Tuesday, May 19, 2009

Work & Die: That's What Your Government Overlords Want From You

New rules: Work till you die

Social Security, Medicare facing insolvency
Posted: May 18, 200911:56 am Eastern© 2009 WorldNetDaily

Treasury Secretary Timothy Geithner announced that Medicare would run out of money in 2017 and Social Security would do the same in 2037, both sooner than previously projected.
Both are reaching a tipping point as federal government tax revenue slows dramatically, unemployment rates increase and program benefit payouts grow.

The U.S. Treasury, on a GAAP accounting basis, calculates the federal government had a $65.5 trillion negative net worth last year when the net present value of future Social Security and Medicare benefits are taken into consideration, a sum nearly identical to the annual gross domestic product, or GDP, of the world.
This puts increased pressure on older Americans who expect to benefit both from Medicare and Social Security benefits in their retirement years. Losses suffered in the economic recession have forced thousands of older workers back into the workforce. Labor Department statistics show participation in the labor force by workers over age 65 hit 16.9 percent in April, the highest for that month since 1971.
"Older workers have been besieged from many different angles during the current economic downturn," Corsi wrote.
He included the following examples:
Home values have lost more than 25 percent or more of peak 2006 value in most urban areas throughout the nation;
Mutual funds and 401(k) plans invested in mutual funds may have experienced losses of up to 50 percent in the past 18 months, depending upon the mix of mutual funds underlying the investment;
Pension funds face uncertain futures for companies that have gone out of business, with losses in pension and retirement health benefits uncertain for UAW workers in the restructured Chrysler and GM bankruptcies; and
Inflation hitting fixed-income retired seniors particularly hard, as living expenses appear on the increase with the price of oil once again topping $60 a barrel in last week's trading.
The Wall Street Journal reported a study conducted in April by the Employee Benefits Research Institute, based in Washington, D.C., showed 22 percent of workers nationwide said they were "not at all confident" that they would have enough savings for a comfortable retirement, surpassing the number who are "very confident" for the first time since the survey was taken, in 1993.
The Financial Times reported that before the recession about 15 percent of the 78 million baby boomers intended to work until they died, but now that has risen to more than 25 percent.
The U.S. Census Bureau projects that the 36.3 million people over age 65 in the U.S. in 2004 will swell to 86.7 million by the year 2050, a 147 percent increase in the 65-and-over population between 2000 and 2050.
By comparison, the Census Bureau projects the U.S. population as a whole will increase only 49 percent in the same period of time.
By 2050, those who are age 65-and-over will constitute 21 percent of the U.S. population.
The Census Bureau has also documented that the percentage of those 65-and-over who are still working nearly doubled between 1977 and 2007, as limited Social Security benefits and a diminished U.S. savings rate made retirement economically more difficult.
Still, the Census Bureau noted that the 65-and-over labor force participation rate had been at historic lows during the 1980s and early 1990s, before the recession which began at the end of the Clinton administration and the turbulent economic times that have hit the United States since the 9/11 terrorist attacks.


Gotta laugh, because if you won't----yup, you'll cry.

