by Marcia Clemmitt, February 20, 2009
Do they stimulate the economy more than tax cuts?
To battle the Great Depression, President Franklin D. Roosevelt put millions of unemployed Americans to work on New Deal projects such as repairing roads and building cabins in national parks. To stimulate today’s ailing economy, Congress has enacted a $787 billion package that includes tax cuts and spending on infrastructure, including expanding highway and rail systems and weatherizing buildings. But many conservatives argue that government spending does not create jobs and merely diverts money from the private sector, which they call the only true engine of job creation. Meanwhile, infrastructure experts worry that if federal public-works dollars are spent too quickly, the money will go to eco-unfriendly projects, such as additional highway lanes that encourage fossil-fuel use and suburban sprawl, rather than to more future-oriented “green” initiatives like expanding rail and public transit and upgrading the electrical grid to accommodate alternative power sources.
* Will federal spending on public works create jobs?
* Does infrastructure construction strengthen the economy?
* Is the Democratic public-works spending plan too big?
For a more in-depth summary, see the Overview of this week’s report.
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Public Works Projects
Overview from the issue on Public-Works Projects (2/20/2008)
by Marcia Clemmitt
Matthew Sinkovec, a truck driver for an excavation company in northeastern Ohio, used to have plenty of work hauling materials to home-construction sites. But as the economic crisis battered the Cleveland area, work dried up.
“Instead of four jobs lined up, I’d get one and then wait for another,” he said. Eventually, “the bottom just fell out,” and he was laid off last November. Now, he mostly stays home, trying to conserve money, and hopes to find another construction job before his unemployment checks end. “I try not to think about this lasting too long,” he said. “That is a real scary thought.”
The construction business was among the first to slow drastically as the United States entered a recession in December 2007, but most other industries now also have slowed – with accompanying layoffs. In January 2009 alone, 598,000 people nationwide lost their jobs, the biggest monthly total since 1974. And in some places, net job loss has been a long-term phenomenon. Hard-hit Ohio, for example, has lost nearly a quarter of its manufacturing jobs since 2000 and 5 percent of its jobs overall.
In response, President Barack Obama and congressional Democrats developed the American Recovery and Reinvestment Act and declared the so-called stimulus package their first major legislative priority of 2009. Enacted by Congress on Feb. 13 and signed into law by Obama on Feb. 17, the act is designed to pump additional demand for goods and services into the economy, partly by creating jobs and retooling infrastructure for the future. It is “the most sweeping economic recovery package in our history . . . putting Americans to work . . . in critical areas . . . that will bring real and lasting change for generations to come,” Obama said.
Parts of the bill’s economic-stimulus provisions are familiar – tax cuts and boosts in aid programs such as unemployment benefits and Medicaid. But it’s the first major economic-recovery plan to include federal spending for public works like highways and energy-efficiency upgrades for buildings since President Bill Clinton proposed, but ultimately dropped, such a proposal in 1993.
Conservative analysts and most congressional Republicans were quick to denounce the public-works spending provisions as a waste of taxpayer dollars that won’t help the economy.
“We have no evidence from recent or distant history” that public-works spending creates jobs or spurs the economy, says Ronald D. Utt, a senior research fellow at the conservative Heritage Foundation. The Obama plan is partly modeled on the Depression-era job-creation initiatives of President Franklin D. Roosevelt’s New Deal. “I don’t know that that many people were ultimately employed” by those 1930s programs, Utt says.
Obama says the programs will benefit the economy both in the current recession and long term. For example, grants to weatherize homes – modifying them to reduce energy consumption – will “immediately put people back to work,” he told CBS News. “And we’re going to train people who are out of work, including young people, to do the weatherization. “Not only are you immediately putting people back to work, but you’re also [helping] families on energy bills and . . . laying the groundwork for long-term energy independence.” Other projects would repair highways, create high-speed rail systems and make public buildings energy-efficient.
A stimulus package similar to the one Congress approved should create between 3.3 million and 4.1 million jobs over the next two years – around 1.3 million of them from public-works programs – according to Christina Romer, chair of the White House Council of Economic Advisers, and Jared Bernstein, chief economist for Vice President Joseph Biden. More than 90 percent of the jobs created will be in the private sector, about a third of them in construction and manufacturing.
Nevertheless, the plan can’t possibly create enough jobs to offset the losses the economy is suffering, Romer and Bernstein caution.
About 11.6 million people were unemployed in January – 4.1 million more than a year earlier – and job losses are expected to continue into 2010, according to the U.S. Bureau of Labor Statistics.
