Monday, April 26, 2010
GM Repayment and Fuel Standards
It isn’t clear what Republican Senator Chuck Grassley from Iowa and Republican Representative Darrel Issa from California are really upset about.
After GM announced that it would pay back the $5.8 billion loan the government had provided the auto company, the two leveled complaints against the Obama administration. Grassley wants to know where the money is coming from to repay the loans. (1) He thinks there is hanky-panky going on with the TARP funds. Issa thinks that Obama and the gang “strong armed” GM into accepting tougher fuel standards. (1) By 2016 fuel standards must reach 35 mpg.
First, Grassley’s answer to the question about where the money is coming from: It is coming from the TARP funds. GM and the Obama administration have not hidden that fact, which was the original deal. GM received more than $16 billion dollars in cash during the bankruptcy. Any of that money left by June 30 had to go to pay off the loan to the corporation before it went into bankruptcy.
As for the answer to Issa’s question about the administration “strong arming” the auto makers into agreeing to higher fuel standards: So what? GM and Chrysler agreed to not fight higher fuel standards. Ford, which did not receive any funds from the government also agreed to the fuel standards, as did all the other manufactures in the country. With the higher standards cars will now go farther on less. It will keep the cost of driving down for the consumer. It will help save a natural resource with a limited supply (we are at “peak oil”). If indeed the Obama administration did strong arm the companies to accept the new standards, it will only help the country and the world.
It is clear that GM is not hiding anything and the increase in the fuel standards will help the country and consumer. When questions like these come up with no foundation there has to be an underlying reason.
Both strongly support free market economics which is just fine when kept in balance with the needs of the community. Free market thinking would have let the auto companies fail completely. This would have sent Michigan into a death spiral that would have taken a generation to pull out of. (This is, of course, from Senator Grassley that represents a farm state that has received agricultural subsidies from the US treasury for generations.) Even just looking at the economics of failure and not the individual lives of the many families that would have been effected by the companies going under, auto workers are now still employed paying taxes. This revenue would not have been there if they are unemployed. The cost of the unemployment insurance alone could have been billions.
If on close examination there is a problem, yes, take a closer look. But if the answers are right there in front of the questions, let it go.
1 Businessweek link for Grassley and Issa