Reading Between The Lines Of this Economic Meltdown

The Real Lesson of the Financial Crisis

Tuesday, May 19, 2009
The financial channels are abuzz with talk of a recovery, but we’re not out of the woods yet. In fact, the deceleration in the rate of economic decline is not a sign of recovery at all, but proof that the economy is resetting at a lower level of activity. That means the recession will drag on for some time no matter what the Fed does.
The problem is the breakdown in the securitzation markets which has cut off the flow of easy credit to consumers and businesses. The credit-freeze has caused a sharp drop in retail, auto sales, furniture, electronics, travel, global trade etc. Every sector has been hammered. Fed chief Ben Bernanke’s lending facilities have helped to steady the financial system and Obama’s fiscal stimulus will take up some of the slack in demand, but these are not a cure-all for a broken credit system. If the system isn’t fixed, asset prices will continue to plunge and hundreds of financial institutions will face bankruptcy.
From Tyler Durden at Zero Hedge:
“In order to fully understand currency and price movements, one has to realize that the securitization of debt, and creation of derivatives amounted to a huge virtual printing press, primarily fueled by a massive increase in risk appetite which allowed for a huge expansion in the value of claims on financial assets and goods and services. It is worth pointing out, that the Fed has little to no control over this “printing press” at this point, which at last count was responsible for over 90% of the liquidity in the system.” (”The Exuberance Glut or the Dollar-Euro Short Squeeze Race” Tyler Durden, Zero Hedge)
The faux-prosperity of the last decade was largely the result of a wholesale credit system which created a humongous amount of credit via sketchy debt instruments, off-balance sheet operations, massive leverage and derivatives. (The Fed’s liquidity and conventional bank loans play a very small part in the modern credit system) Securitization–which is the conversion of pools of loans into securities–is at the center of the storm. It formed the asset-base upon which the investment banks and hedge funds stacked additional leverage creating an unstable debt-pyramid that couldn’t withstand the battering of a slumping market. After two Bear Stearns funds defaulted 20 months ago, the securitization markets froze, credit dried up and the broader economy went into a tailspin. Now that investors know how risky securitized instruments really are, there’s little chance that assets will regain their original value or that the market for structured debt will stage a comeback.
Bernanke’s Term Asset-backed Loan Facility (TALF) is a attempt to restore the crashed system by offering participants generous government funding to purchase securities backed by mortgages, student loans, auto loans and credit card debt. But skittish investors have stayed on the sidelines. The severity of the downturn has dampened the appetite for risk. So Bernanke has cranked up the money supply, cut interest rates to zero and flooded the financial system with liquidity. His actions have convinced many of the experts that the country is on the fast-track to hyperinflation, but that may not be the case, as explained in the Hoisington Investment Management’s Quarterly Economic Review:
“Despite near term deflation risks, the overwhelming consensus view is that “sooner or later” inflation will inevitably return, probably with great momentum.
This inflationist view of the world seems to rely on two general propositions. First, the unprecedented increases in the Fed’s balance sheet are, by definition, inflationary. The Fed has to print money to restore health to the economy, but ultimately this process will result in a substantially higher general price level. Second, an unparalleled surge in federal government spending and massive deficits will stimulate economic activity. This will serve to reinforce the reflationary efforts of the Fed and lead to inflation.