Our $15-trillion-per-year economy has taken at least a 5 percent hit – $750 billion – in the demand for goods and services that keeps business humming, says James K. Galbraith, an economist and a professor of government at the Lyndon B. Johnson School of Public Affairs at the University of Texas, Austin. “Infrastructure is not going to make up a $750 billion to $1 trillion hole in economic activity,” he says.
Infrastructure experts also caution that the country’s longtime neglect and underfunding of infrastructure maintenance and planning means that some public-works projects will suffer some delay before they’re up and running.
“Up to a point, public works are a good way” to stimulate job creation, says Richard G. Little, director of the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California. However, in the present workforce we don’t have the welders, the heavy equipment operators and other skilled workers we need, he says.
“A stimulus package with real sticking power should support training in the construction trades for the vast number of young and underemployed people for whom college is not the career solution,” Little said.
The key question for many is whether infrastructure spending that creates jobs quickly can also be visionary enough to strengthen the nation and economy long term.
Public-works spending can contribute toward stabilizing the economy in the short term, depending on how quickly the money can be spent, “but, much more important, the public works of today will redefine how we live in the future,” says Galbraith, noting that the Interstate Highway System launched by President Dwight D. Eisenhower in the 1950s created America’s suburbs.
When it comes to federal infrastructure spending, “forget about stimulating the economy over the next year,” says Robert P. Inman, a professor of finance and economics at the University of Pennsylvania’s Wharton School of Finance. “The rewards should be found in the project itself,” and, ideally, the benefits should be national, he says.
For example, “if you give money to Pennsylvania to invest in education, their kids will be more productive, and they’ll end up living everywhere in the country,” benefiting the whole nation, he says. In the best-case scenario, the dollars would go to inner-city and other poor schools, he says, thus aiding a cause “that we value but that wouldn’t have received help otherwise” – a good test for the worth of government spending, he adds.
There’s tension between projects that will give local economies a quick boost and those that would best serve future needs, says Anthony Shorris, a fellow at the liberal Century Foundation think tank and former executive director of the Port Authority of New York and New Jersey. “The fastest thing to build is a new road, but it’s the opposite of everything we want” in the long run, producing more sprawling development and more carbon-emitting automobiles, he says.
“If the wrong things are done, they may do damage with this [stimulus] bill,” says John Norquist, president of the Congress for the New Urbanism, a Chicago-based nonprofit that promotes walkable environments and sustainable development.
“It’s crucial to think beyond the current crisis,” says Guian A. McKee, an associate professor of history at the University of Virginia. “What do we want the structure of this economy to be 10 to 15 years from now? Do we want mass transit, alternative energy?” If so, then it’s time to focus on such projects, he says. “While we need the shovel-ready stuff for the crisis, we shouldn’t neglect the long-term things,” he says.
At present, though, “we haven’t really developed a vision of the 21st-century U.S. economy, so we don’t know what infrastructure we need to support it,” says Armando Carbonell, a senior fellow at the Lincoln Institute for Land Policy, a think tank in Cambridge, Mass. To create a vision for the transportation system, for example, “we need to know where the current system breaks down” and stymies important travels, he says. For example, highways and air travel are congested and frustrating in the Northeast Corridor, so we know that providing a rail alternative is a good possibility, he says.
“You need the target, and you need the vision, because tomorrow is going to be different from today,” Carbonell says.
“If we’re going to have an infrastructure feeding frenzy, make sure government builds public works that will make us more productive as a nation,” such as roads, bridges, mass transit, integrated information technology in public industries like health care, and military recapitalization, said New Hampshire Sen. Judd Gregg, top-ranking Republican on the Senate Budget Committee. “This is about bringing the nation out of this recession in a manner that makes us more competitive in the international market.”
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Homeland Security
Is America safe from terrorism today?
By Peter Katel, February 13, 2009
Following the Sept. 11, 2001, terrorist attacks, the U.S. government created the Department of Homeland Security, giving it stepped-up power to shadow and detain terrorism suspects. Then-President George W. Bush credited these measures — and intelligence and military operations abroad — with preventing new attacks on U.S. soil in the nearly eight years since 9/11. But some intelligence experts argue that the new department failed to coordinate the nation's many turf-conscious intelligence agencies, and that continued U.S. military pressure has rendered Osama bin Laden's al Qaeda terrorist network incapable of mounting new attacks within the United States. Moreover, jihadist cells that have wreaked havoc in Europe lack counterparts in the U.S., where Muslims are far less alienated, experts say. Still, the danger of a new attack remains. According to an emerging school of thought, Americans should learn to live with the possibility of an eventual attack, rather than expecting government to eliminate all danger.
