May 7, 2009

Memo to Clueless Media: Obama’s $17 Bil in ‘Cuts’ Aren’t Real Spending Reductions

NROtheCornerLogo0509.jpgPresident Obama today announced $17 billion in “spending cuts” Thursday.

Here are the substantive early paragraphs of the the Associated Press’s coverage of what the President had to say:

Obama sent Congress a detailed budget Thursday proposing to eliminate or trim 121 programs and save $17 billion next year — not a trifle, for sure, but only about half of one percent of the $3.4 trillion in federal spending for the fiscal year begining in October.

The size of the savings clearly was a sore subject at the White House.

“It is important … for all of you, as you’re writing up these stories, to recognize that $17 billion taken out of our discretionary, non-defense budget, as well as portions of our defense budget, are significant,” Obama told reporters. “They mean something.”

Still, Obama’s hit list was smaller than the one President George W. Bush included in his budget last year targeting 151 programs for $34 billion in savings.

These alleged cuts mean almost nothing, according to the Heritage Foundation’s Brian Riedl, who cut through the misdirection earlier today at The Corner (bolds are mine):

….. Virtually every dollar “saved” would automatically go towards new spending instead of deficit reduction.

Here’s why: The president already proposed a specific discretionary spending level (which included these proposals), and Congress has already approved a budget that would spend $1,086 billion on regular discretionary spending in FY 2010. The discretionary savings proposals affect only the composition of such spending. Thus, even if the entire $12.5 billion in discretionary spending cuts are enacted, the savings would automatically be plowed into other programs to maintain discretionary spending at that pre-set $1,086 billion level. So this exercise is about reorganizing — not reducing — government.

Even on the entitlement side, $3.6 billion of the $4.6 billion in 2010 savings comes from phasing out the subsidized student-loan program, with all savings redirected into expanded Pell grants. There is virtually no deficit reduction from these reforms.

To be fair, Bush’s cuts may have meant just as little, for the reasons Reidl outlined.

But as to the media coverage of the current alleged reductions, Reidl is right. If anyone in the establishment media caught what Reidl did, I haven’t seen evidence of it. Among many others, it’s not this LA Times story; it’s not at this piece at the Caucus blog at the New York Times; a Poltico story fails to even mention the total size of the federal budget.

The sleight-of-hand certainly isn’t in evidence at the AP item I referred to above.

AP reporters Tom Raum and Andrew Taylor, despite being supposedly wily news veterans — or perhaps because they are supposedly wily news veterans — also let Obama get away with this propaganda howler:

If there was a theme to Obama’s cuts and spending initiatives, it was to continue to provide generous increases to domestic programs that had been squeezed during the eight years of the Bush administration while reviving oft-rejected Bush-era proposals to cut programs that critics say have outlived their usefulness but still have important support on Capitol Hill.

“What we’re trying to do is reorient government activity toward things that work,” said White House Budget Director Peter Orszag.

Orszag’s use of the word “reorient” is a red flag that there really is no spending reduction going on here.

Sadly, the Obama administration’s claim that the Bush administration put any kind of meaningful squeeze on spending during its first seven years of budget responsibility is clearly a load of rubbish, as the following list of annual federal spending during those years shows:

UncleSamSpending2001to2008

The only year that had anything even resembling control on the spending side was 2006-2007, the last budget for which the Republican majority can claim credit.

Bush’s eighth year of budget and spending responsibility would ordinarily have been the fiscal year ending September 30, 2009, and he surely still bears responsibility for some spending increases, especially those relating to the initial bank and auto bailouts. But the fact is that most of the spending increases that will push this year’s federal spending to $4 trillion, including the $800 billion or so-called stimulus package, were pursued by Barack Obama and enacted after Obama took office.

Obama’s spending increases are real. As shown earlier, the spending “cuts” are just a mirage.

Cross-posted at NewsBusters.org.

Ford Beats GM in 1Q09 Worldwide Revenues (Excl. Special Items); Updates: AFA Boycott’s Impact, UAW Dissension

For the first time in over 80 years, the Ford Motor Company has beaten General Motors in worldwide revenues (excluding special items).

In the first quarter of 2009, GM’s top line was $22.4 billion:

GM1Q09topInfo.jpg

Ford’s was $24.8 billion (from a PDF obtainable at this link — see “Full Financial Release”; a larger JPG with more data is here):

FordCapsule1Q09

“Somehow,” the Associated Press missed it (as of 9:24 a.m.; that version is saved here in case AP updates). So did the New York Times. Yours truly didn’t.

How’s that bailout de facto nationalization going, Barry?

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UPDATE: Actually, Ford was pretty close to GM in the fourth quarter of last year. GM’s 4Q08 top line was $30.4 billion; Ford’s was $29.2 bil. Ford went from being 4% behind GM to 11% ahead of it — in one quarter. Wow.

UPDATE 2: It will never happen, but Ford management should send a thank-you card to Don Wildmon and the American Family Association. The AFA’s two-year boycott that ended in early 2008 probably cost the company at least $1 billion in operating profit. But ultimately it appears to have shaken the company out of its political-correctness distractions into concentrating on its business. Maybe additional cards should go to the vast majority of the 463 commenters at my Pajamas Media column in January 2008 (comment posting was shut down, or the comment count could easily have gone to 1,000 or more) who let the company know in no uncertain terms that its PC obsessions were alienating many long-time loyal customers.

