Meltdown of Subsidized Battery Maker Zaps Obama Detroit Visit

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Power Play 12/10/12

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“The work you’re doing will help power the American economy for years to come.”

-- President Obama in a Sept. 13, 2010 phone call to battery maker A123 Systems, congratulating the firm on using the bulk of a $249 million government grant to open new facilities in Michigan.

President Obama travels to Detroit today to talk about the need for increased taxes on top earners to finance federal spending, and is using an announcement of a $100 million investment from German auto giant Daimler to illustrate that his economic prescription is working.

Obama is not likely to discuss another big business story of the day – the sale of the assets of battery maker A123 to a Chinese competitor. A123 spent at least $132 million of its $249 million stimulus package grant to build two Detroit-area factories, including one in Livonia, right next door to Redford Township, where Obama is speaking today.

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Assuming a bankruptcy judge and the Obama Treasury Department approve of the sale of A123’s assets to Wanxiang Group, the Chinese battery maker would immediately become the dominant force in the industry.

So for $256.6 million, the Chinese firm would get all that the stimulus package purchased plus the company’s existing operations in Massachusetts and Missouri and have the chance to pare down the company to profitability without the overhead of A123’s debt.

A very good deal to be sure, but not one that American firms were willing to take on. As the president has often said, China and its economic central planners are betting very big on the battery business – for cars, for the electric grid, etc. And with A123, they get to take advantage of not only their own government subsidies, but those provided by American taxpayers.

An additional irony: Whatever share of the original $249 million stimulus grant that the Treasury borrowed from China will still have to be paid back. The boys in Beijing must be having a happy Monday. Obama gave A123 lots of subsidy money to expand to compete with subsidized Chinese firms and the subsidized Chinese firms win anyway.

The president today will be arguing on behalf of his proposal to raise taxes on top earners in order to prevent tax increases on middle-income earners and to pay for increased short-term domestic spending that can help lure firms like Daimler to expand and invest in the United States. By hiring more teachers, the American workforce will be better educated; by spending more on infrastructure, corporations will be encouraged to grow; etc.

This comes as the president is doing his best to scatter his Republican foes on the issue of higher taxes. Republicans keep looking to make concessions, but Obama keeps talking tough and staying on the campaign trail.

The growing realization in Washington is that the president means to make the so-called “Fiscal Cliff” not the end of a long-running series, but the pilot for a spinoff in which Republicans are cast as the villains again, but this time on the run.

A headline in Sunday’s New York Times said it all: “Tax Arithmetic Shows Top Rate Is Just a Starter.” The higher tax rates on top earners the president is looking at would only cover about a quarter of the $1.6 trillion in new taxes the president is seeking over the next decade.

Starting next year, the top 20 percent of American households will see their federal taxes go up by an estimated average of $6,000 to finance the new health-insurance entitlement created by Obama’s 2010 health law.

In addition to that and the rate hike Obama is seeking in his negotiations, Obama will need lots and lots more tax revenue to finance his domestic programs, even while continuing to run $1 trillion deficits.

Investment taxes and inheritance taxes would make up another $526 billion of Obama’s $1.6 trillion quasi-budget proposal, on top of the $442 billion that would come from higher rates. The rest of the money comes from some accounting changes and other gimmicky cuts.

Republicans are desperate to talk about cutting Medicare and Social Security, and would seemingly do anything to get on to that discussion. Party elders are increasingly urging Republicans to move on from all the tax talk so that they can get busy expressing their enthusiasm for reductions to beloved existing entitlement programs.

Woof.

What Republicans seem less willing to talk about is what in the heck the president plans to do with the money. Obama isn’t shy about telling people, even to the point of today being just a few miles away from the site one of the worst disasters of his stimulus package to tout the need for stimulus spending.

Obama invited House Speaker John Boehner to the White House over the weekend to talk about how the Republicans should concede on taxes, but today flies out to keep the pressure on Boehner for the need for more spending.

Obama is out talking about growth while Republicans are debating how much to raise taxes and how much to cut entitlements. Merry Christmas.

If Republicans can’t use the example of Obama pitching spending in Detroit the day after beneficiary of a previous Detroit subsidy fell into the arms of the Chinese to make the case against his spending proposals, they might as well go home for Christmas now.

Chris Stirewalt is digital politics editor for Fox News, and his POWER PLAY column appears Monday-Friday on FoxNews.com. Catch Chris Live online daily at 11:30amET  at  http:live.foxnews.com.