By Ian Swanson - 01/20/09 07:20 PM EST
President Obama’s chief political adviser was put on the defensive Tuesday about a new government report that downplays the short-term impact the stimulus package will have on the economy.
Hours before Obama took the oath of office, senior White House adviser David Axelrod suggested on Fox News that Obama’s economic team differs with the new Congressional Budget Office (CBO) findings.
Less than $4 billion in highway construction money would reach the economy by 2010, CBO reported, adding that much of the stimulus spending on energy efficiency, renewable energy programs and expanding broadband Internet services would not reach the economy for at least a year.
In his interview with Fox News, Axelrod said incoming Office of Management and Budget Director Peter Orszag, the outgoing CBO head, has a different view than that of the report put together by CBO under his successor, Robert Sunshine, the acting CBO director.
Axelrod then defended the stimulus, arguing that the government has to act, and act fast. He also said critics were missing the point — “that a lot of these investments are ones that are going to pay dividends in the short term and the long term.
“We should have a discussion and a debate, but we ought to move with all deliberate speed here because we do have a national emergency when it comes to the economy, and that will be our first order of business.”
The CBO report’s findings suggest that funds authorized by the stimulus could reach the economy just when many expect it to recover in 2010. That could be of interest to lawmakers worried about inflation and the rising deficit. CBO earlier this month projected a $1.2 trillion deficit for the current year even without the stimulus.
Republicans have already been criticizing the stimulus for including wasteful spending that they argue would do little to stimulate the economy. GOP officials are likely to seize on the CBO’s findings in the coming days.
Leading Democrats have also raised objections to the House stimulus bill released by Appropriations Committee Chairman David Obey (D-Wis.) last week. Judiciary Committee Chairman John Conyers Jr. (D-Mich.) has called for the measure to include language that would allow bankruptcy judges to shrink mortgages, while Transportation and Infrastructure Committee Chairman Jim Oberstar (D-Minn.) has publicly expressed disappointment that the stimulus bill does not have more money for roads and bridges.
The stimulus bill that was signed into law by then-President Bush early last year was touted by House Speaker Nancy Pelosi (D-Calif.) as “timely, targeted and temporary.” It appears that the 2009 stimulus bill will not attract as much bipartisan backing as the 2008 measure did.
Lawmakers want Buy American stimulus
Lawmakers from both parties are pressing for tough language in the stimulus package that ensures the funds are directed at American companies for the creation of U.S. jobs.
“If we are going to spend up to $1 trillion to stimulate our economy, we should make sure that American taxpayer dollars are used to create American jobs in America, not Chinese jobs in China,” reads the letter, circulated by two Illinois lawmakers, Reps. Daniel Lipinski (D) and Republican Don Manzullo. The two have about 30 signatures so far.
The textile industry was also among those to sign on. It wants assurances that geo-synthetic textiles used in building roads will be American-made.
Stringent rules already require that U.S. steel and iron be used in any projects built with Department of Transportation (DoT) money, but other agencies, including the Department of Homeland Security, face softer rules that have been whittled down by trade agreements forbidding the U.S. to offer favorable treatment to its own firms.
In addition, Lipinski and Manzullo worry there’s still too much discretion for subcontractors working with DoT money to pay foreign firms.
The letter goes much further than steel and iron, worrying groups representing subsidiaries of foreign companies that have heavy investments and workforces in the U.S. For example, the two lawmakers say the stimulus should create software jobs in the U.S., not Bangalore.
The Organization for International Investment argues U.S. subsidiaries of foreign firms should be given equal treatment, noting that such companies boost the economy by employing U.S. workers and purchasing inputs from U.S. suppliers.
Watch for a real fight over the language in the Senate, where any member can offer an amendment.
Some provisions in the stimulus are left over from bills Democrats have been pushing for years.
An example is the Unemployment Insurance Modernization language, which would give federal funds to states that increase unemployment benefits paid to part-time and low-wage workers.
Nineteen states now provide unemployment to part-time workers. The AFL-CIO has estimated that 200,000 workers would qualify for those benefits if the remaining states offered part-timers unemployment compensation, and the inclusion of the language in the stimulus is another small victory for labor.
Car czar nears
A financier who has given hundreds of thousands in campaign contributions to Democratic candidates is being vetted as the Obama administration’s “car czar,” according to industry sources.
The buzz within President Obama’s transition team is that Steven Rattner, who runs the New York-based private-equity firm Quadrangle Capital Partners, will get the position. Auto lobbyists say Rattner would have the support of the Big Three, although the United Auto Workers (UAW) appears to be eyeing him nervously.
UAW President Ronald Gettelfinger last week said he’d like Obama to appoint someone “who knows something about the industry.”
Rattner’s background is not on the assembly line, but he could have the skills necessary to help General Motors emerge from the financial crisis. Rattner’s experience in private equity could help him as a go-between with GM and its bondholders, who must accept lower returns on their holdings if the largest of the Big Three is to survive.
“He understands the biggest part, particularly for GM, which is cramming down bond holders,” one lobbyist said.
Rattner also might be a good fit for Congress if the Obama administration can convince lawmakers that his experience in putting together private equity deals will make him a good manager of the federal government’s investment. Obama is about to inherit decisions on the $17.4 billion in loans provided to GM and Chrysler by President Bush.
Over the last decade or so, Rattner has given $140,000 in soft money to various Democratic candidates and committees and nearly $250,000 in hard money contributions.