- Does al Qaeda remain a danger within the United States?
- Is the Department of Homeland Security set up effectively to spot potential threats?
- Is the United States focusing anti-terrorism resources in the right places?
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Overview from the issue on Homeland Security (2/13/2009)
by Peter Katel
The attackers struck in the last days of November 2008. With terrifying precision, shooters in five two-man teams moved from target to target, unleashing lethal bursts of automatic weapons fire in the train station, an upscale restaurant, two luxury hotels and a Jewish cultural center.
By the time the terrorists had been killed or captured three days later, 173 people had been slain.
The massacre occurred in Mumbai, India, but 7,800 miles away, New York City Police Commissioner Raymond W. Kelly couldn't help but notice some troubling parallels. Mumbai, he told the Senate Homeland Security Committee in January, is “the country's financial capital, a densely populated, multi-cultural metropolis and a hub for the media and entertainment industries. Obviously, these are also descriptions of New York City.”
In the post-9/11 world, Kelly's job is to make such connections. But among Americans in general, beset by foreclosures, job layoffs and other manifestations of the global economic meltdown, terrorism fears have diminished in the years since the Sept. 11, 2001, attacks on the World Trade Center and Pentagon.
“There may be a false sense of security in the United States because we haven't been attacked in seven years,” says Bruce Hoffman, a professor at Georgetown University's School of Foreign Service and former scholar-in-residence for counterterrorism at the Central Intelligence Agency (CIA).
Indeed, while the Mumbai attacks seem as distant from the United States as South Asia itself, Hoffman and others view Mumbai as a wake-up call for the United States.
The attacks have been linked to Lashkar-e-Taiba (LeT), or the “Army of the Pure,” a Pakistani group with deep connections to Pakistan's intelligence service. LeT seeks to force India to cede Kashmir to Pakistan, which, like Kashmir is majority Muslim. The group shares longstanding ties with Osama bin Laden's jihadist group al Qaeda, which carried out the 9/11 attacks.
While the daily fear that gripped Americans after Sept. 11 may have faded, the nation nonetheless has remained on high alert ever since, its security infrastructure extensively strengthened.
Creation of the Department of Homeland Security (DHS) the year after the attacks reflected officials' certainty that further terrorist strikes were imminent. Since then, increasingly intense airport screenings provide constant reminders of danger, along with warnings by terrorism experts that the United States' 361 ports and long borders leave the nation vulnerable.
“America's margin of safety against a WMD (weapon of mass destruction) attack is shrinking,” a blue-ribbon congressional commission reported in December, pointing specifically at Pakistan and the jihadist groups flourishing there. “Were one to map terrorism and weapons of mass destruction today, all roads would intersect in Pakistan. . . . Trends in South Asia, if left unchecked, will increase the odds that al Qaeda will successfully develop and use a nuclear device or biological weapon against the United States or its allies.”
Bin Laden is doing his best to keep fears alive. Five days before Barack Obama's Jan. 20 inauguration, a recording released by bin Laden said the new president was “inheriting two wars, in which he is not able to continue, and we are on our way to open other fronts, God willing.”
Thought to be holed up in the mountainous tribal-ruled belt of northwestern Pakistan, bin Laden and his top commanders — notably Ayman al-Zawahiri, an Egyptian doctor who is considered al Qaeda's second-in-command — remain America's No. 1 counterterrorism targets. As Defense Secretary Robert Gates told the Senate Armed Services Committee in January: “We will go after al Qaeda wherever al Qaeda is.”
Still, some veteran terrorism analysts say bin Laden's network no longer commands the funds, communications facilities nor technical expertise necessary to plan and carry out a major attack in the United States.
Marc Sageman, a former CIA officer in Pakistan, notes that the London subway and bus attacks in 2005 mark the last effective al Qaeda action outside Asia or Africa. “There has not been a single fatality from al Qaeda or an al Qaeda-linked group in the West since July 7, 2005,” Sageman, now a consultant to the NYPD's counterterrorism division, told a Washington conference sponsored by the Cato Institute think tank in January.
Another longtime expert on al Qaeda, Peter Bergen, noted recently that intensive investigations since 9/11 failed to uncover a single al Qaeda “sleeper cell” in the United States or any operatives on immediate missions. “While a small-bore attack may be organized by a Qaeda wannabe at some point, a catastrophic, mass-casualty assault along the lines of 9/11 is no longer plausible,” said Bergen, a journalist and a fellow at the nonpartisan New America Foundation, who interviewed bin Laden in 1997.
