasn’t designed for them to get more money to spend, they wouldn’t work so hard on creating it.

The committee is working as if there will be no higher deficit, even though they’ve been warned there will be. If that is the case and they pass the budget generally as is, almost immediately they’ll have to make changes. Of course no one, except some Republicans, is discussing places where the budget can be cut to make savings.

And so a new week is underway.


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