Ford was probably in a worse position than GM in early 2008. But by late 2008, as noted, it nearly caught its bigger rival, putting it in a position to leapfrog it during the most recent quarter. I wonder why?

UPDATE 2A: Further perspective from the above — A year ago, Ford trailed before special items by 7.6%, so there was already some ground-gaining on GM that took place in the 2nd and 3rd quarters of 2008. What was done during that time was perceived pretty favorably by the financial press. So how does a 4% or so improvement against its rival get ink, and a 15% swing in one quarter (from behind 4% to ahead by 11%) get the (so far) silent treatment?

UPDATE 3: Internal UAW politics, anyone? –

United Auto Workers Vice President Bob King criticized General Motors Corp (GM.N: Quote, Profile, Research) on Wednesday for a restructuring that would eliminate more than 20,000 union factory jobs while adding production overseas.

King, the union’s vice president overseeing Ford Motor Co (F.N: Quote, Profile, Research), lauded that automaker for a truck plant conversion plan that would save some jobs in Michigan, while questioning the restructuring of rivals to Ford that he did not name.

….. “Across the country, (Ford Executive Chairman) Bill Ford and (Chief Executive) Alan Mulally are committed to manufacturing in the United States of America,” King said in a news conference announcing the plant conversion.

King, seen as a potential successor when UAW President Ron Gettelfinger retires in 2010 at the conclusion of his current term, questioned the commitments of other automakers.

“There are some companies that want to sell cars here that they are not going to build here,” King said. “There are some restructuring plans that are saying they want to take the jobs out of America and they want to build (cars) in China and Korea and Mexico rather than building them in the United States of America.”

It would appear that King has the inside track to succeed Ron “Give American the Finger” Gettelfinger. King’s distinct advantage is that he is involved with a company that we can be pretty sure will still be around at the end of the year.

UPDATE 4: From Ed Morrissey at Hot Air

Ford wasn’t all that far behind GM last year, but the marketplace has shifted in Ford’s favor.  While a number of factors may play into that, could buyers have more confidence in Ford and its staying power for having opted out of the bailout?  And could this also be a signal from consumers that they will punish GM and potentially Chrysler as well for taking taxpayer money, especially since bankruptcy will occur anyway?

Based on what we’ve seen since the bailouts began, it would seem that the answer is, “Enough of them to matter already have, and more will.”

Latest Pajamas Media Column (‘Obama’s Frightening Fiduciary Follies’) Is Up

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 8:06 am

It’s here.

It will go up here at BizzyBlog on Saturday morning (link won’t work until then) after the blackout expires.

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There are others making similar points to those made in the column.

Over at Human Events, the Competitive Enterprise Institute’s John Berlau has a nice roundup of many of them.

Berlau also correctly throws the President’s words back at him (parenthetical and all links added by me; aside – hey John, it wouldn’t have killed you to put in the links yourself):

…. forget these contracts (giving the holdout lenders first-lien rights), Obama says, because these creditors were “a group of investment firms and hedge funds” and “I stand with Chrysler’s employees and their families and communities.”

But even if it is now permissible in Obama’s America to ignore valid contracts if they only benefit rich folks, the president’s logic still fails in this situation, because many of these investment firms and hedge funds manage money on behalf of other ordinary “families and communities.” As Financial Times columnist John Gapper explains, “[S]ome of these “speculators” inconveniently manage money on behalf of pension plans and endowments, rather than rapacious rich people.”

Indeed, one of the holdout creditors is Colorado-based Oppenheimer Funds, which manages 401(k)s, IRAs, and colleges savings vehicles such as 529 plans. In a statement, Oppenheimer explains that it “rejected the Government’s offers because they unfairly asked our fund shareholders to make financial sacrifices greater than those being made by unsecured creditors.”

Finally, the President claims that — careful guardian of taxpayer dollars that he is — he just couldn’t give in to creditors who would “hold out for the prospect of an unjustified taxpayer-funded bailout.”

Another rhetorical slight of hand. According to the Wall Street Journal (in its news section, not its editorials), “The most compliant of Chrysler’s big creditors — among them J.P. Morgan & Co. and Citigroup — have received hundreds of billions of dollars in TARP aid.” For these big banks, the auto bailout is just a game of Whack-a-Mole in which they cave to the Obama administration here, but make up for it by getting second helpings at the bank bailout trough.

…. If Chrysler’s lenders can’t get their contracts respected, other lenders will notice, and will be much less likely to fund big or small U.S. businesses, knowing that contracts can be so easily ripped apart by politicians. As an editorial in USA Today, a newspaper not known as a bastion of conservative or libertarian though, puts it, Chrysler’s creditors fighting the Obama administration “are not only defending their own interests, they are standing up for the principles vital to functioning credit markets.”

But utlimately, it would appear that President ‘Prompter doesn’t want functioning credit markets, or capital markets for that matter — unless they “function” under the government’s heavy, whimsical, political hand.