John Mueller, an Ohio State University political scientist, has been arguing for several years that U.S. officials have vastly exaggerated the extent of terrorism danger to the United States. “It's looking more and more that 9/11 was an outlier,” says Mueller, author of a 2006 book on terrorism. “Even if you assume that U.S. protection measures are 90 percent effective, that would mean that some al Qaeda agents would have been caught entering the United States. The fact that the government can't find any means that al Qaeda isn't trying.”
Even experts who question the need for some security procedures call Mueller's position extreme. Al Qaeda and its allies “would kill you if they could,” says James Jay Carafano, director of the conservative Heritage Foundation's Kathryn and Shelby Cullom Davis Institute for International Studies. Minimizing terrorism threats would be risky, he argues. “If you get a cold and just ignore it, then you get pneumonia and die.”
However, experiments conducted last year by journalist Jeffrey Goldberg suggest that domestic aviation security, at least, wouldn't stop terrorists. Goldberg got on a flight from Minneapolis-St. Paul to Washington with a forged boarding pass, no driver's license and a coat (in summertime) over an Osama bin Laden t-shirt. A security supervisor let Goldberg through. “ 'All right, you can go,' ” he said, pointing me to the X-ray line. “ 'But let this be a lesson for you.' ”
Transportation Security Administration (TSA) Director Kip Hawley previously told one of Goldberg's key sources, security guru Bruce Schneier, that the agency's intelligence service effectively spots potentially dangerous passengers before they reach airports. “Our intel operation works closely with other international and domestic agencies,” Hawley told Schneier.
Other intelligence experts argue for paying close attention to the shared jihadist roots and operational ties between al Qaeda and LeT, the apparent Mumbai attack mastermind. “Bin Laden was an early supporter of the group and provided some of the initial funding,” writes Bruce Riedel, a former CIA expert on Pakistan now at the Brookings Institution think tank. He has noted that the first major al Qaeda operative arrested after 9/11, Abu Zubayda, was nabbed in an LeT safe house in Islamabad.
Riedel, author of a recent book on al Qaeda, predicts that Mumbai sets a pattern for future attacks. “I think this will become a role model for terrorists around the world,” he told the German news magazine Der Spiegel. “You will see the copycat phenomenon where others will try to imitate what has just happened in Mumbai.”
Some say it's an easy model to adapt. “In Mumbai, the terrorists demonstrated that with simple tactics and low-tech weapons they can produce vastly disproportionate results,” Brian M. Jenkins, a terrorism analyst at the RAND Corporation think tank, told the Senate Homeland Security Committee. Their weapons, he noted, amounted essentially to a 1940s-era arsenal — rifles, pistols and grenades.
By attacking a non-aviation transportation hub, the attackers reinforced another warning by many terrorism analysts — jihadists' adaptability. “I think what Homeland Security has done well up to this point is to prepare defenses to respond to the last attack,” says Roger Cressey, transnational threat director for the National Security Council during the Clinton administration. “If you look at TSA, it's more focused on aviation than on any other element of transportation.”
Many other terrorism experts point to al Qaeda's apparent obsessiveness about aviation and highly symbolic targets. Sept. 11 provided the clearest example. In addition to the hijackers aiming at the World Trade Center and Pentagon a fourth plane apparently had targeted the Capitol or White House. It crashed in Shanksville, Pa., after passengers rushed the cockpit.
In fact, jihadists had tried toppling the towers once before, exploding a bomb in the garage in 1993. After fast police work rolled up nearly the entire network of conspirators, counterterrorism expert Hoffman warned that the danger hadn't passed.
“The fact there haven't been any more attacks doesn't mean we're out of the woods,” he said. “Terrorism doesn't work in a predictable fashion.” He was speaking in 1994, seven years before 9/11.
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This New Report: The Obama Presidency
By Kenneth Jost, January 30, 2009
Can Barack Obama deliver the change he promises?
As the 44th president of the United States, Barack Hussein Obama confronts a set of challenges more daunting perhaps than any chief executive has faced since the Great Depression and World War II. At home, the nation is in the second year of a recession that Obama warns may get worse before the economy starts to improve. Abroad, he faces the task of withdrawing U.S. forces from Iraq, reversing the deteriorating conditions in Afghanistan and trying to ease the Israeli-Palestinian conflict. Still, Obama begins his four years in office with the biggest winning percentage of any president in 20 years and a strong Democratic majority in both houses of Congress. In addition, as the first African-American president, Obama starts with a reservoir of goodwill from Americans and people and governments around the world. But he began encountering criticism and opposition from Republicans in his first days in office as he filled in the details of his campaign theme: “Change We Can Believe In.”