(But) let’s assume for the moment that inflation rises immediately. With unemployment widespread, wages would seriously lag inflation. Thus, real household income would decline and truncate any potential gain in consumer spending…
Inflation will not commence until the Aggregate Demand (AD) Curve shifts outward sufficiently to reach the part of the Aggregate Supply (AS) curve that is upward sloping…..Therefore, multiple outward shifts in the Aggregate Demand curve will be required before the economy encounters an upward sloping Aggregate Supply Curve thus creating higher price levels. In our opinion such a process will take well over a decade….
The statement that all the Fed has to do is print money in order to restore prosperity is not substantiated by history or theory. An increase in the stock of money will only lead to a higher GDP if V, or velocity, is stable. V should be thought of conceptually rather than mechanically. If the stock of money is $1 trillion and total spending is $2 trillion, then V is 2. If spending rises to $3 trillion and M2 is unchanged, velocity then jumps to 3.
… The historical record indicates that V may be likened to a symbiotic relationship of two variables. One is financial innovation and the other is the degree of leverage in the economy. Financial innovation and greater leverage go hand in hand, and during those times velocity is generally above its long-term average.
As the shadow banking system continues to collapse, velocity should move well below its mean, greatly impairing the efficacy of monetary policy…The problem for the Fed is that it does not control velocity or the money created outside the banking system. “( Hoisington Investment Management Quarterly review, thanks to Leo Kolivakis, of Pension Pulse, “Is Inflation inevitable?”)
Bernanke can print as much money as he wants, but if the banks are hoarding, consumers are saving, businesses are cutting back, and all the money-multipliers are set to “Off”; there will be no inflation. Demand has to pick up, so that money begins to change hands quickly leading to vast amounts of new money competing for the same number of assets. But that won’t happen while the economy is shedding 600,000 jobs a month, housing prices are tumbling and consumer balance sheets are being repaired.
So if inflation is not an immediate risk, and the economy continues to shrink, isn’t Bernanke doing the right thing by trying to restart the securitization markets?
Opinions vary on this topic. On the one hand, Wall Street’s method of deploying credit appears to be more efficient than conventional (bank) loans because the money is provided by investors who are looking for higher yield rather than bankers tapping into reserves. The problem is that securitization creates incentives for fraud by rewarding loan originators who lend to applicants who have no way of repaying the debt. Unless the system is heavily regulated to insure that traditional lending standards are maintained, speculative bubbles will reemerge and there will be more financial disasters in the future. The former head of the FDIC, William Seidman, anticipated this problem way back in 1993 after cleaning up the S&L crisis. Here’s what he said in his memoirs:
“Instruct regulators to look for the newest fad in the industry and examine it with great care. The next mistake will be a new way to make a loan that will not be repaid.” (Bloomberg)
If regulators had heeded Seidman’s advice, they could have steered the country away from the present calamity.
The problem with an unregulated credit system is that investment banks and hedge funds can skim lavish salaries and bonuses for themselves on the front end before anyone discovers that the loans are fraudulent and the securities worthless. Even so, neither congress nor the Treasury nor the Fed have taken steps to re-regulate the financial system or to hold any of the main players accountable. It’s “anything goes”. Bernanke has acted as Wall Street’s chief enabler by underwriting shoddy non performing loans, propping up rotten assets with low interest funding, and bailing out investment giants with trillions in taxpayer-backed loans. None of the $12.8 trillion Bernanke has loaned or committed to financial institutions has been approved by Congress. The Fed operates beyond any mandate and outside of any law.
The debate about securitization goes beyond questions about the quality of the underlying loans to focusing on the process itself. Securitization greatly amplifies leverage by repackaging debt into complex instruments. It’s a way of turbo-charging credit expansion. Joseph Stroupe summarizes the issue in a recent Asia Times article:
“Remember that there are two fundamental camps with respect to the answer to the question of what lies at the root of the present crisis. One camp holds that America’s new generation of financial assets that resulted from the recently invented financial process known as “securitization” are fundamentally sound in value, and that an over-reaction on the part of investors to the subprime crisis has resulted in a panic-induced collapse in their valuations.
This camp believes that the securitization model can and should be revived, and that when investor confidence is restored in financial assets now seen as “toxic”, then all will be well again, almost magically, as toxic assets become valuable and attractive once again. All that need be done, it is believed, is for the government to work with Wall Street to jump-start securitization, a model this camp vehemently denies has failed, even though many trillions of dollars both spent and committed already have so far failed to get securitization’s heartbeat going again.
The other camp believes that the toxicity is inherent in the very nature of the newly developed financial assets themselves, and that once investors recognized this fact, then that is why their values collapsed. This camp sees the securitization model as fundamentally flawed, based as it is upon artificial inflation of assets, the shortsighted growth of serial asset bubbles created by an unholy de facto alliance of government, big Wall Street banks and credit-rating agencies whose credibility and integrity were profoundly compromised, and unsustainable negative real interest rates (the creation of a massive credit excess), without which the securitization model simply won’t run. (Asia Times, Profits Mask the Coming Storm, W. Joseph Stroupe)
Bernanke says that the securitization markets are “frozen” and that the toxic assets should eventually regain much of their original value. But this is just wishful thinking. Investors aren’t shunning these assets because they’re afraid, but because the banks want too much for them given their implicit riskiness. Stroupe’s analysis is closer to the truth; prices have collapsed because investors recognize the inherent toxicity of the assets themselves. The market isn’t driven by fear, but by common sense. $.30 cents on the dollar is probably all they are worth.
Putting Credit Back Where It Belongs
Do people realize that the reason their home equity is vanishing, their 401ks have been slashed in half and their jobs are at risk is because Wall Street was gaming the system with leverage and financial innovation? The current downturn is not really a recession at all; it’s more like a self-inflicted wound perpetrated by avaricious speculators who put a gun to the economy’s head and blew its brains out. The banks and Wall Street have created a capital hole so vast that the entire economy is being sucked into the abyss. And it all could have been avoided.
Credit production is too important and too lethal to entrust to profit-driven vipers whose only motivation is self-enrichment. The whole system needs rethinking and public input before Bernanke wastes trillions more trying to revive the same crisis-prone business model. If “credit is the economy’s life’s-blood,” as President Obama says, then it should be distributed through a government-controlled public utility. The real lesson of the financial crisis is that privatizing credit has been a disaster.

