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House Republicans Seek Auto Industry Cuts To Cover For Disaster Relief Funds

Cantor Hand

First Posted: 09/15/11 07:27 PM ET Updated: 09/15/11 07:27 PM ET

WASHINGTON -- House Republicans rolled out their plan to fund disaster relief in Majority Leader Eric Cantor's (R-Va.) district, but at the cost of almost half of remaining loans set aside to help the American auto industry.

Included in their plan for a continuing resolution to fund the government past Sept. 30 is a provision to cut $1.5 billion of the $3.4 billion in remaining funds for low-cost loans -- sometimes referred to as "Section 136 loans." The money would be reused to pay for aid to states as they clean up after recent natural disasters like Hurricane Irene and the rare east coast earthquake -- both of which greatly affected Cantor's Virginia district. The cost of disaster assistance is usually added to the budget deficit instead of offset with cuts.

Democrats and an auto industry expert warn the funds Cantor picked to pay for disaster aid is currently supporting a successful program that has pulled manufacturing jobs back from other countries and helped keep the industry alive around the eastern Midwest. Taking the money away would jeopardize that program.

"We absolutely need to fund disaster recovery assistance in Eric Cantor's district and all areas affected by Hurricane Irene and the recent earthquake, but that doesn't make it ok to kill American manufacturing jobs," Rep. Gary Peters (D-Mich.) said in a statement to The Huffington Post. "The Greater Detroit area that I represent has been hit the hardest by the recession and I strongly oppose the Republican plan to kill our jobs and delay our recovery.”

The loan program is part of a $25 billion initiative within the Energy Independence and Security Act of 2007, which was a broad plan Democrats pushed to improve energy efficiency in everything from fuel standards to light bulbs.

Even as Republicans have sought to encourage "Made in America" products, experts say this is one of the programs that has achieved bringing manufacturing jobs to the U.S.

The loans for the auto industry were meant to help encourage new manufacturing plants in the U.S. and re-equip existing facilities, as well as drive the companies toward making more fuel-efficient vehicles.

"It was adding some match-type money that would be dedicated to this and give the industry some additional incentive instead of having to wait until the consumer demand; sort of putting the horse out in front of the cart to pull it along," said Kim Hill, associate director of research at the Center for Automotive Research in Ann Arbor, Mich.

One of the direct results was that Ford quit manufacturing their Ford Focus in Mexico.

"All of the Focus production is now here in Michigan," Hill said. "Nissan is building their Leaf in Tennessee. I don't think that program would've happened in the United States if it weren't for this type of money."

Democrats told The Huffington Post the cut to the loan program would have an impact in manufacturing across the country, not just the auto industry in Michigan.

"If the $1.5 billion were cut it would mean that those with applications in the early stages of approval would not get funding," a Democratic Hill source said. "It would mean that thousands of jobs already in the pipeline would not be created. It is difficult to predict the kind of ripple effect this could have throughout the auto industry and other manufacturing sectors, but this will absolutely damage progression toward improving CAFE standards and limit the ability of American manufacturers to compete on a global playing field."

Hill said the idea of defunding the program to pay for disaster is shortsighted. "Where we sit here in Michigan -- that actually was disaster relief. This region of the country was going to fall apart if some of these companies failed," Hill said.

The program didn't simply help the auto industry, Hill said, but there's a number of other states, including many in Speaker John Boehner's home state of Ohio, who are the center of major parts suppliers. As Hill explains it, the auto makers don't create a car in a vacuum. In some cases, they are reaching out to 1,000 different suppliers.

The Government Accountability Office found this program is already understaffed and as such there has been a real problem distributing the funds leaving some companies barely hanging on. For instance, Chrysler Group, LLC., has been waiting on a $3 billion loan for three years now.

This is only one way Republicans are chipping away at legislation passed to improve energy standards in the U.S. The GOP has long been opposed to elements of the Energy Independence and Security Act.

House Republicans pursued the "Light Bulb Freedom of Choice Act" which would've repealed the phase-out of the old high energy-consuming light bulbs, in favor of energy efficient ones. Since that effort has stalled, some Republican-controlled states have tried to slide in their own legislation on light bulb "freedom."

The remaining money in the loan program could all be used if the $3.9 billion in pending requests are granted, Democrats said.

The Hill reported House Minority Whip Steny Hoyer (D-Md.) indicated Thursday that Democrats would be widely opposed to cutting this funding from the loan program in the Department of Energy.

"What we are doing, in my view ... is undermining a specific item in the current scheme of things that is creating jobs," Hoyer said.

Cantor's office did not respond when asked for comment.

On Thursday the Senate passed their version to fund disaster relief without any offset by a vote of 62-37. If a resolution is not made by Sept. 30, FEMA would have to delay aid to disaster victims.

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