* Is President Obama on the right track in fixing the U.S. economy?
* Is President Obama on the right track in Iraq and Afghanistan?
* Is President Obama on the right track in winning support for his programs in Congress?
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Coming Up in CQ Researcher
Auto Industry’s Future
As U.S. automakers continue to seek emergency federal aid amid a global credit crisis and a worldwide slowdown in vehicle sales, policy experts are debating the potential effects of a government bailout and the long-term prospects of the American car industry. After their initial requests for aid were rejected, General Motors, Ford and Chrysler have presented new business plans to Congress aimed at cutting costs and making the companies profitable. Management and the United Auto Workers union argue that letting even one automobile giant fail would have catastrophic consequences for the U.S. economy. Skeptics say, however, that automakers have had years to reform themselves and that the companies need a “bumper-to-bumper” overhaul. GM and Chrysler already have hired advisers to prepare themselves for the possibility they will be forced into bankruptcy reorganization, and Chrysler has announced plans to close all its plants for a month, beginning immediately.
By Thomas J. Billitteri
Homeland Security
How safe is America from terrorism? Nearly eight years after the Sept. 11 attacks, the question refuses to go away. To keep the nation safe, the U.S. government created the enormous Homeland Security Department, giving it stepped-up power to shadow and detain terrorism suspects. Former President George W. Bush credited these measures – and intelligence and military operations abroad – with preventing new attacks by Osama bin Laden’s al Qaeda terrorist network. Some intelligence experts now argue, however, that U.S. anti-terrorism efforts or internal weaknesses have rendered al Qaeda incapable of mounting new attacks within the United States. Moreover, they say, the jihadist cells that have wreaked havoc in Europe lack American counterparts, because U.S. Muslims are not alienated or anti-American. Still, the danger of another attack remains a real possibility, security experts say, According to an emerging school of thought, Americans should learn to live with that possibility rather than trusting government to eliminate all danger.
By Peter Katel
Public Works and the Economy
To break the back of the Great Depression, President Franklin D. Roosevelt’s New Deal put hundreds of thousands of unemployed Americans to work on projects such as repairing roads and building cabins in national parks. Similarly, the Obama administration and congressional Democrats hope to enact new funding in an economic-stimulus package to beef up U.S. infrastructure, including expanding highway and rail systems and modernizing school buildings. But many conservative analysts argue that government spending cannot create jobs but only diverts money from the private sector, which they call the only true engine of job creation, Meanwhile, infrastructure experts worry that if federal public-works dollars are spent too quickly, too much of the money will go to backwards-looking projects such as additional highway lanes, which encourage fossil-fuel use and suburban sprawl, rather than to more future-oriented initiatives like expanding rail and public transit and upgrading the electrical grid to accommodate alternative power sources.
By Marcia Clemmitt
In the News: Senate Votes to Postpone Digital TV Switch
After Obama administration aides raised concerns over the nation’s readiness to switch from analog-to-digital televisions, the Senate voted Monday to postpone the deadline for the changeover to June 12. The House, however, voted against the measure, putting the current Feb. 17 switch date in limbo. House Republicans have argued that postponing the date would confuse consumers and cost millions for broadcasters who have already planned for the transition. The Nielsen Co. estimates that more than 6.5 million U.S. households that rely on over-the-air broadcast signals are not prepared for the transition.
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In the News: Obama Signs Anti-Wage Discrimination Legislation
President Obama has signed the Lilly Ledbetter Fair Pay Act, an anti-wage discrimination bill approved by Congress earlier in the week. The act relaxes the statute of limitations on wage discrimination lawsuits, making clear that each new paycheck is a violation of the law if it results “in whole or in part” from a discriminatory pay decision made in the past. The legislation also allows retirees to argue that their pension benefits are based on wages that were depressed by unlawful discrimination. The bill is named after a longtime female supervisor at a Goodyear tire plant in Alabama who accused the company of paying her less because of her gender. Her lawsuit against Goodyear was rejected by the Supreme Court in 2007.
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In the News: House Passes $819 Billion Stimulus
The House has passed President Obama’s stimulus package intended to jumpstart the economy and quickly create jobs. The package would result in $607 billion in direct spending and appropriations and $212 billion in tax cuts. Despite Obama’s efforts to garner bipartisan support for his plan, no Republicans voted for the bill. The package has been criticized for its large amount of spending and lack of tax cut provisions. Democrats offered near-unanimous support, with only 11 voting against it. The Senate is scheduled to take up its own, somewhat larger, version of the bill next week.
