Stimulus: Republicans Screw Car Makers and Buyers
Well, there they go again.
Republicans took aim at two parts of the now-passed stimulus and recovery bill which would have helped the entire US auto industry, new car buyers and our nation's air quality, while lowering our reliance on foreign oil.
The bill passed by Congress yesterday throws a one-two punch at our auto industry and consumers.
It's the first important bill we can remember with conference changes in two separate rules which will result in harm for the industry which makes cars and trucks and the consumers who buy them.
First, President Barack Obama's desire to upgrade and modernize the federal government's huge fleet of cars and trucks was chopped in half somewhere between the Congress and Senate.
(Cars like this 2008 Ford Taurus may rank as "boring" with many people, but they and similar cars make up a big part of government fleets; newer, cleaner and higher-mileage vehicles must replace older ones, but House Republicans cut that effort in half).
And Maryland's Democratic Senator Barbara Mikulski's amendment to help the auto industry and car buyers, which easily passed the Senate just a few days ago, has become so watered-down in conference that new car buyers, who stood to benefit from $11 billion in savings, will now enjoy barely $2 billion of relief.
Obama requested $600 million for the purchase of new, clean and high-mileage cars and trucks to replace the oldest and dirtiest ones in the federal government's aging fleet. That amount would pay for about 20,000 new cars and trucks, not a huge number but certainly enough to improve and make a real difference in the fleet's emissions and fuel mileage and keep some assembly lines running.
Senate and Congressional Republicans attacked the plan, to paraphrase, as "nothing more than just a way for government employees to drive new cars."
"How does this make or keep jobs?" they asked. To which I'd reply, "How does making and selling new cars and trucks not?"
(What's wrong with helping American auto assembly lines remain open? Someone should ask House Republicans).
Thus, when the bill was finally passed by the Senate yesterday, the amount the White House and Congress originally requested had been cut to $300 million, which will translate into about 10,000 new, cleaner and better cars and trucks. That's a nice number, but not as big as it should be.
The original Mikulski amendment allowed qualifying new car and truck buyers to deduct state and federal excise taxes on their purchases, but the biggest part of the savings to buyers would have been deducting the interest paid on their vehicle loans, as homeowners (at least those who still have homes) can deduct interest paid on their mortgages.
Mikulski's amendment would have retroactively applied to new car and truck purchases from Nov. 12, 2008, to Dec. 31, 2009. To qualify, families' total annual income was to have been under $250,000, and individuals under $125,000.
"Everyone wants to save auto manufacturers, but no matter how much government aid we give to auto makers, they can't survive if consumers don't start buying cars," Mikulski said earlier this week.
The federal "cost" of the original amendment (which was really savings for consumers) was estimated at about $11 billion.
(Making cars and trucks and selling and servicing them keep more than three million Americans employed; only a vibrant auto industry will bring more important and transitional cars, like this Tesla Roadster).
When it emerged from conference, though, and sent to the Senate for passage, Mikulski's proposal had been watered-down by removing the critical interest deduction and the retroactive part of the rule; now the allowed deductions will be effective only on new cars and trucks bought after the bill is signed into law by the president, probably this Monday.
So if you're in the market, don't make that big purchase until President Obama signs it.
Now, a family making less than $250,000 a year could save approximately $600 on a new $35,000 car or truck.
The total amount which could now be saved by buyers drops from $11 billion to $2 billion, a loss of savings to new car buyers of $9 billion.
Both Obama's request for $600 million and Mikulski's $11 billion amendment were also clearly meant to "prime the pump" of the US auto industry, including the Detroit Three and the import companies which make cars and trucks here (thankfully, the protectionist "Buy American" provisions of the stimulus bill have been removed).
(A Code Pink member holds a "Shame" sign behind Bob Nardelli, CEO of Chrysler, during Congressional hearings which saw the heads of the Detroit Three and the UAW undergoing a kind of ritual debasement; Wall Streeters and bankers "testified" this week in Washington, and were treated much more deferentially than the Detroiters, some from Congress talking with them as if the executives are their bosses - Hmmm ...).
Some other countries seem to have little problem with this priming the pump concept when it's aimed at keeping important industries operating.
In Japan, car owners must take their vehicles through a Draconian annual inspection which can cost them more than $1,500 in a process where chipped paint, small dents and not-new tires are considered safety violations (explaining the excellent condition of most cars and trucks in that country, something anyone who's been there can attest to).
