December 22nd, 2008
10:51 AM ET

Financial Dispatch: Obama beefs up economic recovery plan

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Gene Bloch
Managing Editor
CNN New York

We’ve all been there – a vacation that’s supposed to be relaxing, but the stresses of the job intrude. President-Elect Obama, on vacation with his family in Hawaii, has a lot to think about with less than a month to go before inauguration. Obama this weekend expanded the goal of his economic recovery plan, which will now aim to create 3 million jobs, up from 2.5 million in the original version. That news comes as this weekend Vice President-Elect Joe Biden took to the airwaves and pressed the need for a recovery plan, saying the U.S. economy is in danger of “absolutely tanking.”

The malls were humming with holiday shoppers this weekend, but discounts were steep and profits likely thin, as retailers struggle with one of their toughest seasons in memory. We’ll find out how Americans are feeling about things Tuesday morning with the University of Michigan’s preliminary report on consumer sentiment. It’s among the slew of reports crammed into the first three days of this holiday week. The trading week is a short one on Wall Street, with a 1p closing bell on Wednesday, no trading for Christmas Day of course, and then a full day on Friday. In the early doing this morning, the Dow is near the break even mark (down 4 as of this writing).

If you think the problems in the auto industry are isolated to Detroit’s big three, think again. The world’s biggest auto maker, Toyota, stunned the markets with news that it will report its first ever operating loss this fiscal year (ending in March 2009). The company expects to lose almost $1.7 billion, as the global recession wallops vehicle sales, especially in the last month. The news raises new fear that GM and Chrysler achieving “viability” with their government loan may be difficult.

Back in the U.S., companies are cutting costs every way they can, including the painful step of eliminating company matches to 401(k) plans. Human resources research group Watson Wyatt Worldwide says 7% of companies are considering cuts to contributions, up from 4% two months earlier. Among those companies suspending matches are FedEx, Eastman Kodak, General Motors, Ford Motor, and Dollar Thrifty Automotive Group.

The Wall Street banks that have tapped into half the $700 billion bailout (aka the TARP or Troubled Assets Relief Program) will not say what they’ve done with the money. The Associated Press asked 21 banks how much has been spent, what was it spent on, how much is being saved, and what’s the plan for what’s left over. The banks did not provide specific answers to any those questions. The AP also calculated that executives from companies receiving bailout money from the TARP in 2008 were awarded nearly $1.6 billion in salaries, bonuses, and perks in 2007.

Some good news finally – gas prices are down a half cent to $1.663 for a gallon of regular unleaded according to AAA, and the bi-weekly report from Lundberg also measured the average at $1.66, down nine cents from its previous report (that was a four year low...whereas the daily AAA figure was only the lowest since last week). Oilman T. Boone Pickens appeared on American Morning this morning, saying he believes that we will see $100 a barrel oil again, and gas will go back to the $2.50-$3 gallon range. Pickens continues to push his plan to move to alternative energy sources – it’s certainly an uphill battle when gas is cheap and many people are focused on simply getting by in the short term.

And finally, are you looking to hit the dance floor and be energy efficient at the same time? Now you can! Across the country, and around the world, green nightclubs are the latest trend. At London’s Club Surya, a special dance floor actually helps power the club.

In New York City, 'Greenhouse' says it uses 40% – 60% less energy than a standard club, thanks to high-efficiency heating and cooling and LED lights. It also has two waterless urinals that save 15,000 gallons of water a year.

Is all of this just a gimmick to get people in the door... or will club-goers really choose to spend their money at a green nightclub over one that isn’t?

Filed under: Bailout Turmoil • Economy • Finance • Gene Bloch
soundoff (8 Responses)
  1. Annie Kate

    I guess Obama isn't going to be able to get away from the demands of the job when he is "on vacation" for much of his term. Something is always happening. I certainly hope his economic plan works and that job creation starts soon.

    Companies cutting their 401K matching is bad. I understand they can't afford it right now but the employee can't afford the cut either. First they cut out the pensions saying that we would have to do our own retirement with our 401Ks which they would match up to a certain point. Now they have cut that which if you look at your entire compensation package (pay plus benefits that the company pays for you) you just took a pay cut. Young people have the time to work around this but older workers are really going to hurt because they don't have much time between now and retirement to make up the difference. The worker is getting shafted from all sides...yet again.

    December 22, 2008 at 6:45 pm |
  2. Bruce Hoff

    At a time when the world is viewing us with a squinted eye, including ourselves, I hope Obama is able to come out fighting with both eyes opened and his back being watched. Like many folks, this last year has seen almost everything we worked for gone. Our Christmas wish; get us out of this mess as soon as possible. God bless us everyone and everyone reach out a helping hand to someone in need. It shouldn’t be hard to find someone.

    December 22, 2008 at 5:45 pm |
  3. Larry

    Guess he'll create jobs in those other 7 states, since he said we have 57 states.

    December 22, 2008 at 4:44 pm |
  4. J. C. Cobb

    The cause of financial turmoil is lack of confidence in our economy. How can we be confident if our government is spending more than than we have? Confidence would come from our Congress passing a balanced budget amendment and then allocating percentages of each sector of the budget to programs as opposed to dollars. Repealing the income tax and taxing wealth instead of work would boost confidence for the majority of us, A flat tax on sales/transfers/exchanges on everything with absolutely no exemptions, socks, stocks, businesses, charities and churches. No exemption for any special interest would generate revenue fairly. If Congress decided to allocate funds from a sector to a group it would not be concealed through a tax code exemption rewarding a special interest.

    December 22, 2008 at 4:38 pm |
  5. Gene Penszynski from Vermont

    Well , well, well it seems that Toyota is suffering as well as those horrible nasty American automakers. The REALITY of this situation is that all manufacturers of large priced products are suffering ......... simple because those fat cat middle income Americans with all that 'disposable income' have been relegated to the scrap heap by G W Bush Herbert Hoover style economics. G W Bush's tax cuts have in the end not created any jobs at all. They have lost millions of jobs and these jobs are gone forever thanks to the Conservative Republican battle cry of 'Free trade' and 'Free markets'. What a sham this has been from day one. The only thing all this 'Free' stuff has done is promote GREED which has endagered our viability as a World Leading Democracy. The bottom line is that 'FREE MARKETS' and 'FREE TRADE' are simply NOT FREE. They only create more weath for those at the very top at teh expense of everyone else including the once thriving American Middle Class.

    December 22, 2008 at 3:36 pm |
  6. Gene Penszynski from Vermont

    I agree JC- Los Angelese. I hope as well that the Christian Fundamentalist selection is only an an anomaly in the President-Elects operating plan. My God we sure don't need another G W Bush -like Chhristian Fundamentalist movement of any kind. The last movement nearly destroyed this great nation of ours !!!!!!!!!!

    December 22, 2008 at 3:04 pm |
  7. Max

    Ya THINK????

    Somebody BETTER be BEEFING something UP somewhere.


    December 22, 2008 at 2:54 pm |
  8. JC- Los Angeles

    Judging from Obama's track record with selecting pastors and his questionable Windy City associates like Blagojevich, Rezko and Ayers, here's hoping he make some sounder decisions on an economic recovery team.

    December 22, 2008 at 12:26 pm |