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Overview of the New Report on the Obama Presidency
They came to Washington in numbers unprecedented and with enthusiasm unbounded to bear witness and be a part of history: the inauguration of Barack Hussein Obama on Jan. 20, 2009, as the 44th president of the United States and the first African-American ever to serve as the nation’s chief executive.
After taking the oath of office from Chief Justice John G. Roberts Jr., Obama looked out at the estimated 1.8 million people massed at the Capitol and National Mall and delivered an inaugural address nearly as bracing as the subfreezing temperatures.
With hardly the hint of a smile, Obama, 47, outlined the challenges confronting him as the fifth-youngest president in U.S. history. The nation is at war, he noted, the economy “badly weakened” and the public beset with “a sapping of confidence.”
“Today I say to you that the challenges we face are real,” Obama continued in his 18-minute speech. “They are serious and they are many. They will not be met easily or in a short span of time. But know this, America -- they will be met.”
The crowd received Obama’s sobering message with flag-waving exuberance and a unity of spirit unseen in Washington for decades. Despite Democrat Obama’s less-than-landslide 7 percentage-point victory over John McCain on Nov. 4, hardly any sign of political dissent or partisan opposition surfaced on Inauguration Day or during the weekend of celebration that preceded it.
“It’s life-changing for everyone,” said Rhonda Gittens, a University of Florida journalism student, “because of who he is, because of how he represents everyone.” Gittens traveled to Washington with some 50 other members of the school’s black student union.
The inaugural crowd included tens of thousands clustered on side streets after the U.S. Park Police determined the mall had reached capacity. The crowd was bigger than for any previous inauguration -- at least three times larger than when the outgoing president, George W. Bush, had first taken the oath of office eight years earlier. The total number also exceeded independent estimates cited for any of Washington’s protest marches or state occasions in the past.
The spectators came from all over the country and from many foreign lands. “He’s bringing change here,” said Clayton Preira, a young Brazilian accompanying three fellow students on a two-month visit to the United States. “He’s bringing change all over the world.” The spectators were of all ages, but overall the crowd seemed disproportionately young. “He really speaks to young people,” said Christian McLaren, a white University of Florida student.
Most obviously and most significantly, the crowd was racially and ethnically diverse -- just like the new first family. Obama himself is the son of a black Kenyan father and a white Kansan mother. His wife Michelle, he often remarks, carries in her the blood of slaves and of slave owners. Among those behind the first lady on the dais were Obama’s half-sister, Maya Soetoro-Ng, whose father was Indonesian, and her husband, Konrad Ng, a Chinese-American. Some of Obama’s relatives from Kenya came as well, wearing colorful African garb.
The vast numbers of black Americans often gave the event the air of an old-time church revival. In quieter moments, many struggled to find the words to convey the significance, both historic and personal. “It hasn’t sunk in yet,” Douglas Collier, a photographer from Detroit, remarked several hours later.
David Moses, a health-care supervisor in New York City, carried with him a picture of his late father, who had encouraged him and his brother to join the anti-segregation sit-ins of the early 1960s in their native South Carolina. “It’s the culmination of a long struggle,” Moses said, “that still has a long way to go.”
Shannon Simmons, who had not yet been born when Congress passed major civil rights legislation in the 1960s, brought her 12-year-old daughter from their home in New Orleans. “It’s historic,” said Simmons, who made monthly contributions to the Obama campaign. “It’s about race, but it’s more than that. I believe he can bring about change.”
For black Americans, old and young alike, the inauguration embodied the lesson that Obama himself had often articulated -- that no door need be viewed as closed to any American, regardless of race. For Obama himself, the inauguration climaxed a quest that took him from the Illinois legislature to the White House in only 12 years.
To win the presidency, Obama had to defy political oddsmakers by defeating then-Sen. Hillary Rodham Clinton, the former first lady, for the Democratic nomination and then beating McCain, the veteran Arizona senator and Vietnam War hero. Obama campaigned hard against the Bush administration’s record, blaming Bush, among other things, for mismanaging the U.S. economy as well as the wars in Iraq and Afghanistan.
After a nod to Bush’s record of service and help during the transition, Obama hinted at some of those criticisms in his address. “The nation cannot prosper long when it favors only the prosperous,” he declared, referencing tax cuts enacted in Bush’s first year in office that Obama had called for repealing.
