November 21, 2008 [LINK / comment]
It was quite heartening that leaders on Capitol Hill gave a resounding "no" to the pleas by Detroit auto executives for a loan to tide them over until next year ... or whenever. The CEOs couldn't quite say for sure how much money they would need, or for how long. The bosses got chewed out -- and rightly so! -- for having flown in to Washington on private jets rather than using commercial airliners. Ordinarily, I'm not fond of populist attacks on the lifestyles of the rich and famous, because doing so only justifies and thereby stimulates the latent greed and envy that all people have to one extent or another. We don't need class warfare. But when the overlords of Corporate America come begging for taxpayers' money, such criticism is fitting and proper.
One of the good things about this gloomy economic situation is that it has created an unusually strong consensus across party lines that, when it comes to corporate welfare, enough's enough! Democrats have joined forces with staunch fiscal conservatives on the Republican side such as Sen. Richard Shelby of Alabama, and Richard Viguerie is leading the chorus of nays. Perhaps that strong expression of bipartisanship will get Detroit's attention!
Or maybe not. Don't forget that Congress initially refused to go along with the bailout of the financial sector in late September, but they eventually buckled under. After President Bush used what little clout he still possesses, and after the bill was sweetened with all sorts of special-interest goodies, Congress finally did pass a financial bailout package in early October -- in spite of vehement warnings that the whole thing was grievously wrong-headed. In this case, a bailout package would amount to a big step toward de facto nationalization of the auto industry, which is exactly what many on the Left want. Without a doubt, there would be many strings attached to any rescue, including mandated salary cuts for executives. (That would certainly be a good thing, but it shouldn't be decided in a political forum.) So, we should take with a grain of salt those loud jeers from the Democratic side of the aisle, because it may just be a negotiating tactic to bargain down the price of the eventual buyout of Detroit by Washington.
As far as the fate of the Big Three auto companies, one point needs to be made very clearly: The main reason that G.M., Ford, and Chrysler can't compete against the foreign auto makers is the high embedded cost of labor -- present and past. It's not just the (relatively) high salaries earned by the unionized American auto workers, it's the huge amount of pension money that the U.S. companies have to pay out to all their retired employees. One compromise solution to save the U.S. auto industry from bankruptcy would be to negotiate new pension terms with existing workers and retirees. That may be the only way to rescue the industry that was once the pride of the United States. Are there enough patriotic-minded auto workers out there?
When I cited the Economist editorial ("Ship of fools," about the GOP) yesterday, I forgot to mention the person who brought it to my attention. Thank you, Matthew Poteat!