The Auto Bailout and Fiscal Responsibility

August 1, 2010

Sometimes fiscal responsibility means making wise investments with long term benefits taking precedence over short term concerns. That seems to be the case with the auto bailout.

It is worth noting that the use of the term “bailout” is a bit of a misnomer as the money given to the auto industry was in the form of a loan and will be repaid with interest. It is by no means a giveaway. However, since it is the well established nickname for the aid given to the auto industry, I will continue to use it.

I probably would not have supported the auto bailout without serious limitations on executive pay. Wealthy executives should not be rolling in piles of money while working class Americans pay for bailouts of the same company. Additionally, unreasonable executive pay indicates problems with the fiscal responsibility of auto companies and their executives and that raises the question of whether the public should be risking their hard earned dollars to bail them out.

However, it seems as though the auto bailout has paid off. One Chrysler plant “added a second shift of production to the tune of about 1,100 jobs.” Another Chrysler plant will add 900 at a plant outside Detroit. In the year following the bailout and bankruptcies, 55,000 jobs were created in the auto industry which is the largest growth for the auto industry in more than a decade. More than 10,000 additional jobs are projected to be created by the end of the year. Chevrolet and Ford are both operating at a profit and Chrysler is nearly profitable with only the interest on the government loans keeping them in the red.

Equally important is the fact that, while the government likely will not recoup the approximately $25 billion given to the auto industry by the Bush administration, all of the $60 billion given by the Obama administration in the form of loans will be recouped with interest. This is obviously good news.

Fiscal responsibility is a long term approach and means making the financial decision that is the most fiscally responsible, not necessarily the one that is the most fiscally reluctant.


Obama’s Proposed Education Funding & Pay-As-You-Go

June 20, 2010

Recently, President Obama has been urging Congress to pass legislation that will provide $50 billion in aid to the states to fill budget gaps related to education/teachers, health care, and emergency personnel such as police and firefighters. Specifically, the legislation includes “$23 billion to help prevent teacher layoffs, $25 billion for state healthcare aid and $2 billion for cops and firefighters.”

The idea is simple. Without the aid, states will be forced to cut jobs and services in these areas, increase deficits, raise taxes, or a combination of these. Regardless of the outcome, it will have a disastrous effect on states already struggling to make ends meet while reviving their economy.

The plan, however, is meeting resistance from both parties, particularly from Republicans. Some Democrats, such as Majority Leader Steny Hoyer have asked Obama to consider using unallocated funds from last year’s stimulus bill. Republicans are pointing to the fact that Democrats are not abiding by their own Pay-Go (Pay-As-You-Go) legislation which requires new spending to be paid for by cutting spending or raising taxes.

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Addressing the National Debt

May 23, 2010

The national yearly deficits and long term debt in the United States is increasingly in the focus. People, regardless of political persuasion, generally recognize our current path is unsustainable. We got here through increased spending by both parties on programs and wars, as well as through substantial tax cuts for the wealthy.

The question is what do we do about it? While one could write volumes on ideas to deal with the national debt, there are three key areas that I feel deserve more debate:

1) Reforming our approach to assistance to the working class and those in poverty

2) Reform defense spending

3) A very small national sales tax dedicated to debt service

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