Friday, December 19, 2008

Just Do It Anyway

Q: What’s a president to do when lawmakers can’t achieve enough agreement to approve a provision he wants to pass? A: Do it anyway by executive fiat. That’s what happens in a banana republic. Or rather, that’s what happens in the U.S.A.

The nation’s Big Three automobile makers and their union fellow travelers have dumped about a quarter million dollars into politics this year, all in the hopes of preserving their uncompetitive good-old-boys-centric business model. But when the car companies’ chief executives (and their union cronies) came panhandling the government, they refused to bend enough even for the hooligans in Congress to stomach.

No problem. President Bush decided this morning to use $17.4 billion of the gargantuan financial industry bailout fund (i.e. a boatload of cash the government doesn’t really have — and remember that the Treasury Secretary has authority to use it pretty much however he wants) to make sure that the car company and union execs won’t be kicked out of their plush jobs (see AP report). At least, not just yet.

You see, it’s apparently OK for government to take money from prudent taxpayers and pump it into failing businesses to make sure that your precious resources are used in the least efficient manner. You wily investors wouldn’t do this yourself, so government must force you to do so. For the public good, of course.

But it’s all OK, because these are only “temporary loans.” To get this lucre, the car companies must agree to come up with a plan that will ensure viability within 90 days. Holy guacamole! These guys have been going down the toilet for 30 years (and especially for the past five years), and they don’t yet have a plan for becoming viable?! How is 90 days going to change that?

It works like this. 90 days gives President B the opportunity to make it look like he’s doing something substantive, while merely chucking the ball into President O’s court. The car and union execs don’t need 90 days to develop a plan. They already have one: lobby the new president and Congress to ante up much larger loads of money to preserve their unviable business models; maybe even an ongoing subsidy, kind of like the farm bill.

But the gesture also gives President B the opportunity to throw in a number of provisions that the current Congress, the next Congress, nor President O would dare to think about imposing on the car companies.

The car makers get to use your money until the end of March. If they don’t have satisfactory viability plans (satisfactory to the new administration and Congress, whatever that means), they will have to repay the “loans,” something everyone knows they will be completely incapable of doing. (This is very similar to sub-prime mortgage loans. And we all know how well that worked out.)

President B may be playing a clever ploy. But if that’s the case, it could easily backfire. If these guys come panhandling Washington again in the spring after having squandered $17.4 billion, even a Democratic president and congress may be hard pressed to toss more cash at them.

On the other hand, what’s to stop them from playing the sky-is-falling routine again? “Sure we blew over $17 billion in the first quarter of ’09, but if you don’t cough up another $30 billion we’re going to have economic Armageddon.” The question is whether Americans will allow themselves to be duped yet again.

At least President B knows that by that time, it will be somebody else’s problem and he won’t be blamed for destroying “the American car industry.” Never mind that the other American car industry — Toyota, Honda, Subaru, etc — continues to be economically viable in difficult times, even without massive infusions of taxpayer dollars.

But today you can be proud that the tax dollars of hard working Americans — mechanics, soldiers, nurses, clerks, etc — will go to prop up unionized workers making $75/hour on average (some of them being paid for not working). Just be on the lookout for the huge numbers of others that are now queuing up to seek a bailout from the federal government. Heck, it worked for the car companies. Why not give it a shot?

This is not our nation’s proudest moment.


Jake said...

Yet another erroneous quote of $70+/hour in wages.
From CBS News:
"But then what's the source of that $70 hourly figure? It didn't come out of thin air. Analysts came up with it by including the cost of all employer-provided benefits--namely, health insurance and pensions--and then dividing by the number of workers. The result, they found, was that benefits for Big Three cost about $42 per hour, per employee. Add that to the wages--again, $28 per hour--and you get the $70 figure. Voila.

Except ... notice something weird about this calculation? It's not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that--probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees--in other words, the cost of benefits for other people. One of the few people to grasp this was's Felix Salmon. As he noted friday, the claim that workers are getting $70 an hour in compensation is just 'not true.' "

Are foreign auto makers really doing that much better? I'm not so sure after reading that Toyota is posting it's first annual loss since it was founded.

Scott Hinrichs said...

The $75/hour figure was agreed to by the auto company execs in congressional testimony. It's in the Congressional Register. I never said the foreign companies could never post a loss. Toyota has, in fact, experienced a bigger decline than GM during 2008. However, Toyota remains viable on its own. GM does not.