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President-elect Obama’s Baseline, and His Silence On the Big 3 Bailout

Wednesday, November 19, 2008  |  posted by Hugh Hewitt
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When Barack Obama was elected:

The inflation rate was 3.7%
Unemployment was 6.5%
The prime was at 4%
The Dow closed at 9,625
The NASDAQ closed at 1,780
The S&P closed at 1,005
Oil was $60 a barrel.
U.S. monthly domestic oil production: appx 155 million barrels
U.S. proven oil reserves: 21.3 billion barrels
U.S. offshore proven reserves: 3.9 billion barrels

These were the facts as polls closed on 11/4. His domestic success or failure should be measured against them.

The two weeks since his election have featured exactly one Obama press conference even as the country’s economic worries continue. His party’s rush to craft a bail-out for GM, Ford and Chrylser has magnified concerns that any Democratic Party constituency –in this case the UAW– with a want will get Congressional action whether or not it makes sense, and the doldrums of the last week are in no small part a reaction to the approach of the purposeless spending festival.

President Bush and the GOP simply do not believe GM CEO Rick Wagoner when he says that a Big 3 bailout is necessary to “save the U.S. economy from a catastrophic collapse,” but if the president-elect does believe that he should say so and demand the lame-duck Congress act. In this day and age, though the formal transfer of power is two months away, the accountability clock has already begun.

GM’s Wagoner makes his case for federal assistance here.

Mitt Romney takes the opposite view here in a New York Times’ op-ed. Romney’s conclusion:

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research -on new energy sources, fuel-economy technology, materials science and the like -that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass -they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

I will devote most of today’s show to the topic of whether or not the Big 3 should get a big check. If you are a dealer -Big 3 or otherwise– send me an e-mail with your contact info, to hugh@hughhewitt.com. Ditto for car execs who want to weigh in.

This is a huge question, and the president-elect should make his views known, asap.

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