Owners have the option of paying thousands to repair the problems, and many, after considering the cost and hassle, decide to trade-in their used jalopies for brand-new vehicles, while their trade-ins are usually shipped to other countries, often in Southeast Asia, where they're sold as used cars.
It's not a very fair system, but the Japanese consider their car making industry crucial to their society, and have been willing to go through the whole charade, which they see as something of a patriotic duty.
(Toyota's Lexus LF-A supercar concept at the 2007 Tokyo Motor Show, that country's bi-annual exhibition of their most important domestic industry; because of the Bush Worldwide Depression, this car, once scheduled for production in two or three years, will not be seen until well after that, if ever; this year's Tokyo show may very well be canceled).
Remember when Republicans trashed Vice-President Joe Biden for saying, during the election campaign, something about "paying taxes is patriotic?" People around the world have at least two opinions on that concept, as we can see from the Japanese auto inspection process, but I most appreciate what Justice Oliver Wendell Holmes had to say on the topic: "I like paying taxes. With them, I buy civilization."
Priming the pump of our industries, especially automotive, is not a bad idea, even if Republicans gag at the thought.
So, who are the patriots now?
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I like cars, and own two American cars (although I think the Chrysler Mini-Van was made in Canada), but I don't think the rest of the country should pay to keep Detroit's big three separate. If GM and Chrysler go through bankruptcy they will still need government money to restructure, but what will emerge will be far stronger. Perhaps Ford will buy some lines and GM will carve back to fewer... profitable
On the credit for buying a car, making it retroactive makes no sense (they already bought the car so clearly they could afford it....why give them money now). In fact, why is buying a car any more patriotic than buying a new cloths washer or putting a roof on the garage? This is government trying to tell us what we should spend our money on ....they won't get it right.
Why should we take money from the taxpayers so the government workers can drive new cars? They already have better pensions and benefits than the citizens. If they want to buy new cars, let them buy them themselves. Then the people can spend their money on what they want, perhaps a new car, perhaps a new coat.
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Econ, your argument is a red herring. Sure, they'll drive some new cars and trucks, but the point is that they will all be cleaner, safer and get much better mileage than their current vehicles - and help keep some assembly lines open, which it seems you're wisely in favor of.
I also like Justice Holmes' words on a similar topic: "I like paying taxes - With them, I buy civilizati
The bloom is now officially off the "No government is the best government" rose, finally. And all credit to George W. Bush.
Steve
Steve,
It is nice for the government people to have newer cars, but my point was more that having the government select some areas of the economy to support (necessarily at a cost to the others) is a bad idea. It is particularly bad when we support our losers rather than our winners. For example is the auto industry more important than the semiconductor industry?
I am neither a fan of big government nor big business. Big can be efficient but often leads to entrenched interests and insulation if not protection from the customer. This can be seen by the activities of the management of GM as well as the Congress.
This is a little off the topic, but the train between Vegas and LA is not something that magically appeared because of the stimulus bill, Bush signed legislation last year and authorized $45 million for environmental studies for that project. And, the $8 billion is not for that one train, more projects are included.
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And both states involved are pouring a ton of money into the project, too.
I hope we build as many high-speed rail projects as we need, nationwide.
As Obama said today, these public works programs are the most massive undertaking since Eisenhower created the Interstate Defense Highway System (its complete name) in the 1950s. And it's STILL being built! Been through Las Vegas or Phoenix lately? Some of those roads have been a-building for 40 years (and are being constantly improved, too - Now we'll have the money to really make some magic when it comes to the transportation choices in the US; today, the railroads only want to carry freight because there's no money in hauling people around).
The story of then- Colonel Eisenhower surveying our nation's roads, coast-to-coast, before WWI, and his reaction when he got to Germany in WWII and saw the Autobahn system Hitler had built, is very interesting and even inspiring.
Steve
It really is amazing to me that these Republicans evidently do not understand the meaning of the word "investment", especially when it is associated with "future savings" or "future income". It really is.
It seems ridiculous that the repug senators were against pay caps for bank executives but for them for working class people. I guess our spending doesn't stimulate the economy, but , the rich hoarding more money is supposed to stimulate the economy. Union busting!!! I hope the working class in their states are paying attention!
If you initiate pay caps, the company's best employees will likely leave to work for companies without the pay caps. Most folks in the financial industry get the majority of their compensation from commissions and bonuses. These folks generate a lot of income for the companies they work for (in the vast majority of cases).
