Sunday, December 21, 2008

Bush Goes Wobbly -- Bails Out the United Auto Workers

Democrat Congressional leaders played a game of chicken with Republican Bush and Bush blinked. They wouldn't/couldn't pass a bill themselves to throw money at the failing automakers (really the United Auto Workers union), but intimidated the dazed and rudderless Bush into doing it. If it doesn't work out, it's his fault; if it does, they were always in favor of it, for, after all, helping unions is always Democrat policy.

Bush decided to give GM and Chrysler bailout money rather than see them enter forced restructuring. The money is coming from the Troubled Asset Relief Program, enacted specifically to bailout financial firms, not industrial companies. But honesty and perhaps even legality are trifling issues when Something Important Must Be Done.

Frank James writes (link) at the Chicago Tribune's Swamp weblog:

President Bush has decided to bailout the Detroit Three automakers [Ford may say no thanks]with a $17.4 billion rescue package of bridge loans to give the struggling automakers more breathing room to restructure and to avoid a collapse that some had warned could come early next year if they received no help. In doing so, the president rejected the idea that had been discussed in recent days of a so-called structured bankruptcy for the auto industry, at least for now.... But the president made it clear that the bridge loans were coming with tough terms. He said the automakers needed to submit workable plans for restructuring by March 31 and that if they didn't the federal government would require its loans to be repaid immediately. In addition, he said his administration expected all the auto industry players -- management, creditors, dealers, workers and bondholders -- to make significant concessions in order to make the rescue work.
It's the old "but you must return with a plan" routine. The old "just this once" bit. He "expects" the autoworkers' union to make significant concessions.

James continues:

Bush was also attempting to lead his party away from what he saw as a political abyss. The White House, including Vice President Cheney, had argued to Senate Republicans, that the party risked being branded again as President Herbert Hoover's party if Senate Republicans didn't approve a rescue plan. Hoover, a Republican, has been blamed for decades, for not acting aggressively enough to keep the Great Depression from worsening.
But Senate Republicans, by rejecting the recent Democrat Congressional bailout attempt (link), were trying to save the companies by forcing them into a needed restructuring. Bush has now given them money hoping that all parties will voluntarily make the necessary concessions. Bush will be long gone when the foolishness of this latest gambit comes due.

Think the autoworkers are interested in concessions? Here's James again:

One of the first congressional responses to the president's action came from [Democrat] Rep. John Dingell of Michigan who welcomed the assistance but not the president's call for more sacrifice from auto workers: "I have strong concerns about some of the conditions that were placed on these loans.... [i]t is irresponsible during a time of economic crisis for the White House to insist that workers take further wage cuts on top of the historic concessions they have already made."
Bush apparently doesn't conceive of the possibility that by doing something, he may actually do harm. He seems to believe that when faced with a big, big problem, throwing money at it must help and can never do more harm than good. He undoubtedly believes that the Great Depression was Great because Hoover and Roosevelt didn't mess with the economy enough, rather than too much.

Larry Kudlow, undoubtedly reflecting what many Americans feel, strongly criticized Bush's "loan" on CNBC (link):
"[I]f anybody reads this goofy document, the absolute essential issues in this -- the wages, the compensation, the work rules, the debt restructuring -- are non-binding targets," Kudlow said. "[N]on-binding targets - that is a total outrage for the American taxpayer, and ... we're going to be shoveling taxpayer money for years and years because there is nothing in here that is specific, and tough, and enforceable.... It's not just the car companies that got what they wanted, which is to say money - it's the UAW that got what it wanted," Kudlow said. "[T]he UAW opposed Republican Sen. Corker's plan because he had tough clear binding conditions. It was essentially a government-sponsored Chapter 11 bankruptcy. This [Bush document] is just a bunch of words on a piece of paper that has no meaning. And the worst part of the story is taxpayers are going to be left on the hook. We are going to own General Motors for years to come.... [F]rom the taxpayers' standpoint, from the possibility of serious structural reform where their hands are tied, from... having an adult monitoring this - some kind of car czar or bankruptcy judge - this Bush deal strikes out.... And I regret to say this to Mr. Bush and Mr. Paulson, you blew it because you didn't protect the taxpayers and you're not protecting the long-run health, either, of the American car business, which needs this radical restructuring, or the American economy."
So what has Bush bailed out? In his mind a couple of auto companies, but many of us know better. As I have written (link), the American auto companies "are now private social-welfare-plus-executive-stock-plan cooperatives, which finance themselves through the financing of increasingly uncompetitive motor vehicles that they manufacture at a loss. And these social welfare cooperatives have finally run out of money and now want American taxpayers to subsidize them." Well now we have.

John M Greco