Degree of Madness

Obama's economic recovery plan summed up in one word.

Bailouts. 

Simple.  Easy to remember.  No need to leave the golf course, or the fundraiser, or the party.  Just dial it in.

President Obama wants another $50 billion.  According to this Washington Post headline, he's "pleading" for it:

President Obama urged reluctant lawmakers Saturday to quickly approve nearly $50 billion in emergency aid to state and local governments, saying the money is needed to avoid "massive layoffs of teachers, police and firefighters" and to support the still-fragile economic recovery. 

House Majority Leader Steny H. Hoyer understates the obvious:

"I think there is spending fatigue... It's tough in both houses to get votes."

Spending fatigue?  I'll say.  I don't think Obama is concerned with spending fatigue, however.  His agenda here is clear.  The union controlled public sector must be propped up - to hell with the cost.

Helping out his political comrades is standard operating procedure for Barack Obama.  When the original stimulus bill was being debated the reliably Democratic feminists came calling howling.  Their complaint?  Too much money for the men.  All those "shovel-ready" jobs Obama promised to create are traditionally held by men:

Last November [2008], President-elect Obama addressed the devastation in the construction and manufacturing industries by proposing an ambitious New Deal-like program to rebuild the nation's infrastructure. He called for a two-year "shovel ready" stimulus program to modernize roads, bridges, schools, electrical grids, public transportation, and dams and made reinvigorating the hardest-hit sectors of the economy the goal of the legislation that would become the recovery act.

Women's groups were appalled. Grids? Dams? Opinion pieces immediately appeared in major newspapers with titles like "Where are the New Jobs for Women?" and "The Macho Stimulus Plan." A group of "notable feminist economists" circulated a petition that quickly garnered more than 600 signatures, calling on the president-elect to add projects in health, child care, education, and social services and to "institute apprenticeships" to train women for "at least one third" of the infrastructure jobs. At the same time, more than 1,000 feminist historians signed an open letter urging Obama not to favor a "heavily male-dominated field" like construction: "We need to rebuild not only concrete and steel bridges but also human bridges." As soon as these groups became aware of each other, they formed an anti-stimulus plan action group called WEAVE--
Women's Equality Adds Value to the Economy.

The National Organization for Women (NOW), the Feminist Majority, the Institute for Women's Policy Research, and the National Women's Law Center soon joined the battle against the supposedly sexist bailout of men's jobs. At the suggestion of a staffer to Speaker of the House Nancy Pelosi, NOW president Kim Gandy canvassed for a female equivalent of the "testosterone-laden 'shovel-ready' " terminology. ("Apron-ready" was broached but rejected.) Christina Romer, the highly regarded economist President Obama chose to chair his Council of Economic Advisers, would later say of her entrance on the political stage, "The very first email I got . . . was from a women's group saying 'We don't want this stimulus package to just create jobs for burly men.' "

No matter that those burly men were the ones who had lost most of the jobs. The president-elect's original plan was designed to stop the hemorrhaging in construction and manufacturing while investing in physical infrastructure that is indispensable for long-term economic growth. It was not a grab bag of gender-correct programs, nor was it a macho plan--the whole idea of economic stimulus is to use government spending to put idle factors of production back to work.

Obama didn't disappoint:

...Our incoming president did what many sensible men do when confronted by a chorus of female complaint: He changed his plan. He added health, education, and other human infrastructure components to the proposal. And he tasked Christina Romer and Jared Bernstein, Joseph Biden's chief economist, with preparing an extraordinary report that calculated not only the number of jobs the plan would likely create, but the gender composition of the various employment sectors and the division of largess between women and men.

And where did the money wind up?  From a June 4, 2009, AP story:

Remember the "shovel-ready" projects lined up for all that stimulus money? It turns out social spending, more than construction, is hitting pay dirt in the huge federal effort to turn the economy around.

...

Most of the roughly $300 billion coming directly to the states is being funneled through existing government programs for health care, education, unemployment benefits, food stamps and other social services.

And how was the money supposed to benefit the states?:

John Husing, a Southern California economist, said keeping teachers and police officers employed should help prevent the recession from getting worse. But he said the stimulus package would have improved communities' ability to grow over the long haul if it had dedicated more money to public works.

While billions of dollars eventually will flow to infrastructure projects, Democrats who crafted the package say they directed most of it to existing government programs such as Medicaid and education to prevent state economies from slipping even more. One goal was to help fill state budget gaps, keeping teachers and others employed while strengthening the social safety net.

$300 billion here, $50 billion there.  Pacify the feminists, pacify the unions.  