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You may be right about some of the car maker executives leaving for other companies if pay caps happen. But how many car companies are hiring these days? Especially $26 million a year execs , which is what GM's Rick Wagoner made last year.
And it might sound quaint and naive, but their patriotism should be appealed to, also. As far as bankers and Wall Street, if any of the execs of companies getting our money decide to leave, good riddance! They're the idiots who got us into this disaster in the first place.
All the money and great ideas in the world won't save Detroit if the same top level management remains in place.
Steve
I really do not understand why this is all such a large issue. There is only one solution, but many options after that solution.
The solution? Let them fail.
Bust them up and lower auto production totals, require alternative energy production plans, and give them all the capital and labor retraining they need.
With excess factory space and equipment, sell them with large tax breaks for investment to re-tool them for battery, solar, electricity grid, or any future or near future green production. Smelts that used to make metal for cars for instance, now cast for massive production of solar panel bases.
Workers could be paid flat re-training wages tax free at 60% pay, while being retrained, and could qualify for other short term benefits. they could also be employed to help with the re-tooling.
Now would be a great time to invest in mandatory college education as well. In a global downturn like we see today, we will soon run into the issue of over availability of labor in the U.S. It would pay to keep people busy and smart.
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Yes, your idea is one possible solution. But the problem is the 3 million Americans working at the car makers' supplier companies who would also lose their jobs for a long period of time. Here's another idea: Merge the three into one, hire the best people in the world to run this new company, have them build not only cars and trucks but high-speed and light rail projects and cars, and if the company succeeds - After a period of time it can be split again into two or three.
Steve
None of what you write addresses the simple problem; that cars made aren't worth $35,000. I ain't paying $35,000 for a car no matter what tax breaks the government offers.
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The average cost of a vehicle in the 2009 model year is just under $28,000.
This is all part of the "free market" which so many support; if they weren't priced "right," they wouldn't sell. And now that we all have less money, they aren't selling.
Steve
GOP wants to bust the union. The auto union is way out there. The baseball union is killing MLB. The US has a crisis of management. We have no meaningful oversight. Cheating, lying, and complete lack of ethics, morality rules the day, and is actually taught at HBS.
Our justice system is in FAIL mode, out Military leaders are being investigated, we are killing people in mountain villages with drones, Chavez is giving oil to US seniors so they can have heat this winter, Palin swears she can see Russia across the water, and Obama wants an end to politics as usual.
I do see how letting an insolvent bank go bankrupt makes sense. I do not see how making a deal with Madoff makes sense. Busting the auto union right now may be the straw that breaks our back. I am not sure we are willing to pay the price, and most folks do not really understand what the price will be.
Hold on, we have not hit bottom yet!
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Now that's an encouraging post!
I'm kidding - you're just writing things as you see them.
I think it all comes down to what our parents told us: "Give some people an inch, and they'll take a mile."
With the Republicans' deregulation and the move to privatize everything, including Social Security, what else did they expect to happen?
Man, we dodged a huge bullet when another one of Bush's "boxes of candy" to Wall Street, that proposed privatizing of Social Security, failed. But he still managed to gift them $350 billion as a "parting gift." And all he ever wanted to be was commissioner of baseball ...
Steve
how about people who make less than$ 30,000 a year?do we all have to walk or take a bus forever? people are still needed in lower level jobs.They are the base of this economic pyramid.Wi
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And maybe in our post-Bush Depression economy, people who need loans will get them for low interest, and those who can afford high interest rates will have to pay them. I always thought our "credit system" is backwards. But luckily for everyone else, I'm not an economist.
They tell a story about Harry Truman looking for one-armed economists. When asked why, he's reputed to have said, "So they can't say, 'Now, on the other hand.'"
Steve
Harry Truman PERSONALLY visited every single business that received public funding for World War II when he was in Congress, and not just in his home state, either. If he found one that wasn't on the up and up, the funding was immediately withdrawn. We needed that kind of oversight in Iraq and we needed that kind of oversight of the bail out funding. That we didn't get it, that nobody cared, says just how far down the corrupt, jaded path we've gone. It's very difficult to re-impose discipline, but discipline must be imposed.
ATUO JOBS PAY TOO MUCH !
Republicans can't destory the middle class and keep high paying jobs !!!!
since when is 2 billion measure is chump change ?
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As Illinois senator, the late Everett Dirksen, often said: "A billion and a billion there - Pretty soon you're talking about real money!"
