Chrysler to Merge with Fiat (and the American Taxpayer)

President Obama today announced struggling auto giant Chrysler would file for Chapter 11 bankruptcy. As part of the process, he pledged another 8 billion taxpayer dollars, and outlined early plans to merge America’s third largest auto manufacturer with the Italian car company Fiat, in a last ditch effort to save the company.

While criticizing Chrysler for failing to, “adapt to the future [while] designing and building cars that were less popular, less reliable and less fuel efficient than foreign competitors” the President blasted Chrysler’s creditors for failing to “work” with the administration to prevent today’s announcement.

Chrysler CEO Robert Nardelli announced his intention to resign his position after the company emerges from Chapter 11, which is expected to be sometime in the next 60 to 90 days. The AP reports the “government will be an investor in the revamped Chrysler and will help choose its new directors[.]”

Congress Borrows Another $1.1 Trillion

The Associated Press reports:

Democrats in Congress capped President Barack Obama's 100th day in office by advancing a $3.4 trillion federal budget for next year — a third of it borrowed — that prevents Republicans from blocking his proposed trillion-dollar expansion of government-provided health care over the next decade. …

The Senate adopted the plan by a 53-43 vote just hours after a 233-193 House tally.

Newly-turned Democrat Arlen Specter of Pennsylvania voted against the measure as he did earlier this month when it initially passed the Senate. Three other Democrats also voted no: Ben Nelson of Nebraska, Robert Byrd of West Virginia and Evan Bayh of Indiana.

Seventeen House Democrats, mostly from GOP-leaning districts, voted against the budget.

Not a single Republican in the House or Senate voted for the measure.

Senator Gregg of New Hampshire just released the following statement on the measure:

Despite the majority's insistence that this bloated budget is the answer to all of our problems, several facts are irrefutable: working Americans will be hit hard with higher taxes and more debt.

Under this budget, Americans across the economic spectrum will be paying more of their earnings to the government - it will go far beyond simply taxing "the rich." Owners of small businesses, which are the engines of economic growth, will be taxed at a much higher rate under the backwards theory that the government can better generate prosperity. This budget penalizes investment and innovation through higher taxes, which will constrain the nation's long-term productivity.

This budget will allow a national sales tax on energy which will cost American households up to $3,000 a year. It would add to the burden on the middle class by ending the Make Work Pay tax credit and omitting $187-billion worth of tax relief that was promised in the House-passed budget resolution. That will cost working Americans more money at a time they can least afford it.

But even after making sacrifices to pay these higher taxes, Americans will be rewarded with massive new levels of debt as far as the eye can see. The spending is so reckless that even with much higher taxes, we are on an extremely dangerous fiscal path. This budget will double and eventually triple the public debt, driving it up to 75% of GDP. How does a nation get out from underneath that? Are we no longer capable of disciplining ourselves and governing in a responsible manner, and where does it leave our children?

The Democratic majority has missed a tremendous opportunity to put this nation on the road to fiscal stability, and has instead chosen to dramatically grow the government at the expense of future generations, and so I could not support their plan.

The First 100 Days of Spending

It is fitting that on this, the 100th day of the Obama Presidency, the United States House has just passed a $3.4 trillion budget resolution. Since taking office at the end January President Obama has actively pursued a rigorous spending agenda.

Just a quick summary of your money the President has spent in the first 3 months of his 4 year term. He signed into law the “stimulus” bill totaling $787 billion. In early March he also signed the $410 billion omnibus spending bill, which, incidentally is laden with over 9,000 earmarks according to Heritage. So 100 days, $1.2 trillion in money spent. Averaged out that’s nearly $12 billion a day Barack Obama has spent already. To put that in perspective, the U.S. government spent $2.9 trillion in 2008, or just more than twice the Obama administration has spent in the first 3 months.

No matter how you look at this is an unprecedented federal spending rate.

SBA Delays

Democrats and Republicans alike agree that small businesses, those with less than 500 employees, are the backbone of the American economy.

According to a fact sheet produced by the Small Business Association, the government agency designed to support and protect these businesses, small businesses represent 99.7 percent of all employer firms and pay nearly 45 percent of the total U.S. payroll.

Most important, with unemployment rates continuing to rise, the SBA estimates that small businesses have generated 60 to 80 percent of net new jobs annually over the last decade.