On national defense, “we reject the false choice between our safety and our ideals,” Obama continued. The Bush administration had come under fierce attack from civil liberties and human rights advocates for aggressive detention and interrogation policies adopted after the Sept. 11, 2001, terrorist attacks on the United States.
Despite the attacks, Obama also sounded conservative notes throughout the speech, blaming economic woes in part on a “collective failure to make hard choices” and calling for “a new era of responsibility.” Republicans in the audience were pleased. “He wasn’t pointing fingers just toward Bush,” said Rhonda Hamlin, a social worker from Alexandria, Va. “He was pointing fingers toward all of us.”
With the inauguration behind him, Obama went quickly to work. Within hours, the administration moved to institute a 120-day moratorium on legal proceedings against the approximately 245 detainees still being held at the Guantánamo Bay Naval Base in Cuba. Obama had repeatedly pledged during the campaign to close the prison; two days later he signed a second decree, ordering that the camp be closed within one year.
Then on his first full day as president, Obama on Jan. 21 issued stringent ethics rules for administration officials and conferred separately with his top economic and military advisers to begin mapping plans to try to lift the U.S. economy out of its yearlong recession and bring successful conclusions to the conflicts in Iraq and Afghanistan.
By then, the Inauguration Day truce in partisan conflict was beginning to break down. House Republicans pointed to a Congressional Budget Office study questioning the likely impact of the Democrats’ $825-billion economic stimulus package, weighted toward spending instead of tax cuts. “The money that they’re going to throw out the door, at the end of the day, is not going to work,” said Rep. Devin Nunes, R-Calif., a member of the tax-writing House Ways and Means Committee.
The partisan division raised questions whether Democratic leaders could stick to the promised schedule of getting a stimulus plan to Obama’s desk for his signature by the time of the Presidents’ Day congressional recess in mid-February. More broadly, the Republicans’ stance presaged continuing difficulties for Obama as he turned to other ambitious agenda items, including his repeated pledge to overhaul the nation’s health-care system.
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Overview of the CQ Researcher issue on the Auto Industry's Future
By Thomas J. Billitteri February 6, 2009
U.S. automakers, by their own admission, have made a lot of mistakes over the years. Too much emphasis on trucks and SUVs; poor quality; and failure to respond to the growing consumer demand for fuel efficiency.
But their biggest blunder of all — at least in the public relations realm — may have been the three private jets. Amid the most serious economic crisis to face the nation since the Great Depression, the chief executives of Ford, General Motors and Chrysler each took his own corporate jet to Washington to ask Congress for billions in aid.
Predictably, lawmakers (and late-night comedians) had a field day. “There's a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands,” said Rep. Gary L. Ackerman (D-N.Y.). Afterwards, with billions in loans in hand, GM Chairman Richard Wagoner predicted brighter days ahead.
“When we get done and get through this, we will have an industry . . . positioned for real long-term success,” the embattled executive told a Detroit radio audience. “There is going to be some point when it's morning, and the sun is going to come up.”
But Wagoner's forecast may have been overly optimistic. The global economic crisis has darkened the sky over the entire auto industry, and the outlook for Detroit's Big Three — GM, Ford and Chrysler — appears especially gloomy.
Car and light-truck sales at GM and Chrysler — both of which received low-interest bridge loans — were down 23 and 30 percent, respectively, last year. Both companies, under pressure to show they are cutting costs as part of the bailout agreement, reportedly were offering new buyouts this month to hourly workers that included cash payments and vouchers for vehicle purchases.
Sales were down 21 percent at Ford, which declined a federal loan. The company, which reported a record $14.6 billion loss for 2008, believes it can survive without federal aid.
Sales results for the Big Three in January, including declines of 49 percent at Ford and 55 percent at Chrysler, showed that the storm over Detroit is growing even more ominous. In fact, in January, Toyota usurped GM's 78-year reign as the world's biggest carmaker.
The bad economy and plunging sales figures are only part of the gloom hanging over Detroit. Experts say the domestic auto industry is mired axle deep in challenges that include massive benefits for retirees, labyrinthine dealer franchise laws that hinder automakers' ability to downsize and reorganize and growing foreign competition on U.S. soil.
Under the $17.4 billion loan agreement, GM and Chrysler have until March 31 to show they are on the road to financial viability. But key terms — or “targets” — remain negotiable, meaning the Obama administration and Congress will bear the burden of oversight in coming months.
To thrive — or at least survive — Detroit must move at a race-car pace to remake itself into a more cost-efficient, nimble and innovative business, experts say. That will require new concessions on wages and work rules from the United Auto Workers (UAW) union, compromises from suppliers, creditors and dealers and an uncharacteristic degree of flexibility by management, they say.