Dollar Is Going To Get Rousted

Brazil, China team up against the dollar
Tuesday, May 19, 2009
Prisonplanet comment: The US Government is doing pretty well against the Dollar on its own.
Brazil and China are teaming up to initiate the decline of America’s currency as the world’s reserve standard.
From The Financial Times:
Brazil and China will work towards using their own currencies in trade transactions rather than the US dollar, according to Brazil’s central bank and aides to Luiz InĂ¡cio Lula da Silva, Brazil’s president.
The move follows recent Chinese challenges to the status of the dollar as the world’s leading international currency.
Mr Lula da Silva, who is visiting Beijing this week, and Hu Jintao, China’s president, first discussed the idea of replacing the dollar with the renminbi and the real as trade currencies when they met at the G20 summit in London last month.
People’s Bank of China Governor Zhou Xiaochuan said ahead of the 2009 G-20 summit that he wants to replace the dollar, installed as the reserve currency after World War II, with a different standard run by the International Monetary Fund (IMF).

Both Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner have said they would not allow the dollar to be stripped of the premier status as suggested by Beijing.
China, the top holder of US Treasury bonds with 739.6 billion dollars as of January, according to US figures, earlier expressed concern over its investment as the world’s largest economy battles a deep recession.

Saturday, May 9, 2009

These Guys In Montana Rock!

Montana Governor Signs New Gun Law
Executive Summary – The USA state of Montana has signed into power a revolutionary gun law. I mean REVOLUTIONARY. The State of Montana has defied the federal government and their gun laws. This will prompt a showdown between the federal government and the State of Montana. The federal government fears citizens owning guns. They try to curtail what types of guns they can own. The gun control laws all have one common goal – confiscation of privately owned firearms.
Montana has gone beyond drawing a line in the sand. They have challenged the Federal Government. The fed now either takes them on and risks them saying the federal agents have no right to violate their state gun laws and arrest the federal agents that try to enforce the federal firearms acts. This will be a world-class event to watch. Montana could go to voting for secession from the union, which is really throwing the gauntlet in Obamas face. If the federal government does nothing they lose face. Gotta love it.
Important Points – If guns and ammunition are manufactured inside the State of Montana for sale and use inside that state then the federal firearms laws have no applicability since the federal government only has the power to control commerce across state lines. Montana has the law on their side. Since when did the USA start following their own laws especially the constitution of the USA, the very document that empowers the USA.
Silencers made in Montana and sol in Montana would be fully legal and not registered. As a note silencers were first used before the 007 movies as a device to enable one to hunt without disturbing neighbors and scaring game. They were also useful as devices to control noise when practicing so as to not disturb the neighbors.
Silencers work best with a bolt-action rifle. There is a long barrel and the chamber is closed tight so as to direct all the gases though the silencer at the tip of the barrel. Semi-auto pistols and revolvers do not really muffle the sound very well except on the silver screen. The revolvers bleed gas out with the sound all over the place. The semi-auto pistols bleed the gases out when the slide recoils back.
Silencers are maybe nice for snipers picking off enemy soldiers even though they reduce velocity but not very practical for hit men shooting pistols in crowded places. Silencers were useful tools for gun enthusiasts and hunters.
There would be no firearm registration, serial numbers, criminal records check, waiting periods or paperwork required. So in a short period of time there would be millions and millions of unregistered untraceable guns in Montana. Way to go Montana.
Discussion – Let us see what Obama does. If he hits Montana hard they will probably vote to secede from the USA. The governor of Texas has already been refusing Federal money because he does not want to agree to the conditions that go with it and he has been saying secession is a right they have as sort of a threat. Things are no longer the same with the USA. Do not be deceived by Obama acting as if all is the same, it is not.

Text of law is at link below:

Is Anyone Minding the Store at the Federal Reserve?

Amazing! Watch the Inspector General of the Federal Reserve evade questions about who got the bailout money and how large the losses are. As you watch, you will realize that the government is not in charge of the Fed. It's the other way around.

