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Budget bill helps poor's power bills, U.S. automakers

By ROSALIE WESTENSKOW, UPI Correspondent

In this month of financial turmoil, the Big Three automakers and low-income families have a reason to celebrate today, following the finalization of an act that provides capital for efficient cars and utility payments.

On Tuesday night, President Bush signed the continuing resolution passed by Congress last week, which provides funding for government activities through March 2009. The appropriations legislation contains some important energy provisions, most notably a suspension of the ban on offshore oil drilling that has been in place since 1981. The administration, which has been pushing for increased domestic drilling for some time, heralded the provision.

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"We think it's a positive step in the right direction to helping our country develop more energy resources here at home," said White House spokesman Scott Stanzel.

Other key energy legislation also passed into law with the CR package, including a loan guarantee program for auto manufacturers.

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The $25 billion program, approved in comprehensive energy legislation passed last December, will help the industry build more fuel-efficient cars by providing capital to convert old plants or build new ones. In a loan guarantee program like this one, the government promises to pay back the loan if the borrower defaults, making it easier for recipients to take out substantial loans and get better interest rates. Government officials estimate the total risk to taxpayers for defaulted loans in the program to be $7.5 billion.

With Wall Street faltering, the auto industry desperately needs federal backing to procure loans, said Greg Martin, General Motors' Washington, D.C., spokesman.

"As the financial market is going through turmoil, the credit markets are freezing up," Martin told United Press International. "We can't get access to the capital to carry out our plans to implement new technology."

It's critical that industry be able to do so, as federal law now mandates more efficient cars. In last December's energy act, Congress raised the Corporate Average Fuel Economy standard for passenger cars and trucks to 35 mpg by 2020. The cost for the entire industry to meet the new CAFE requirements will ring in at $100 billion, Martin said, and the $25 billion in loans will play a critical role in enabling industry to muster the necessary funds.

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"It will be expensive, but it's money we think is well spent," he said.

However, others point to the program as an example of overregulation robbing the taxpayer and, in this case, forcing government to interfere with the financial market -- an occurrence that's becoming the norm as Congress debates the biggest bailout in U.S. history this week.

"It's more taxpayer risk," said Marlo Lewis, a senior fellow at the Competitive Enterprise Institute, a non-profit think tank that supports free-market principles.

Meeting the new CAFE standards will be extremely difficult, Lewis told UPI, particularly as only two out of the 1,153 car models he's looked at currently meet the requirements. However, if the auto industry knew they couldn't acquire enough capital on their own to make the necessary changes, they shouldn't have supported the new fuel efficiency standards last year, Lewis said.

"It's a bad precedent," Lewis said. "If the government offers loan guarantees to one industry, why not another, and another, and another?"

Actually, that's precisely what the government already does.

"We have all kinds of loan guarantee programs: nuclear, clean coal, the renewable energy industry," said Bill Wicker, Democratic spokesman for the Senate Energy Committee.

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The auto industry is in as great, if not greater, need as other industries, Wicker said, and the loans will help stabilize an important sector of the economy. For instance, retooling the factories to build fuel-efficient cars and parts could create 60,000 jobs, according to the Senate Appropriations Committee.

"The whole idea is to continue to allow the auto industry to be competitive," Wicker told UPI.

The auto industry isn't the only entity suffering from rocky times on Wall Street. Low-income households have been particularly hard hit, as a number of factors have combined to push the cost of commodities like food and fuel through the roof.

The CR package will double the available funds for the Low Income Home Energy Assistance Program to $5.1 billion. This will provide much-needed relief for the country's poor and the elderly who live on fixed incomes, said Cristina Martin Firvida, director of economic security at AARP, many of whose members are having an increasingly hard time paying for utilities.

"With winter coming, there are a lot of concerns about what happens to folks who can't pay for heat," Martin Firvida said. "It's not like you can go to the food bank for energy."

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While Bush signed the CR, administration officials said the increase in the LIHEAP program it contained was unnecessary.

"For LIHEAP, we believe the program was adequately funded and didn't need the additional funding in the CR," said Corinne Hirsch, spokeswoman for the Office of Management and Budget.

But costs have gone up, which means more money is needed, said Michael Bracy, director of the Campaign for Home Energy Assistance, an advocacy organization for LIHEAP.

"We're on the cusp of an absolute catastrophe this winter with record energy prices and increased unemployment, the credit crisis and foreclosures," Bracy told UPI.

Energy prices are expected to rise 20 percent this winter, decreasing the number of families the program would be able to serve if funding had remained stagnant. Currently, only 15 percent of eligible families can tap into LIHEAP, according to the Senate Appropriations Committee, and as many as 15.6 million households are poised to face utility shutoffs because they can't foot the monthly bill.

The CR package also increases funding for a weatherization program that could help as many as 10 million poor households improve the energy efficiency of their homes. The $250 million devoted to the project could save $400 in energy costs per home, the Appropriations Committee estimates. Considering the payback, it might be wise to devote more funds to this program, Bracy said.

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"It attacks the problem at the front end instead of just trying to fix it by tacking a Band-Aid on the back end," he told UPI.

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