The UAW has pledged cooperation but also said it will resist targets in the loan agreement that, it argues, single out workers. The targets aim, in part, to make work rules and wages competitive with those at foreign-owned U.S. plants by the end of 2009. “We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed,” said UAW President Ron Gettelfinger.
The recession, which has choked off credit and slowed car sales to a crawl, is making Detroit's job all the harder. In recent weeks, many experts said they expected the economic slowdown to force Chrysler — generally viewed as the weakest of the Big Three — to file for bankruptcy or merge with another company.
In January, the Italian car company Fiat agreed to acquire a 35 percent stake in Chrysler, which Chrysler Chairman Robert L. Nardelli said would enable the automaker to offer a broader lineup of vehicles while adhering to conditions of the federal bailout. But the deal reportedly depends on Chrysler getting $3 billion in additional government loans.
“It would be difficult for Chrysler to be sustainable by itself,” David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said before the Fiat deal became public. As for GM and Ford, “We just don't know,” he said. “Once the economy begins to have a little life, it could make a huge difference.” But, he added, “It's a race against time.”
In mid-January, Wagoner said that while GM wanted to avoid a Chapter 11 bankruptcy reorganization, its viability was “not 100 percent” certain.
The auto industry's woes are likely to add pressure on President Barack Obama and the Democrat-controlled Congress to reshape the nation's health-care and energy policies, which are closely tied to Detroit's fortunes. Experts say a national health-care plan could reduce the costly benefits the Big Three shoulder for workers and retirees. And a policy that deemphasizes oil could induce more consumers to embrace hybrid vehicles and make automakers' product planning less unpredictable and more environmentally friendly.
But for now, far-reaching policy changes may be difficult to pull off because of the worldwide recession, and no car manufacturer — domestic or foreign — has escaped the wreckage. Last year Toyota's U.S. car and light-truck sales fell 15 percent and Honda's 8 percent, and their December sales results were worse than those of either GM or Ford, according to Autodata.
“The tough times are hitting us far faster, wider and deeper than expected,” said Katsuaki Watanabe, the outgoing president of Toyota Motor Corp., which projected its first operating loss in 70 years.
Still, experts say Detroit's problems are far deeper than those facing foreign-based makers, in part because of past decisions the domestic manufacturers have made. The car companies themselves acknowledged missteps in December as they sought to wrest some $34 billion in federal aid from Congress — a gambit blocked by conservative Republicans.
“We made mistakes,” GM's Wagoner told the Senate Banking Committee, citing a failure to make the company's operations more flexible and move faster into the U.S. market for smaller, more fuel-efficient vehicles. In a trade journal ad, GM apologized for violating Americans' trust by, among other things, letting quality lag behind industry standards and designs to become “lackluster,” skewing its product mix toward trucks and SUVs and agreeing to “unsustainable” employee-compensation plans.
The stakes in achieving long-term viability of the auto industry could not be higher, economists and policy makers say.
From plastics and electronics to glass and steel, the auto industry is among the nation's biggest consumers of U.S.-manufactured goods. Economists say a failure of even one auto company — especially GM or Ford — could set off a cascade of devastating job losses, send parts suppliers into bankruptcy and further destabilize auto production. The fallout would also hit businesses that rely indirectly on the auto industry, such as retailers in manufacturing towns.
The Economic Policy Institute, a liberal think tank in Washington, says the collapse of the domestic auto industry could eliminate up to 3.3 million American jobs, with much of the damage in Rust Belt states like Michigan and Indiana, which already are reeling from this year's economic travails.
Similarly, the Center for Automotive Research estimated that a shutdown of the Big Three would eliminate nearly 3 million jobs in the first year, with a slow recovery in employment afterwards. A shutdown would cost government $60 billion the first year alone, the group said.
It was fear of a domino-like economic tumble that led former President George W. Bush in December to throw automakers a lifeline. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action,” he said in announcing that the Treasury Department would use money from the Troubled Asset Relief Program (TARP) — the $700 billion financial-industry rescue plan passed in early October — to prop up Detroit.
But support for a rescue has been far from overwhelming, both in Congress and on Main Street. “I believe it is wrong to make the American taxpayers an unsecured creditor to the automakers,” Sen. Johnny Isakson, R-Ga., said after Bush announced his rescue plan.
Obama backed the bailout, saying a collapse of the auto industry would have had “devastating” economic consequences. But he tempered his support with a tough message. “The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it,” he said.
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