Why GM Should Send a Thank You Note to Saudi Arabia

Why GM Should Send a Thank You Note to Saudi Arabia

FILE PHOTO: People walk past a rack of SUV doors on a cart, at the General Motors Assembly Plant in Arlington, Texas June 9, 2015.  REUTERS/Mike Stone
Mike Stone
By Michael Rainey

General Motors shares are up more than 4 percent Thursday after the automaker reported better-than-expected profits. The company earned more than $1 billion in profits last quarter, well above Wall Street’s forecasts.

A big reason for the blowout quarter was record margins in North America, thanks in large part to increased sales of trucks and SUVs. The headline at the Detroit Free Press says it all: “GM earns $1.1B in Q2 as pickup, SUV sales surge in U.S.”

Related: What's Next for Oil Prices? Look Out Below!

As a general rule, big pickup trucks and SUVs deliver higher profit margins than smaller, cheaper cars, so Detroit is always happy when large vehicles are selling. Another general rule seems to be that when gas is cheap, Americans start dreaming about gas-guzzling vehicles of all kinds, from blinged-out GMC Yukon XL Denalis to fuel-blasting Chevy Camaro ZL1s. And gas certainly has been cheap lately, thanks in large part to Saudi Arabia’s decision to maintain crude oil production levels in the face of increased U.S. production and a global slowdown in demand for energy.

Here’s a chart of gas and oil prices over the last three years, courtesy of GasBuddy. Note the steep decline starting in 2014:

As long as oil and gas are cheap, GM can probably count on selling lots of its most profitable vehicles. And with China slowing and Iran rejoining the global oil market, cheap fuel may be here for a while.

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It’s Official: No Government Shutdown – for Now

iStockphoto/The Fiscal Times
By The Fiscal Times Staff

President Trump signed a short-term continuing resolution today to fund the federal government through Friday, December 22.

Bloomberg called the maneuver “a monumental piece of can kicking,” which is no doubt the case, but at least you’ll be able to visit your favorite national park over the weekend.

Here's to small victories!

Greenspan Has a Warning About the GOP Tax Plan

Alan Greenspan
REUTERS/Kevin Lamarque
By Michael Rainey

The Republican tax cuts won’t do much for economic growth, former Federal Reserve Chair Alan Greenspan told CNBC Wednesday, but they will damage the country’s fiscal situation while creating the threat of stagflation. "This is a terrible fiscal situation we've got ourselves into," Greenspan said. "The administration is doing tax cuts and a spending decrease, but he's doing them in the wrong order. What we need right now is to focus totally on reducing the debt."

The US Economy Hits a Sweet Spot

iStockphoto
By The Fiscal Times Staff

“The U.S. economy is running at its full potential for the first time in a decade, a new milestone for an expansion now in its ninth year,” The Wall Street Journal reports. But the milestone was reached, in part, because the Congressional Budget Office has, over the last 10 years, downgraded its estimate of the economy’s potential output. “Some economists think more slack remains in the job market than October’s 4.1% unemployment rate would suggest. Also, economic output is still well below its potential level based on estimates produced a decade ago by the CBO.”

The New York Times Drums Up Opposition to the Tax Bill

FILE PHOTO: People line up for taxi across the street from the New York Times head office in New York
Carlo Allegri
By The Fiscal Times Staff

The New York Times editorial board took to Twitter Wednesday “to urge the Senate to reject a tax bill that hurts the middle class & the nation's fiscal health.”

Using the hashtag #thetaxbillshurts, the NYT Opinion account posted phone numbers for Sens. Susan Collins, Bob Corker, Jeff Flake, James Lankford, John McCain, Lisa Murkowski and Jerry Moran. It urged readers to call the senators and encourage them to oppose the bill.

In an editorial published Tuesday night, the Times wrote that “Republican senators have a choice. They can follow the will of their donors and vote to take money from the middle class and give it to the wealthiest people in the world. Or they can vote no, to protect the public and the financial health of the government.”

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Can Trump Succeed Where Mnuchin and Cohn Have Flopped?

U.S. Treasury Secretary Steven Mnuchin smiles during the 2017 Institute of International Finance (IIF) policy summit in Washington
REUTERS/Yuri Gripas
By The Fiscal Times Staff

President Trump met with members of the Senate Finance Committee Monday and is scheduled to attend Senate Republicans’ weekly policy lunch and make a personal push for the tax plan on Tuesday. Will he be a more effective salesman than surrogates in his administration?

Politico’s Annie Karni and Eliana Johnson report that both Democrats and Republicans say Mnuchin and chief economic adviser Gary Cohn have repeatedly botched their tax pitches, “in part due to their own backgrounds” as wealthy Goldman Sachs alums. “House Speaker Paul Ryan earlier this month asked the White House not to send Mnuchin to the Hill to talk with Republican lawmakers about the bill, according to two people familiar with the discussions — though Ryan has praised the Treasury secretary’s ability to improve the legislation itself,” Karni and Johnson write.