Morning Must Reads

President Obama has gone off on his own hook on global warming and is using the EPA and the Department of Transportation to enforce a carbon crackdown. That may encourage some environmentally minded members of Congress to vote against the Waxman plan that would dole out hundreds of billions of dollars to connected companies in order to get support from carbon state Democrats. Republicans won’t support the plan that, though generous but iniquitous in its favors, would still amount to the largest tax increase in American history.

Writers Ian Talley and Stephen Power also include in their piece the fact that China came up with its new concept for a global carbon plan that would dwarf the U.S. initiative. When Obama goes to Copenhagen this fall to negotiate the successor to the Kyoto treaty, the Chinese will be ready with a brutal opening bargaining position that demands huge reductions from the U.S.

“The Chinese proposal, which asks for much deeper cuts than the Waxman-Markey bill is proposing, highlights one of the challenges facing the Obama administration and other supporters of more aggressive U.S. action to reduce greenhouse gases. Many U.S. lawmakers worry that U.S. businesses could suffer if they are subject to carbon caps that add costs to their operations and their Chinese rivals aren’t. In response, some have proposed imposing tariffs on goods imported from countries that don’t have strong greenhouse-gas controls. China has resisted any mandatory quotas on carbon emissions, and has said that such tariffs would violate international trade law.”

New York Times — Obama Faces Pitfalls With ‘Surgical’ Tack on Detainees


Writer Peter Baker neatly sums up the political stakes for President Obama with his more nuanced approach to fighting terrorists.

Baker’s net – complicated answers are harder for people to accept on national security than on domestic policy because the immediate stakes are higher.

White House consigliore David Axelrod explained to Baker that the president’s embrace of some Bush polices he once deplored while still undertaking to uproot a couple hundred terrorists in the name of the national reputation – a “surgical” approach – respected the intelligence of the American people and was consistent with Obama’s campaign message.

Cue Joe Biden:

“Yet even as the White House argued that Mr. Obama always recognized the complexity of the issues before him, Vice President Joseph R. Biden Jr. on Thursday acknowledged some surprise at the difficulties involved. Speaking with reporters at Camp Bondsteel in Kosovo, he described going through portfolios on ‘every single detainee’ at the detention center at Guantánamo Bay.

‘We knew we were inheriting a system that was not functioning,’ Mr. Biden said. ‘We knew we were inheriting a system that was causing us great difficulty around the world.’ But he suggested that the administration’s approach had been shaped by what it learned after taking office.

‘It’s like opening Pandora’s box here,’ Mr. Biden said. ‘We don’t know what’s inside the box. Now we know a lot more than we did in January.’”

Financial Times — Markets fall amid fears of downgrade

Britain just lost its top-drawer bond rating because the country’s debt has equaled its GDP and looks to stay there for quite a while.

With the Obama spending plan likely to send American debt well past that point in the next two years, bond buyers started fleeing from Treasury-backed debt on Thursday. Those fears caused a retreat in world markets that seems to be persisting.

It seems that markets have already begun to factor in the possibility of an insolvent U.S. That means debt will cost more.

If the market for U.S. debt dries up and taxpayers must finance increasingly high interest rates to entice bond buyers, the impact on tax rates and inflation could be dire.

Treasury Secretary Tim Geithner promised that the administration would get a handle on debt after the domestic economy began it’s recovery.

“The bearish mood was fanned when the Fed’s offer to buy $7.4bn bonds was flooded with $45.7bn in offers, the most since the Fed began buying Treasuries. Analysts said that the turmoil could simply represent a spasm on the road to recovery. But a leading hedge fund manager told the FT: “This may be one of those days we look back on and remember five years from now.”

Confidence in the two pillars of the US crisis response – the government’s creditworthiness and the Fed’s ability to exploit its position as the issuer of the world’s reserve currency – appeared to be at least briefly shaken.”

Washington Post — U.S. to Steer GM Toward Bankruptcy

 

The Obama administration, encouraged by the swiftness with which it has been able to take over Chrysler and reallocate its ownership, is ready to do the same thing with General Motors as soon as next week along with another $30 billion cash pump from taxpayers.

Writers David Cho, Peter Whoriskey and Kendra Marr explain that Chrysler was just the warm up, but the lessons learned about beating back creditors, dumping dealers, and pushing through court-ordered sales have been good preparation for GM.

If a bankruptcy judge ends Chrysler’s brief bankruptcy next week the way the government wants – with the company going to the United Auto Workers, Fiat , and the feds – President Obama may bring his surgical bankruptcy approach to GM as soon as a week from today.

“The government previously indicated that it planned to take at least 50 percent of the restructured company, and likely would take the right to name members to its board of directors, as it has at Chrysler, where the government will control four of nine seats.

The United Auto Workers retiree health fund is set to own as much as 39 percent of the restructured GM, in exchange for giving up its claim to at least $10 billion that the company owes it. Yesterday, the union announced that it reached an agreement with GM that will reduce the company’s labor costs.

Still unknown is what part the Canadian government might play in the ongoing GM restructuring.”

Los Angeles Times — Federal officials unsure about California bailout

The negotiations are on for what the federal government can do to help California climb its way out of a $21 billion hole.

Writers Peter Nicholas and Richard Simon report that President Obama’s chief political officer, David Axelrod, lamented that the administration couldn’t help California the same way it has helped Detroit and Wall Street with immediate cash dumps. Other states would want in on the second round of government stimulus.

Treasury Secretary Tim Geither, meanwhile, said it would be up to Congress to bail out California since he couldn’t yet find any authority to give one state money to pay off its debts.

Without the ability to borrow more, facing voter revolt for any more tax increases and unable to cut enough to meet the staggering budget shortfall, California lawmakers are either facing honest-to-goodness federal receivership or the unlikely prospect of passing a law that makes the residents of the other 49 states responsible for California’s debts.

“A California-specific bill would test the state’s political clout in Washington. California’s 53-member delegation is the largest state contingent. Californians chair five House committees, more than any other state, and Nancy Pelosi of San Francisco is House speaker. But the delegation is fractured. And it was splitting, mainly along party lines, over federal intervention in California’s budget crisis. The delegation includes a number of Republicans who dislike Gov. Arnold Schwarzenegger, a fellow Republican, and don’t believe that Washington should bail out Sacramento for its own failures.