WASHINGTON (Reuters) – President Barack Obama yesterday tried to sway skeptical Democrats in the US House of Representa-tives to back an expensive budget plan for 2010 by arguing it was needed to reverse the economy’s sharp downward spiral.
Obama has said his $3.55 trillion 2010 budget would help pull the economy out of a deep recession and begin overhauling healthcare and energy policies, but his fellow Democrats have scaled it back amid worries it will explode the deficit and backfire against them in next year’s congressional elections.
Democrats control the House and Senate and are expected to pass separate versions of a five-year budget plan this week, after taking heed of budget forecasters’ warning that Obama’s plan could add $9.3 trillion in debt over the next decade.
“The president’s proposition, I think, will be very compelling for all our members, that this is part and parcel of bringing our country back to economic health, of creating jobs, of stopping foreclosures,” House Majority Leader Steny Hoyer told reporters after an hour-long meeting with Obama.
“The president said, ‘We are all in this together,’“ said Representative George Miller, echoing many of his colleagues as they left the closed-door meeting on Capitol Hill.
One of the difficult tasks Obama and House Democratic leaders will face is convincing fiscal conservatives to back the budget and Representative John Larson said the president made his pitch directly, telling them that he would endeavor to cut the deficit and pay for new programs created.
“There’s no more convincing salesperson in America than Barack Obama,” Larson told Reuters. One congressional aide quoted Obama telling lawmakers that he was “serious as a heart attack” about tackling the record trillion-dollar deficits.
Obama also told those concerned about his budget to imagine going home next year to face re-election without passing his calls for change, such as upgrading education, expanding healthcare and moving the nation toward energy independence, Representative Jesse Jackson said.
… tough auto stance may include bankruptcy
WASHINGTON (Reuters) – President Barack Obama ordered General Motors Corp and Chrysler LLC to accelerate their survival efforts and brace for possible bankruptcy, saying neither company had done enough to justify the taxpayer money they were seeking.
Obama, describing the industry as a pillar of the economy, nevertheless gave GM and Chrysler a little more time and money to wring further concessions from workers, creditors and other stakeholders.
“We cannot, we must not, and we will not let our auto industry simply vanish,” Obama said in White House remarks yesterday that were partly overshadowed by his decision to force out GM CEO Rick Wagoner.
US stock indexes tumbled on the harsher-than-expected government stance, which could push GM and Chrysler closer to a bankruptcy court restructuring that could threaten equity holders and force deeper losses on creditors.
A committee representing GM bondholders planned to meet later on Monday to discuss a debt restructuring plan according to a source familiar with the situation.
With about $28 billion in debt to bondholders, the GM offer would translate into $2.2 billion in cash, $4.3 billion in debt and an additional stock-based payout in a recapitalized company that would all but wipe out current stockholders.
The Obama administration is giving GM 60 days to rework its survival plan. The new CEO of the biggest US automaker said a court-supervised restructuring in bankruptcy might be necessary.
Chrysler’s operation would be funded for the next 30 days as it works to complete an alliance with Italy’s Fiat SpA, considered the No. 3 US maker’s best chance of surviving.
A source familiar with the negotiations said Fiat’s stake in Chrysler could start as low as 20 percent.
GM had sought more than $16 billion in new aid after getting $13.4 billion in December, while Chrysler wanted $5 billion on top of $4 billion at the end of 2008.
GM shares closed 25 percent lower yesterday while stock of Ford Motor Co, which has not sought a bailout, closed down 2.8 percent. Chrysler is privately held by Cerberus Capital Management.