Dirksen was that rare bird which has left the Republican party. Along with Nelson Rockefeller, and several others, he was a moderate Republican. Try to find one now.
Steve
You don't have the shaken regime quite right.
The first inspection is after three years of ownership and then there are subsequent inspections every other year. But freight bearing trucks have a more strict regime and company cars even more so. Also, the expense is more like 60,000 yen (about $600).
It was enacted in 1951 because the quality of Japanese cars then weren't very good and they frequently broke down on cramped roadways. However, they also have not changed the law to reflect the improved quality of Japanese cars.
And here is why I think that MIGHT be.
Crap American cars would have a hard time passing it.
Japanese cars are more or less an export product. Making owning cars such a hassle that people would think twice about it would drive folks to public transport, which is a money loser for the government right now and private rail is hurting, too.
Furthermore, it reduces the demand for the building of more roads and parking lots in a country where habitable land is relatively scarce, and it means less auto pollution in big cities that are also hundreds of years old and thus not really designed for auto traffic (even Tokyo is mostly a rabbit warren of winding side streets).
In the countryside, you need a car. But they are largely unnecessary in the big cities, especially when you have to prove you have a place to park it before you can register a vehicle.
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Thanks for your facts ... I'll check them out. I do think the $1,500 fee is correct; maybe it's gone up since you've checked it out. But if I'm wrong I'll post it here.
You're absolutely right about the (non-) need for private vehicles in Japan. I hope this country becomes a place where car ownership for most people is an option, not a necessity.
There's a movement afoot in Japan (pun intended) called "karuma banare" which means "de-motori
Steve
It's actually spelled "kurumabanare" and it literally means, "separating people from cars." And I am in favor of it.
I speak and read Japanese and I have lived in Japan. The info I got about the shaken was off of Wikipedia Japan and I would link to it for you, but HuffPo has a habit of deleting posts that contain external links.
But then again, Wikipedia's reliability can be dicey at times. So I hope the details I translated are indeed correct, and I think they are, but I am not 100% sure.
The more interesting trade barrier for me is actually in Korea, where to be seen driving a foreign car can bring one heaps of abuse. The Korean hyper patriotism has long been a thorn in the side of U.S. auto sales there.
Republicans cut the bill in conference? Republicans didn't touch the bill.
Obama kept Nancy and Harry to $800 billion. How was Harry to get his $8 billion railroad if he did not take some away from the auto companies.
The auto companies need to hire better lobbyists, that's all that counts now. Not your product nor service but the quality of your lobbyists to add pork.
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Thanks for the comments!
Republicans "didn't touch the bill?" Of course they did - they got the tax breaks increased, they got the cost down and they cut out as much as they could given their loser status. I think they just don't "get it," to use a now-hackneyed phrase. Even I still half-expect to see George Bush when the president is introduced. I find myself asking, "Who's that guy? Where's the president?" I'm pretty sure I'll get over it.
That "$8 billion railroad" should have been allotted at least twice that much. Like China, we're going to end up buying used Shinkansen from Japan. And also like China, the US should be building mag-lev transit systems, not old equipment . With the new electricityl grid that's in the bill, mag-levs will become a reality (of course we still have to figure out superconductivity to get all that electricity to the systems).
Steve
The Repubs had no say in this they weren't in on negotiations!
I've driven my 1996 Ford Explorer into the ground and was going to upgrade to a diesel car when I heard about the interest deduction.
Now I'm going to play it safe and keep driving my clunker until we see inflation from the stimulus start to kick in and I'm forced to buy before my dollars fall in value. I won't have to wait for long.
It looks like my spending behavior will follow the basic economic models that I learned in undergrad.
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You, and a lot of other folks, might also be interested to know that "Clunker Laws," government
So keep that old Exploder, err, Explorer, I mean.
Steve
can someone explain to me how the House Republicans - none of whom VOTED FOR THE BILL - managed to cut Obama's federal fleet plan in half, not to mention all of the other unilaterial concessions? I get Obama's notion of "long-term dividends" re: bipartisanship, but this is insane.
as many others have written already, bipartisanship is a means to an end, not an end in itself and it shouldn't be treated like one.
This is one of the universal mysteries apparently. I was hoping they would call the repugnicants bluff and force them to put what little they had left on the line in the first month of the new administration, and crush them for good. they had so much more to lose then the pres. why dosent someone tell him that?
