Frank defends intervention to save GM facility in his district

Rep. Barney Frank (D-Mass.) said he doesn’t think his intervention on behalf of a General Motors center in his district will lead other lawmakers to do the same thing.

“I don’t think this will lead to a pattern,” said Frank, who convinced GM CEO Fritz Henderson to keep a distribution center in Norton, Mass., open for at least another 14 months.

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The intervention has drawn criticism from those who question whether other lawmakers will ask for favorable treatment for GM entities in their states given the government’s pending plan to take a 60 percent ownership stake in the company after it emerges from a managed bankruptcy proceeding.

Obama repeated Tuesday that his administration has no interest in running GM, and he’s said the government will not be calling the shots on opening plants or building cars. Still, many predict there will be a natural pressure on GM to make business decisions for political reasons as long as the company is under the government’s arm.

Greg Mankiw, a Harvard economist who worked in the Bush administration, wrote an entry on his blog questioning whether the Obama administration would ask Frank to “refrain from further politicization of GM business decisions.”

In a telephone interview, Frank said his intervention was unique in that the Norton center was neither an auto plant nor a dealership. He also stressed environmental reasons for keeping the Norton center open.

Closing it, he said, would have meant parts would have been sent to New England from a distribution center in Philadelphia, putting more trucks on the road and for greater distances. He also said GM dealerships are still guaranteed to stay open until the end of 2010; the Norton distribution center could be closed sooner, even with the 14-month reprieve.

While Frank said other lawmakers might look for deferrals from GM to keep entities open longer, he repeatedly said there’s no reason to think Congress needs rules to police lawmakers seeking to trade votes for support for plants or dealerships.

“I can’t make the connection,” said Frank, who added that he spoke to Henderson about the Norton plant, and not someone from the administration. He said there are no pending votes in Congress that GM would have an interest in.

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Frank also said the administration isn’t interested in making business decisions for GM. “They’re trying to keep away from it,” he said.


Another stimulus?

Unemployment could hit its highest rate since the Great Depression, according to several economic observers.

The latest unemployment numbers mean the economy has lost about 7 million jobs since the recession began, with more to come. That’s already twice as many jobs lost as President Obama hoped to create or save with the stimulus signed into law this year.

Former Clinton Treasury official Brad DeLong predicted on his blog that unemployment will hit 11 percent. In a draft letter to Obama that he said he might send this week, DeLong said that meant the nation was likely to see a recession twice as deep as the one Obama’s incoming administration predicted at the end of 2008.

To put the figure into perspective, 11 percent unemployment would be a higher mark than that seen in the recession of the early 1980s and the worst since the Great Depression. At the height of the Depression, in 1933, the unemployment rate reached 24.9 percent. Unemployment hit 10.8 percent in the ’80s, which some see as the new benchmark figure to watch in this recession now that 10 percent seems a certainty.

And the latest jobs report highlighting the 9.4 percent unemployment rate suggests another stimulus is needed, according to several economists on the left.

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John Schmitt, a senior economist at the Center for Economic Policy and Research, highlighted DeLong’s analysis as a “pretty realistic” view of what’s to come. His group also is highlighting economists who have called for another stimulus to boost the economy.

“I think the clear policy prescription that comes out of a jobs report like this is, we need more stimulus,” said Heidi Shierholz of the Economic Policy Institute.

Pushing another stimulus would be difficult for Obama. Republicans are attacking him for fiscal recklessness, and a Gallup poll that shows a slim majority disapprove of his spending policies suggests some vulnerability.

Still, experts like Schmitt and Shierholz suggest Democratic lawmakers and Obama could pay more later if they don’t do more to lower unemployment figures.

It took 15 months after the recession of the 1990s ended for the unemployment rate to peak. In the much milder recession of 2001, unemployment did not peak for 19 months after the recession ended.

When the report was released Friday, many hailed it as a sign of good news because it reported the economy lost 345,000 jobs in May, substantially less than in previous months.

But it also noted a jump in the unemployment rate, from 8.9 to 9.4 percent, reflecting an expanding number of workers unable to find jobs.

Shierholz said the economy needs to create about 127,000 jobs a month just to keep up with population gains. The trend in the unemployment rate, she said, suggests unemployment will break the 10 percent mark this year. The question is where it will end up.