It is disappointing then that Obama’a SBA has implemented only two of the eight SBA related provisions included in the economic stimulus. MSNBC reports:

[A]gency officials told the Government Accountability Office (GAO) [meeting the deadlines] wasn’t possible because creating regulations for new programs like these is complicated and time-consuming. The GAO report also noted the SBA is hampered by lack of sufficient staff. …

In an April 15 letter to the GAO, [SBA Administrator Karen] Mills said SBA’s senior managers are working to implement the agency’s economic stimulus programs “with both urgency and appropriate care.”

“The need to act with speed is being balanced with the need to assure that significant risks to the agency that might arise through Recovery Act projects are systematically and effectively identified, evaluated and addressed where appropriate,” Mills wrote.

“Inherently vulnerable to fraud, waste and abuse”

The LA Times reports, on Tuesday, the Special Inspector General overseeing the Troubled Asset Relief Program released a nearly 250 page report detailing the first cases of fraud in the program. The IG also announced the opening of 20 criminal probes into possible securities fraud, tax violations, insider trading and other crimes which, when all told, could reach into the tens of billions of dollars.

The disclosures reinforce fears that the hastily designed and rapidly changing bailout program run by the Treasury Department and Federal Reserve is going to carry a heavy price of fraud against taxpayers[.]

[The IG] said the complex nature of the bailout program makes it "inherently vulnerable to fraud, waste and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering."

Illinois' Stimulus Surplus

According to federal and state officials, President Obama’s home state of Illinois has received more stimulus transportation funds than any other state.

Obama’s Transportation Secretary Ray LaHood, a former Illinois Congressman, recently told a local radio station, “‘there is no favoritism’ involved in the distribution of federal money, but instead said it was based on a long-standing formula for allocating highway funds to the states. … More than $600 million in funding has been approved for nearly 250 projects” throughout the state.

Tax Day Tea Parties

There are currently six Tax Day Tea Parties scheduled around New Hampshire throughout the day tomorrow.

Check out the list of times and locations and consider joining a rally or two near you!

VA Rejects Stimulus Funds

On Wednesday, the Virginia General Assembly rejected $125 million in stimulus related unemployment funds. The Washington Post reports:

The GOP-controlled House of Delegates, a fiscally conservative body that has long opposed fundamental changes to laws that extend such benefits, killed the proposal after members argued it would translate into higher taxes for businesses once the supply of stimulus money was exhausted.

"We are being used," Sen. Ken Cuccinelli II (R-Fairfax) said. "Actually our constituents . . . who are now unemployed are being used by this administration to hold a gun to the head of this General Assembly with the assistance of the governor to force through a bad bill."

The defeat was a blow to Gov. Timothy M. Kaine, chairman of the Democratic National Committee, who had pushed the matter as the state legislature reconvened for a one-day session.

Virginia now joins, Alaska, South Carolina, Louisiana, and a few other States in rejecting these funds because they realize that this short term cash infusion will negatively effect their states, most notably in the form of higher taxes, when the money runs out in two years.

“Going further into debt will not solve a problem that was created by too much debt.”

Ben Smith today highlighted a new YouTube video of South Carolina’s Governor Mark Sanford defending his decision to refuse some of the federal stimulus dollars slated for his state.

In less than a minute, Sanford makes a clear and concise argument against increased government spending and in support of policies that don’t “saddle our children with massive debts.”

Output Lost

The New York Times today put a dollar value to the level of production and output the nation has lost since the recession began. In a sobering assessment, the Times' Louis Uchitelle writes:

[E]ven if the recession miraculously ended tomorrow, economists estimate that at least three years would pass before full employment returned and output rose enough for the economy to operate at full throttle. …

But the president’s solution, the recently enacted stimulus package, spreads $787 billion over two years. So even if every dollar of spending restored a dollar of output, President Obama would be nearing the end of his first term before output approached the level achieved just before the start of the recession in December 2007.

Of course, we know that every dollar spent will not restore a dollar of output. As STEWARD’s recent economic study found, for example, significant portions will simply supplant existing spending, contributing nothing further to the nation’s output.

Moreover, as the CBO has warned, the stimulus bill will actually have a negative impact on the economy from 2015 on because of the massive debt incurred as a part of the bill.