More 401(k) retirement funds are denying investors the right to withdraw their money. Why? Because they don't have it.

401(k)s Hit by Withdrawal Freezes

Some investors in 401(k) retirement funds who are moving to grab their money are finding they can't.
Even with recent gains in stocks such as Monday's, the months of market turmoil have delivered a blow to some 401(k) participants: freezing their investments in certain plans. In some cases, individual investors can't withdraw money from certain retirement-plan options. In other cases, employers are having trouble getting rid of risky investments in 401(k) plans.
When Ed Dursky was laid off from his job at a manufacturing company in March, he couldn't withdraw $40,000 from his 401(k) retirement account invested in the Principal U.S. Property Separate Account.
That fund, which invests directly in office buildings and other properties, had stopped allowing most investors to make withdrawals last fall as many of its holdings became hard to sell.
Now Mr. Dursky, of Ottumwa, Iowa, is looking for work and losing patience. All he wants, he said, is his money.
"I hate to be whiny, but it is my money," Mr. Dursky said.
The withdrawal restrictions are limiting investment options for plan participants and employers at a key time in the markets. The timing is inconvenient for the number of workers like Mr. Dursky who are laid off and find their savings inaccessible.
Though 401(k) plans revolutionized the retirement-savings landscape by putting investment decisions in the hands of individuals, the restrictions show that plan participants aren't always in the driver's seat.
Individual investors mightn't even be aware of some behind-the-scenes maneuvers causing liquidity problems in their retirement plans. Many funds offered in 401(k) plans lend their portfolio holdings to other investors, receiving in exchange collateral that they invest in normally safe, liquid holdings.
The aim is often to generate a small but relatively reliable return that can help offset fund expenses. But in recent months, many of the collateral investments have gone haywire, prompting money managers to restrict retirement plans' withdrawals from the lending funds.
Some stable-value funds also are blocking the exits. These funds, available only in tax-deferred savings plans such as 401(k)s, typically invest in bonds and use bank or insurance-company contracts to help smooth returns. But in cases of employer bankruptcy and other events that can cause withdrawals, these funds can lock up investor money for months at a time.
Investors in the Principal U.S. Property Separate Account said they understood the risk of losses, but didn't think their money could be locked up for months or years. Most participants in the 15,000 plans holding the fund haven't been able to make any withdrawals or transfers since late September.
"To sell property at inappropriately low prices in order to generate cash for a few would hurt the majority of investors and violate our fiduciary obligations," said Terri Hale, spokeswoman for Principal Financial Group Inc., the parent of the fund's manager. The fund, which had $4.3 billion in net assets at the end of April, still is making distributions for death, disability, hardship and retirement at normal retirement age.
As of April 28, redemption requests that had yet to be honored totaled nearly $1.1 billion, or roughly 26% of the fund's net assets. Principal doesn't anticipate that it will make any distributions to investors who have requested redemptions until late 2009 or beyond, Ms. Hale said. Meanwhile, the fund continues to fall, declining 25% in the 12 months ending April 30.
Some investors have lost hope of recovering their money. Judith Sterner, a 69-year-old part-time nurse, had more than $12,000 in the fund when she tried to transfer that balance to a money market last fall. But her transfer was denied, and her stake has since declined to less than $10,000.
"This $12,000 represents a year of my retirement money that I don't have," said Ms. Sterner, of Morton Grove, Ill.
Principal still allows new investors into the fund. It categorizes the U.S. Property account as a fixed-income investment, alongside much stodgier funds holding high-quality bonds. New investors are warned of potential withdrawal delays, Ms. Hale said. As for the fixed-income categorization, she said, "a substantial portion of the account return is based on income streams from rents, and its returns have been comparable to fixed-income funds."
While the problems selling real-estate investments are relatively straightforward, withdrawal restrictions related to securities lending stem from far more obscure practices.
Funds often lend out portfolio holdings, through a lending agent, to other investors. These borrowers give the lender collateral, often amounting to about 102% of the value of the securities borrowed. Some of the collateral pools in which funds invest this collateral held Lehman Brothers Holdings Inc. debt and other investments that plummeted in value or became hard to trade in the credit crunch.
Though agents who coordinate funds' lending programs share in profits from securities lending, the risk of such collateral-pool losses falls entirely on the funds that have lent the securities and, ultimately, retirement plans and other investors holding those funds.
The problems have limited retirement plans' ability to get out of securities-lending programs, though participants' withdrawals generally haven't been affected.
Retirement plans offered to employees of energy company BP PLC last fall tried to withdraw entirely from four Northern Trust Corp. index funds engaged in securities lending. Certain holdings in Northern's collateral pools had defaulted, been marked down, or become so illiquid that they could only be sold at low values, according to a BP complaint filed in a lawsuit against Northern Trust.
The BP plans halted new participant investments in the funds and asked to withdraw their cash so it could be reinvested in funds that don't lend out securities.
But under restrictions imposed by Northern Trust in September, investors wishing to withdraw entirely from securities-lending activities would have to take their share of both liquid assets and illiquid collateral-pool holdings, according to a Northern Trust court filing. BP rejected that option, and the companies still are trying to resolve the matter in court.
Northern Trust's collateral pools are "conservatively managed" and focus on liquidity over yield, the company said.
State Street Corp. in March notified investors of new withdrawal restrictions in its securities-lending funds. Until at least the end of the year, plans can make monthly withdrawals of only 2% to 4% of their account balance, the notice said.
Plans wishing to withdraw entirely from lending funds will have to take a slice of beaten-down collateral-pool holdings.
"Given the current state of the fixed-income market, we felt it was prudent to put some well-defined withdrawal parameters in place," said State Street spokeswoman Arlene Roberts.

