Economic Crisis-Tip of the Iceberg?

by Christina Lovato, University of New Mexico-Talk Radio News Service


“I came to the conclusion that unless we did something about this problem in terms of tax reform and entitlement reform that my children and grandchildren would not have the same opportunity for the quality of life and standard of living that I’ve had. That we owed it to them... to be responsible and deal with this project.” said Senator George Voinovich (R-Ohio)

Today at a press conference held by Senators Kent Conrad (D-N.D.), George Voinovich (R-Ohio), Congressmen Jim Cooper (D-Tenn.), Frank R. Wolf (R-Va.), and David Walker, CEO of the Peter G. Peterson Foundation addressed policy ideas including a bipartisan, action-oriented commission or task force that would pertain to America’s structural deficit and rising debt levels. Walker also announced the Foundation’s plans for a $1 million-plus DC-focused media advertising campaign aimed at raising awareness of America’s financial crisis.

“Americans are reading the papers today see a lot of bad news, a lot of bad economic news and they don’t know what to make of it. They don’t know if we have a bad cold or maybe an Phneomnia or if it’s worse than that’s may be a kind of economic cancer... I’ve had cancer and that's a bad day when you get that diagnosis... but you would like to get that diagnosis early so you can do something about it instead of getting that dreaded diagnosis late. We are here today to try to cure this problem for America.” said Cooper.

Auto bailout must lead to "self sustaining" companies

At a hearing today with executives from Ford, Chrysler, and General Motors, Chairman Frank lamented that the U.S. is in its worst economic situation since the Great Depression including 533,000 lost jobs in November. He called the current lack of jobs in the U.S. "an unmitigated disaster." Rep. Al Green (D-Texas) said that allowing the car companies to fail would put "2 million people out of work."

Rep. Spencer Bachus (R-Ala.) said the reality is that "Detroit is making good cars." He called a potential $34 billion loan to the major U.S. automobile companies "limited transitional assistance" and said he would only support giving the car companies the loan they requested if there is an "expectation of success." Rep. Judy Biggert (R-Ill.) claimed these companies must find a way to be "self sustaining."

Rep. Donald Manzullo (R-Ill.) said that the U.S. needs to "increase the demand for these vehicles." He felt that either the government or the car companies need to find a way to encourage Americans "to start buying cars again."

Ron Gettelfinger, President United Auto Workers (UAW), said workers in the automobile industry are "prepared to do our part." He did caution against making auto workers and retirees the "scapegoat" since they only make 10 percent of the total cost of the businesses. He also said that allowing the car companies to declare Chapter 11 bankruptcy is not an option because people will not buy vehicles from a bankrupt company.

President and CEO of the Ford Motor Company Alan Mulally said that Ford had "too many brands" of vehicle, but they are now "matching production" with "customer demand." He claimed Ford needs to become more balanced and efficient. He also stated that he has worked with the UAW to "reduce labor costs." On behalf of Ford, Mulally asked Congress for a $9 billion bridge financing loan.

Robert Nardelli, CEO of Chrysler, asked Congress for $7 billion in bridge financing. He blamed his company's lack of success on current U.S. auto sales, which he said were the worst in 20 years. Nardelli was excited about current improvements in his company's vehicles though, saying that 73 percent of them would have improved fuel economy in 2009.

Chairman and CEO of the General Motors Corporation (GM) Richard Wagoner, who asked Congress for $12 billion in short term loans, said that GM is dedicated to conserving energy volumes and finding new "green jobs" in the future. He also said that his company will change the way they give executive compensation after his company's economic fallout.

Without support for automakers, job losses will be devastating

In a statement made before the House-Senate Joint Economic Committee, the Commissioner of the Bureau of Labor Statistics (BLS) Keith Hall said that the newest job report "may be the worst job report the BLS has ever produced." The committee was lead by Chairwoman Carolyn Maloney (D-N.Y.) who said that retailers reported the worst November sales in over thirty years yesterday, and that economists are referring to this as "the Great Recession."

Joining Maloney was Congressman Phil English (R-Pa.) and Congressman Elijah Cummings (D-Md.). Cummings stated that the $700 billion dollar bailout asked very little of banks, but is asking a lot from automakers. He referred to this as a "different standard for white- and blue-collar jobs."

Hall said that approximately 115,000 jobs have been lost from auto dealers since December of 2007, while a national average of 419,000 jobs have been lost every month since December. The hearing concluded with an appeal by all three Representatives for an immediate and bipartisan solution to support the automakers and to prevent millions of more jobs being lost.

Paulson defends objectionable decisions

Treasury Secretary Henry Paulson said that although some of his decisions have been unpopular, they have been essential to preserving the free market system.

"Some of the things that I've been part of have been very, very objectionable decisions but they've not been difficult decisions because they are much [better] than the alternatives," said Paulson during a forum on business and policy issues sponsored by Fortune magazine.

When asked if there was any line that he would not cross in order to protect the economy, the Secretary was reluctant to answer.

"You're not going to get me to say 'never' and tell you where I'll draw the line, because if you were to ask me the question a year ago, I would have drawn the line in a different place than I actually did when I was faced with the choice."

Paulson explained that in order to combat the recent economic setbacks, there are several steps that need to be taken, such as creating more effective regulation in the financial system, establishing authorities to deal with non bank institutions, and updating infrastructure to better handle OTC derivatives. The Treasury Secretary contended that taking these actions warrants more immediate concern than finding the origins of the crisis.

"We don't want to rush to a quick conclusion...we should be focusing on getting through the night first and then when recovery is well underway we can look in the rearview mirror and really understand the nature of the problem."

As economic crisis rises, so does global hunger

The economic crisis has led to 100 million more people starving worldwide according to David Beckman, President of the Bread for the World Institute. In addition to that, Joy Phumahi, Vice President for Human Development at the World Bank said that 44 million more people are suffering from malnutrition as a result of the worldwide financial crisis.

At a presentation held by the Bread for the World Institute, Phumaphi said "all countries are in harm's way." In order to try and help global poverty and hunger, Phumaphi felt the U.S. must financially assist in improving health, agriculture, and infrastructure. She also stated that the U.S. must invest in better education abroad. Phumaphi noted that children leaving school as a result of the financial crisis "rarely return to the classroom." She did acknowledge that there had been positives in poverty globally, especially in Africa, but this crisis had left those improvements "at risk."

Ken Hackett, President of Catholic Relief Services, said that any foreign assistance should be done in the interest of the poor. He also claimed that foreign assistance has become too "fragmented," and collaboration should be a priority in improving foreign assistance. He also felt it is "critical" that civil society agencies be used to help assist government in providing relief to poverty-stricken communities globally.

In a report released by the Bread for the World Institute, the institute states U.S. foreign assistance reform should include specific goals of poverty reduction worldwide, partnerships with countries receiving assistance to meet long-term goals, and closer coordination with other international donors worldwide.