STEWARD in the News

Kevin Landrigan of the Nashua Telegraph profiled STEWARD in his column this morning. Landrigan’s piece offers some of the first insights into STEWARD’s new study, which will be released tomorrow, as well as some information about our new Executive Director, Erin Abell:

A stimulus rival draws his guns, targets cash trails

A former Barack Obama supporter turned federal-stimulus-bill opponent will ramp up his campaign with a new executive director and 24-page report on the New Hampshire impact from the Washington largesse.

In February, Fred Tausch, 37, of Nashua, bankrolled $100,000 in ads to promote his effort known as Stimulating The Economy Without Accumulating Record Debt and created a STEWARD Web site, www.stewardofprosperity.org/meet/STEWARDS, to report on where the stimulus money is going in the state.

His staff hire for the expanded effort is Erin Abell, who started on John McCain's 2008 presidential campaign team the last six weeks before the first-in-the nation primary vote.

During the general election, McCain installed Abell as a full-time, $38,000-a-year regional coordinator working in the national campaign headquarters. She previously worked in finance for Morgan Stanley and KBC Financial Products, and is a 2002 Towson University graduate. On Monday, the group will release results of an economic analysis study done by Brian Gottlob, who has his own Seacoast consulting business and produces an ongoing report on economic trends.

In the report, Gottlob identified more than $920 million in stimulus money already headed to New Hampshire. That total is incomplete, he wrote, because it doesn't include what competitive grants New Hampshire projects may win in the coming months.Here's how Gottlob gets to this massive number:

• Education: $258 million.

• Medicaid: $250 million.

• Transportation: $129 million.

• Individual income support: $79 million.

• Environment: $63 million.

• Energy-weatherization: $61.7 million.

• State fiscal stabilization aid: $36 million.

• Housing: $33.5 million.

• Health care: $9.3 million.

Gottlob noted the two largest pools of money would be used to help pay for the next two-year state budget.

"Thus, states receive targeted dollars to assist them in meeting the two largest financial obligations of state government (K-12 education and Medicaid), perhaps avoid cutbacks in these programs or harmful tax hikes to maintain current levels of these expenditures,'' Gottlob wrote.

"These funds will not increase aggregate demand or stimulate job creation but they may preclude some job losses in state and local government.''

House budget writers come up with smaller numbers, with $226 million for Medicaid. The larger education number from Gottlob includes what Lynch and the House agreed to spend on state education aid, but for low-income families in Title I ($31 million) and special education ($52 million).

Barack's Budget

Last night, both the U.S. House and Senate voted to approve separate versions of President Obama’s budget

In the House, the roll call was 233-196 in favor of a $3.6 trillion budget plan that includes a deficit of $1.2 trillion – both Reps. Paul Hodes and Carol Shea-Porter voted in favor.

The Senate vote was 55-43 with every Republican voting against. Democrat Senator Jeanne Shaheen supported it.

Following the vote, Senator Gregg released the following statement:

“This budget, which was passed by the Democratic majority along party lines, puts the nation in a perilous fiscal position. This budget spends so aggressively in order to expand the government that even the largest tax increase in history isn’t enough to pay for it. Instead, this budget doubles and eventually triples the debt, putting us on an unsustainable path that will leave future generations struggling to maintain the same quality of life that we enjoy. It is simply wrong for one generation to do that to the next.

“So I am disappointed to see the Democratic majority put this plan into place, which will not lead to prosperity as they claim, but to a situation where we are steadily sinking under the weight of spending, taxes and borrowing. Prosperity can only result from creating an environment where spending is restrained, the tax burden is low, and the government shows its serious intent to address debt over the long-term. I hope that the budget conferees will work together in a bipartisan way to make the needed adjustments to this fiscal blueprint.”

Big Win for the Anti-Stimulus Governors

The AP is just now reporting:

In an important victory for the nation's governors, the White House is acknowledging that state legislatures across the country can't wrest control of $48.6 billion made available under the new federal stimulus law to help states cope with their budgets.

White House budget chief Peter Orszag says there is no provision in the stimulus law for state lawmakers to accept that money without approval by the governor. South Carolina's Republican governor, Mark Sanford, has said he may decline more than $700 million in stimulus money because the White House won't let him spend the money to pay down his state's debt.

Orszag wrote in a letter to Sen. Lindsey Graham, R-S.C., that Sanford controls those purse strings. The White House also urged Congress to change the law to avoid what it called unfortunate and unintended consequences.

STEWARD is working to obtain Director Orszag's letter and will post it as soon as possible.