Massachusetts provides free cars to welfare recipients - to help them go to work, of course. Meanwhile many taxpayers cant afford cars.

Free cars for poor fuel road rage
By Hillary Chabot Thursday, May 7, 2009
Gov. Deval Patrick’s free wheels for welfare recipients program is revving up despite the stalled economy, as the keys to donated cars loaded with state-funded insurance, repairs and even AAA membership are handed out to get them to work.
But the program - fueled by a funding boost despite the state’s fiscal crash - allows those who end up back on welfare to keep the cars anyway.
“It’s mind-boggling. You’ve got people out there saying, ‘I just lost my job. Hey, can I get a free car, too?’ ” said House Minority Leader Brad Jones (R-North Reading).
The Patrick administration decided last month to funnel an additional $30,000 to the nearly $400,000 annual car ownership program.
The program, which is provided by the State Department of Transitional Assistance, gives out about 65 cars a year, said DTA Commissioner Julia Kehoe.
The state pays for the car’s insurance, inspection, excise tax, title, registration, repairs and a AAA membership for one year at a total cost of roughly $6,000 per car.
The program, which started in 2006, distributes cars donated by non-profit charities such as Good News Garage, a Lutheran charity, which also does the repair work on the car and bills the state.
Kehoe defended the program, saying the state breaks even by cutting welfare payments to the family - about $6,000 a year.
“If you look at the overall picture, this helps make sure people aren’t staying on cash assistance. It’s a relatively short payment for a long-term benefit,” Kehoe said.
But Kehoe admitted about 20 percent of those who received a car ended up back on welfare, and while they lose the insurance and other benefits, they don’t have to return the car.
“Given the state’s fiscal condition, paying for AAA and auto inspection costs is outrageous,” said Senate Minority Leader Richard Tisei (R-Wakefield). “There are so many families out there trying to deal with layoffs and pay cuts. You have to wonder what the state’s priorities are at this point.”
Applicants for cars must have a job or prove they could get one if they had the car in order to qualify. Once they have the wheels, they must send DTA their pay stubs to prove they are employed.
To get the cars, they must be unable to reach work by public transportation and have a clean driving record. The program is only available to families on welfare with children.
Kehoe said the bulk of cars go to places with less public transportation, such as Fitchburg, New Bedford and Lowell.
“I can’t believe there are no restrictions on how they use the car,” Jones said. “I just don’t see this as a core function of government.”

After receiving bailout with taxpayer's money, GM to move jobs overseas.

