"A tourniquet for a hemorrhaging economy"

As the credit squeeze tightens around Main Street, the Senate prepares to vote on its version of the bailout bill.

Published October 1, 2008 8:36PM (EDT)

There will be many parties watching with bated breath to see whether the Senate will pass its huge combo bailout-energy-tax bill on Wednesday night. Among them are some you might not connect directly with Wall Street: Ford, GM, Toyota ...

On Wednesday, the auto industry reported horrible monthly sales numbers for September. Ford and Toyota both reported sales declines of more than 30 percent, measured against last year -- making September's performance the worst of 2008.

Most Americans are familiar with some of the reasons for this dismal performance: high gas prices, fuel inefficient cars, a slumping economy. In recent months a new wild card has joined the deck -- the credit squeeze. It has become dramatically more difficult for would-be car buyers to get financing. The New York Times reported on Wednesday that in 2007 "early 83 percent of applications for auto loans in the United States were approved ... but so far this year, the approval rate has plunged to 63 percent." And even if loans do get offered, the interest rates are steep.

"Mark LaNeve, head of North American sales for General Motors," reports the Times, "estimates that G.M. is losing 10,000 to 12,000 sales a month because of tighter lending practices."

With those facts in mind, we can understand why Senate Majority Leader Harry Reid, speaking to reporters shortly before the Senate formally began debating the new bill, repeatedly returned to the plight of the car industry. The difficulty Americans are encountering in getting financing for car purchases provides a concrete example of how the credit crunch is hitting Main Street.

That message has gotten through to the Senate, helped along by Monday's market debacle and an apparent sudden clamor from constituents. When the likes of arch-conservative Sen. Tom Coburn, R-Okla., takes the floor and vows to vote for the bill, even as he spends 10 minutes ranting about how the bailout violates the powers of Congress as enumerated in the Constitution, you can be relatively certain that bailout will get the 60 votes it needs. How big will the majority be? Both Reid and Senate Minority Leader Mitch McConnell promised that the bill would get a "good" vote. But neither would commit to specific numbers, and Reid added that as far as he was concerned, "a good vote is any Senate vote that passes."

So it would be a shocker if the Senate failed to pass the bill, dubbed by Sen. Jack Reed, D-R.I., as a "tourniquet for a hemorrhaging economy." But the prospects in the House are still up in the air, complicated by the reality that this new bill is anything but "clean" -- it is, in fact, three, or even four, bills, squashed together. What was once a three-page plan from Henry Paulson that became 110 pages long when considered by the House is now a 451-page monster.

The Emergency Economic Stabilization Act of 2008 now also includes the Energy Improvement and Extension Act of 2008 and a smorgasbord of other add-ons. Among the notable features of the additional provisions are tax credits for wind and solar power, an extension of relief from the Alternative Minimum Tax, a provision to ensure that healthcare plans include mental health benefits and so many other handouts to various constituencies that no blog post would be sufficient to include them all.

But here's a taste:

  • Sec. 105. Energy credit for geothermal heat pump systems.
  • Sec. 111. Expansion and modification of advanced coal project investment credit.
  • Sec. 113. Temporary increase in coal excise tax; funding of Black Lung Disability Trust Fund.
  • Sec. 115. Tax credit for carbon dioxide sequestration.
  • Sec. 205. Credit for new qualified plug-in electric drive motor vehicles.
  • Sec. 405. Increase and extension of Oil Spill Liability Trust Fund tax.
  • Sec. 309. Extension of economic development credit for American Samoa.
  • Sec. 317. Seven-year cost recovery period for motorsports racing track facility.
  • Sec. 501. $8,500 income threshold used to calculate refundable portion of child tax credit.
  • Sec. 503 Exemption from excise tax for certain wooden arrows designed for use by children.

And so on.

The passage of tax credits for wind and solar power is likely to please environmentalists, but they have been shoveled into this bill along with scores of tax "extenders" that so far have been rejected by House Democrats because no provision has been made to pay for them. This means that a House of Representatives that has already rejected this bill will now confront a new bill stocked with unpaid-for tax breaks that conservative House Democrats -- the infamous "Blue Dogs" -- have been stalwart in opposing.

"Are you trying to jam the House?" one reporter asked Reid. The Senate majority leader denied he was attempting to do any such thing, but it seems self-evident than in attempting to rally significant support for the bailout in the Senate, he has orchestrated the creation of a piece of legislation that is guaranteed to ruffle feathers in the House.

Business as usual in Congress? Perhaps. But with the stakes for the entire country and the global economy as high as they are right now, it sure seems like a perilous game for the Senate to be playing.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

MORE FROM Andrew Leonard

Related Topics ------------------------------------------

Auto Industry Globalization How The World Works U.s. Senate Wall Street