News Intelligence Analysis
From the New York Times
November 11, 2008
Obama Asks Bush to Provide Help for Automakers
By JACKIE CALMES
WASHINGTON The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President Bush in a meeting at the White House to support immediate emergency aid.
Mr. Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Mr. Obama and Congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Mr. Bush has long fought, people familiar with the discussion said.
The Bush administration, which has presided over a major intervention in the financial industry, has balked at allowing the automakers to tap into the $700 billion bailout fund, despite warnings last week that General Motors might not survive the year.
Mr. Obama and Congressional Democratic leaders say the bailout law authorizes the administration to extend assistance.
Mr. Obama went into his post-election meeting with Mr. Bush on Monday primed to urge him to support emergency aid to the auto industry, advisers to Mr. Obama said. But Democrats also indicate that neither Mr. Obama nor Congressional leaders are inclined to concede the Colombia pact to Mr. Bush, and may decide to wait until Mr. Obama assumes power on Jan. 20.
Separate from his differences with Mr. Bush, Mr. Obama has signaled to the automakers and the unions that his support for short-term aid now, and long-term assistance once he takes office, is contingent on their willingness to agree to transform their industry to make cleaner, more energy-efficient vehicles. (Emphasis added.)
A week after Mr. Obamas election, and more than two months before he takes office, the steadily weakening economy and the prospect of many more job losses are testing his effort to remain aloof from the nations business on the argument that we only have one president at a time.
As the auto industry reels, rarely has an issue so quickly illustrated the differences from one White House occupant to the next. How Mr. Obama responds to the industrys dire straits will indicate how much government intervention in the private sector he is willing to tolerate. It will also offer hints of how he will approach his job under pressure, testing the limits of his conciliation toward the opposition party and his willingness to stand up to the interest groups in his own.
G.M.s shares tumbled on Monday to 1946 prices, closing down 23 percent to $3.36, as analysts downgraded the stock on worries it would soon run out of cash and shareholders would be wiped out by any federal bailout.
Mr. Obama has been far more receptive than Mr. Bush to having the government intervene to rescue another major sector of the economy. He called automakers the backbone of American manufacturing in his first post-election press conference last Friday, and many thousands of their employees belong to unions that are part of the Democratic Partys base.
But Mr. Obamas stance raises the question, with the country in a worsening economic situation, where would the Democrat draw the line as president?
Mr. Bush has drawn his line at the automakers doors, having already been forced to shelve the free-market principles of his Republican Party to bail out the financial industry over the past two months. But Republicans say he would acquiesce in aid to automakers in return for Congresss ratification of the Colombia pact and pending trade agreements with Panama and South Korea.
The outgoing and incoming presidents met at the White House in private, without staff.
The Democratic leaders in Congress, the speaker of the House, Nancy Pelosi, and the Senate majority leader, Harry Reid, have declined to call a lame-duck session for next week, as they had hoped, without assurance that Mr. Bush would support a stimulus package.
Mr. Obama has called on the Bush administration to accelerate $25 billion in federal loans provided by a recent law specifically to help automakers retool. Late in his campaign, Mr. Obama proposed doubling that to $50 billion. But industry supporters say the automakers, squeezed both by the unavailability of credit and depressed sales, need unrestricted cash now, simply to meet payroll and other expenses.
On Friday, Mr. Obama said he would instruct his economic team, once he chooses it, to devise a long-range plan for helping the auto industry recover in a way that is part of an energy and environmental policy to reduce reliance on foreign oil and address climate change.
While Mr. Obama campaigned on a promise of bipartisan conciliation, his choice for his White House chief of staff, Representative Rahm Emanuel, indicated on Sunday that no such deal linking auto-industry aid and a stimulus package with trade pacts was in the cards. You dont link those essential needs to some other trade deal, Mr. Emanuel said on ABCs This Week.
Democrats close to both Mr. Obamas transition team and to Congressional leaders seemed willing to call Mr. Bushs bluff, calculating that he would not want to gamble that G.M. an iconic, century-old American corporation with business tentacles in every state would fail on his watch and add to the negative notes of his legacy. Also, economists as conservative as Martin Feldstein, an adviser to a long line of Republican presidents and candidates, have called more broadly for stimulus spending of up to $300 billion.
The major automakers G.M., Ford and Chrysler are each using up their cash at unsustainable rates. The Center for Automotive Research, which is based in Michigan and supported by the industry, released on Election Day an economic analysis of the impact of one or all of them failing. If the Big Three were to collapse, it said, that would cost at least three million jobs, counting autoworkers, suppliers and other businesses dependent on the companies, down to the hot-dog vendors and bartenders next door to their plants.
The center also concluded that the cost to local, state and federal governments would reach to as much as $156.4 billion over three years in lost taxes and higher outlays for things like unemployment and health care assistance. Separately, some economists say the demise of even one of the automakers could tip the current recession toward a depression.
For Mr. Bush, however, the hard-line approach is his only leverage to make the trade agreements part of his legacy. The Colombia deal, especially, is strongly opposed by organized labor groups, which are a major force in the Democratic Party, and by human-rights activists.
In the Senate and during his nomination race against Senator Hillary Rodham Clinton, Democrat of New York, Mr. Obama opposed the pacts and especially the Colombia agreement, given that countrys reported human rights abuses against unionists. He insists he favors free trade, but only if trading partners agree to protections for their workers and the environment reflecting the standard Democratic Party line since President Bill Clintons administration.
On his campaign Web site, Mr. Obama said he would oppose the Colombia pact if President Bush insists on sending it to Congress because the violence against unions in Colombia would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements.
Organized labor is not the only interest group with influence in the Democratic Party that is weighing in as Mr. Obama plans his transition. Environmentalists are adamant that any aid be conditioned on the auto industrys dropping of its opposition to higher fuel-efficiency standards and investing more in new technology. That puts them at odds with unions, who oppose any strings, leaving it to Mr. Obama to mediate.
Both as a candidate and now as president-elect, Mr. Obama has been in contact with former Vice President Al Gore, who last year won the Nobel Peace Prize for his work on climate change. In a column published in Sundays New York Times, Mr. Gore wrote that we should help Americas automobile industry (not only the Big Three but the innovative new start-up companies as well) to convert quickly to plug-in hybrids that can run on the renewable electricity that will be available.
Mr. Obama has said that he wants to meet with the Big Three auto executives, but advisers say no meeting is scheduled. Among his advisers who have communicated with the industry chiefs and their representatives are Jason Furman, the Obama campaigns economic policy director; John D. Podesta, the head of Mr. Obamas transition; and former Treasury Secretary Lawrence H. Summers, an Obama adviser who is under consideration to be Treasury secretary again.
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