Under Restructuring, GM To Build More Cars Overseas
By Peter WhoriskeyWashington Post Staff WriterFriday, May 8, 2009
The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company's new jobs will be filled by workers overseas.
According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double.
The proportion of GM cars sold domestically and manufactured in those low-wage countries will rise from 15 percent to 23 percent over the next five years, according to the figures contained in a 12-page presentation offered to lawmakers in response to their questions about overseas production.
As a result, the long-simmering argument over U.S. manufacturers expanding production overseas -- normally arising between unions and private companies -- is about to engage the Obama administration.
Essentially in control of the company, the president's autos task force faces an awkward choice: It can either require General Motors to keep more jobs at home, potentially raising labor costs at a company already beset with financial woes, or it can risk political fury by allowing the automaker to expand operations at lower-cost manufacturing locations.
"It's an almost impossible dilemma," said former labor secretary Robert B. Reich, now a professor at the University of California-Berkeley. "GM is a global company -- so for that matter is AIG and the biggest Wall Street banks. That means that bailing them out doesn't necessarily redound to the benefit of the U.S. or American workers.
"More significantly, it raises fundamental questions about the purpose of bailing out these big companies. If GM is going to do more of its production overseas, then why exactly are we saving GM?"
The administration has aroused similar complaints by shepherding a merger between Chrysler and Italian automaker Fiat. But it has extracted a promise from Fiat that it will build small cars in the United States.
The complaints about GM's operations portend a potentially larger argument, a political dispute led in part by the United Auto Workers.
"The bottom line is GM would rather pay $2 an hour -- and it's a slippery slope downward," said Alan Reuther, the UAW's legislative director. "If GM is going to be getting government assistance, they ought to be maintaining their manufacturing footprint in the U.S. rather than going off to China, Mexico and South Korea."
Labor costs in those countries are far lower. While paying a U.S. autoworker with benefits costs about $54 an hour, a South Korean worker earns about $22 an hour, a Mexican worker earns less than $10 an hour and some Chinese workers can earn as little as $3 an hour, industry sources said.
On Tuesday and Wednesday, GM chief executive Fritz Henderson met with legislators and sought to ease their concerns over the overseas operations.
He emphasized that the company, which is shuttering factories at home, is also canceling projects in Mexico, Russia and India.
He also assured legislators that none of the figures are final, and that negotiations with the union are ongoing.
"We continue to work closely with GM, UAW, and all the stakeholders to further refine and develop GM's plan," a Treasury spokesman said.
The U.S. government has loaned GM $15.4 billion. But billions more are expected to be invested, and under the current plan, it will be the majority owner of the company.
The company forecasts that between 2010 and 2014, as the recession recedes, its U.S. sales will rise from 2.4 million to 3.1 million.
Most of that growth -- about two-thirds of it -- will occur in the United States. But about one-third of that growth will come from other countries, mostly Mexico and South Korea.
Those proportions roughly reflect how GM builds the cars it sells in the United States today -- about two-thirds come from the United States and one-third from other countries.
According to the figures shared with lawmakers, the percentage of GM's U.S. sales of cars built in the United States dips from 67 percent in 2009 to 61 percent in 2012. Yet the company projects that by 2014 the percentage will rebound to 66 percent.
Under the viability plan, "the U.S. percentage stays roughly the same," Henderson said in an interview last week.
But the union and some legislators object that the company's U.S.-funded revival should not help pay for expanding foreign operations. Moreover, they believe that planned cuts in Canadian production -- down 23 percent -- will have direct effects on U.S. jobs because the U.S. and Canadian auto industries are so intertwined.
"If you are shutting down plants in this country, U.S. tax dollars should not go for building plants in other countries," said Sen. Sherrod Brown (D-Ohio), who was among those who met with Henderson.
But company officials and industry analysts have long argued that, even putting aside the issue of labor costs, it makes logistical sense to build some cars in other countries, even if they are destined for sale in the United States.
Take, for example, the Chevrolet Spark, a tiny car that GM sells in South Korea and elsewhere in Asia. In the next few years, the company plans to send some of those cars -- which are built in Changwon -- to the United States for sale.
But since only about 5 percent of the car's market will be in the United States, the manufacturing will remain in South Korea.
Analysts who study the auto companies and their global operation warn against allowing political passions to obstruct GM's efficiency.
"If we start making political decisions with the auto industry, we're going to be in tremendous trouble," said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide.

Pandemic? What pandemic?