Roger’s Rules

When "Bailout" means "Payback": or, $14 billion just to make it to the funeral?

Once upon a time, it was cheerfully said that “as Detroit goes, so goes America.” The same thing is being said to day, but in more worried tones. Is America the basket case that the American car industry is, hamstrung by asphyxiating labor contracts, saddled with crushing pension and health-care obligations, snagged in a purblind corporate culture that is out of touch with the consumer? I don’t think so, but the fact that grown-ups are seriously considering pumping billions of dollars into this failed industry makes me realize that many of our duly elected leaders are farther down that road than one would like.

But why? I know Democrats like to spend as much money as possible. Even so, is it smart to throw $14 billion (or whatever the figure is today) to Detroit just so it can stay afloat long enough to attend its own funeral? Why would they do it. Gary Bauer, in his “End of Day” email newsletter (available here), got it exactly right.

As was widely expected, the Democrat-controlled House of Representatives passed the $14 billion bailout bill for the auto industry on a largely party-line vote of 237-to-170. But there is little that indicates the current business model is workable, and given that the Big Three were asking for more than twice that amount, it also seems highly likely that this $14 billion is just a down payment.

$14 billion a “down payment”? Yes, folks, you read it here: should this fiscally irresponsible fiasco go forward you can be sure that in 8 months or a year Detroit will discover that it needs another $20 or $30 billion “to save the American car industry,” etc. The CEOs of the Formerly Big Three won’t make the mistake of taking their corporate jets to Washington again, but, like Arnold Schwarzenegger in the Terminator movies, you know that they’ll “be back.”

Washington talks about “bailout.” What it is really engaged in is “payback,” not in the sense of “revenge” but in the sense of financial consideration for favors rendered. Rod Blagojevich has been a little too outspoken in his proposed transactions. But is the proposed Detroit Bailout-Payback really much different?

Bauer explains:

And while the bailout is described as assistance for the auto industry, it is in many respects a bailout of the United Auto Workers union, one of the most militant unions the nation has ever had. Now, I realize a lot of good people are at risk of losing their jobs, and I am not cavalier about that. But the UAW has saddled the industry with tremendous debts and obligations that far exceed those of other industries. As much as anything else, this bailout appears to be political payback by liberal politicians to their big union donors. According to the Center for Responsive Politics, the UAW gave 99% of its 2008 campaign contributions to Democrats, and in return 86% of House Democrats voted last night for the UAW bailout.

Well, what do you know. As I wrote here a couple of weeks ago, the ailing auto industry is just the sort of thing that Chapter 11 was designed for. Why, I asked, should the American taxpayer foot the bill for perpetuating the the inflated labor and benefit costs of a bloated, non-competitive industry? They shouldn’t.