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I imagine Rahm Emanuel is telling Obama that very thing, and probably using much more colorful language and hand gestures than we can use here. Obama, though, clearly really does believe in the necessity of a future of bi-partisanship, and some comments he made yesterday about his efforts this first time out not being the end of his attempts to reach out to Repubs gives me hope. And Obama can afford to play the "good cop;" after all, he won and he has the power now. Let Emanuel and Pelosi and Reid be the "bad cops." He's already grown in th job (and apparently was coloring his hair during the campaign, because he's already gray on the sides!). So if he's optimistic, so am I. Least we can do.
When no GOP voted for the bill, they aren't ultimately responsible for what is or what isn't in there. Author, you didn't get what you wanted...s
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Thanks for your comment!
Being not "ultimately responsible" for the bill is exactly why Repubs voted against it. They're taking a big chance, and to paraphrase The Great Limbaugh, "I hope they fail."
Leadership did the best they could with a bill which should have been written by Congress and the White House, not just Democratic House members.
Steve
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They say there are two things we regular people should never observe: Making sausages and the negotiations for a bill. While no one who wasn't there can't say for certain what transpired between the Dems and Repubs in conference on these issues, we all know which side would have been pulling for the Obama fleet plan and the Mikulski amendment and which side would have been against it. Frankly, I'm a bit surprised the bill got passed with ANY help for the auto industry.
Steve
Republicans got about 17 amendments into the bill, then not a one of them voted for it anyway.
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It happens "in conference," which is when a bill is passed by both Houses; after the Senate vote, it goes back to Congress, where conferees come up with the final version. And during that process, any and all people from both sides of the aisle have their opportunities to propose changes. After those negotiations, they vote again, and if it passes it goes on to the president. Don't you remember "I'm just a bill" from PBS?
What really galls me is that many Republicans, who bragged about how they would all vote against the package before they ever saw it, are now bragging about how much money they're bringing back to their districts and states - all that money from a bill they voted against!
Steve
If it were Chinese industries that needed help,or sadly,"American" industries that moved to China,I'm sure the GOP would be all for it. More proof-as if needed-that the Right has no interest in the betterment of this once-great nation. They want a relatively poor,and under- or uneducated populace that they can manipulate and control. Would you like some Hannity with your Rush,and a side of O'Reilly? ...and for dessert,we have Coulter... Sadly,there's a LARGE part of our nation that still savors this perverse smorgasbord.
What? Did Wagoner,Mullaley and Nardelli not meet their financial obligations to the GOP,and the "support" dwindled for any help for their respective corporations? Or,did the foreign automakers just do a better job of lining the pockets of people(?) like Shelby,McConnel,et al? I also often wonder whose side Pelosi and Reid are on in this fight,when they call for wage cuts from workers-did you forget that you are Democrats,the party of the working class(alle
If President Obama would like to be even bolder(and also REALLY piss off the Right),he would insist that any new government vehicle would be truly AMERICAN made,as in "Not Made-in-Mexico-with an American nameplate". I wouldn't hesitate to think that people(?!) like Dick (how apropos) Shelby and ol' Mitch Mac are lobbying for Toyotas,Hy
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My feeling is that right-wing hate radio is so popular and progressives like Air America, for example, and NPR for another , have trouble staying solvent is because we progressives actually have jobs (at least some of us used to) and don't have time to listen to radio talkshows all day. And talkradio is "top of mind," demanding the full attention of the listener; not like "background music" which is called that name for a reason - might explain why some people are really bad at their jobs.
Why do Republicans hate Detroit? They think the companies "gave in" to unions and that's the SINGLE reason Detroit is now failing. Seriously - that's the talk in the industry. Also, auto execs tend to think farther along than the next quarter - well, a few of them do - which also is anathema to god-fearing Republicans.
The "poor under-educated populace" you mention has finally been defeated politically. Since 1980 there's been an unholy alliance between Wall Street and right-wing christianists. It never would have worked-out anyway: The christianist goal is the second coming of Christ, with we Jews all going to hell and the battle of armageddon proving the righteousness of their particular religious myth. You think Wall Streeters would put up with that kind of stuff?
And there are NO cars made with only American parts. Even one of the most popular fleet cars purchased by government, the Ford Crown Victoria, is made in Canada (hence the name).
Steve
Cute, but the name of the Ford Crown Victoria made in Canada is deconstructed like this: Ford (an American company) Crown (a stainless steel band on the original model) Victoria (a type of French Carriage) made in Canada (who agreed to merge auto industries with the US in a fair trade deal long before free trade or NAFTA)
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