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Demos urge aiding auto industry with bailout funds

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WASHINGTON — Democratic leaders in Congress urged the Bush administration on Saturday to consider using the $700 billion bailout for the financial system to aid distressed American automakers, in a prelude to what may become urgent negotiations over additional economic stimulus measures.

In a letter to Treasury Secretary Henry M. Paulson Jr., the Democratic leaders said, "A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy and the livelihood of the automobile sector's workforce." The letter was signed by the House speaker, Nancy Pelosi of California, and the Senate majority leader, Harry Reid of Nevada.

But the Democratic leaders also urged Paulson to include strong taxpayer protections as a condition of any aid to the automakers, mindful of public frustration over the repeated efforts by the government to aid large financial institutions and other corporations while average citizens struggle in the economic downturn.

On Friday, General Motors said that it had been burning through cash at a pace of more than $2 billion a month and that it could run short of money by mid-2009 without federal help.

The company said it had suspended merger talks with Chrysler to focus on its own problems. Chrysler and Ford have also been battered by the weak economy, tight credit markets and high oil prices, but General Motors seems to be the worst off.

Congress recently approved $25 billion in loans for auto manufacturers, but executives say that is not

enough to keep the industry afloat.

On Thursday, representatives of the Big Three automakers met on Capitol Hill with congressional leaders to make a pitch for additional assistance. And in their letter to Paulson, the lawmakers said they believed such aid was needed.

"We left the meetings," they wrote, "convinced that our nation's automobile industry — the heart of our manufacturing sector — and the jobs of tens of thousands of American workers are at risk. Friday's news of the automobile industry's record low sales figures only reaffirm the need for urgent action."

The letter to the Bush administration came slightly more than a week before Congress might reconvene for a lame-duck session in which an economic stimulus measure would be the main order of business.

Democrats have proposed a stimulus measure of as much as $100 billion that would include new spending on infrastructure projects, an extension of unemployment benefits for those whose payments are about to run out, an increase in food stamps and additional aid to help cash-strapped states meet rising Medicaid costs.

But whether a lame-duck session will take place largely depends on whether President Bush drops his opposition to a stimulus bill. Brookly McLaughlin, a Treasury spokeswoman, did not directly address the Democratic leaders' call for an extension to the auto industry, saying in response to the Reid-Pelosi letter, "We continue to work on a strategy that most effectively deploys the remaining TARP funds to strengthen the financial system and get lending going again." TARP, or the Troubled Assets Relief Program, is the name for the government's financial rescue program.

Alternatively, the Democrats could wait until after President-elect Barack Obama is inaugurated to push forward an even more aggressive stimulus measure, but some officials fear that the economic crisis is so severe that waiting even two and a half months would be a grave mistake.

One alternative to using the financial bailout to aid the auto industry would be to include additional assistance for the car manufacturers in a stimulus package.

Democratic leaders said they intended their letter to potentially jump-start those conversations with the White House.

In their letter, the Democrats said they hoped that government aid to the automakers would also help address the energy crisis and ultimately combat global warming.

"It is our hope," the letter said, "that the actions that Congress has taken, and that the administration may take, will restore the pre-eminence of our domestic manufacturing industry so that it can emerge as a global, competitive leader in fuel efficiency and in new and path-breaking energy-efficient technologies that protect our environment."