John Hinderaker:

The original "stimulus" bill was all about keeping state and local government spending, and the salaries it supports, sky-high. It doesn't appear that President Obama has a game plan to help the economy, other than continuing to feed the already-bloated public sector. This is consistent with his apparently complete ignorance of basic principles of economics. Democrats in Congress, however, can see the writing on the wall. It will be interesting to see whether they are willing to brave voter wrath by stimulating the public sector still further.

Bottom line from Ed Morrissey:

This is a $50 billion bailout to Big Labor — the SEIU, AFSCME, and the NEA.

Obama's rules

Principles for Managing Ownership Stake:

Largely overlooked in the coverage of the historic bankruptcy filing by GM, President Barack Obama laid out his four principles for government ownership for financial firms. (my emphasis)

Chilling words.  Government ownership of formerly private enterprises. 

Rule number three:

After any up-front conditions are in place, the government will protect the taxpayers’ investment by managing its ownership stake in a hands-off, commercial manner. The government will not interfere with or exert control over day-to-day company operations. No government employees will serve on the boards or be employed by these companies.

After the up-front conditions are mandated no government employee will need to serve on the board.  The "rules" will be in place, the board will have no choice but to follow them.  This is no slippery slope.  This is a downhill slalom and once we hit bottom it will be a long, difficult climb to get back up.  If it's not too late by then.  If we're going to turn back this socialist clock, we'd better get started.

Taxpayers to Loan Auto Industry $17.4B

The actual headline reads:  White House to Loan Auto Industry $17.4B.  I believe mine is more accurate. 

Yes, it would be devastating if GM and/or Chrysler failed.  But this loan is not the only option.  Yesterday it was reported President Bush was considering managed bankruptcy for the automakers, as a last resort "to be used only if an agreement for a voluntary overhaul of the industry could not be reached".  The UAW and auto executives fought bankruptcy because they do not want to overhaul the industry.  Union leaders especially do not want to make the drastic concessions necessary for the automakers to survive:

In a traditional bankruptcy proceeding, the U.A.W.’s contracts could be voided and the union forced to renegotiate benefits like health care.

Health care benefits, especially for retirees, are crushing the Big Three:

GM, for instance, has about 450,000 retirees - more than three times the number of its current full-time employees - to whom it pays pensions and for whom it provides medical care. By some estimates, medical costs alone add $1,500 to the average cost of each GM automobile. And the company is facing an unfunded liability of more than $80 billion, about half its annual pre-downturn gross sales, for future health-care costs for employees and retirees and their dependents.

Which explains the old joke that GM is no longer a car company that provides health benefits, but a health-care company that happens to make cars.  Unfortunately, the joke's on us.  It is now the responsibility of the taxpayers to insure the continued funding of bottom-line busting health care benefits.  

UAW President Ron Gettelfinger has consistently maintained bankruptcy is not an option.  Yes, it is.  No it's not something most companies want to do but when faced with overwhelming costs and a need for drastic restructuring, bankruptcy is the most viable option.  Bankruptcy courts exist for this very reason.  As for the (supposed) main objection to bankruptcy, that no one would buy a car from an automaker in Chapter 11, surveys don't back it up:

A pair of new surveys suggest buyers aren't completely unwilling to buy a car from an auto maker in bankruptcy court, as long as the federal government is willing to play a role in helping the company restructure.

This contradicts the conventional view of Detroit auto makers that suggests consumers would shun a bankrupt auto maker over fears related to the resale value of a car, the warranty and the ability to secure service and replacement parts.

Too bad the survey didn't ask another question:  Would you be more willing to buy from a company in bankruptcy or one in "bailout"? 

It will be interesting to see exactly what concessions the UAW is making in exchange for $17.4 billion.

Pelosi: bankruptcy is not an option

An announcement could be made by Wednesday:

The Bush administration was considering using money from the $700-billion Troubled Asset Relief Program, designed to help the financial services sector, to provide the emergency loans to automakers. House Speaker Nancy Pelosi (D-San Francisco) told reporters Monday that she was optimistic action would come "sooner rather than later."

"All the signals coming from the White House are that they know that bankruptcy is not an option, and that TARP funds are the only recourse" after a $14-billion auto bailout bill failed in the Senate last week, Pelosi said.

Todd Zywicki debunks this mantra and offers a reasonable explanation why some in Congress are refusing to consider bankruptcy as a solution to the (self-inflicted) mess the automakers are in.  Bankruptcy Is the Perfect Remedy for Detroit:

While Washington tries to arrange a bailout, the Detroit Three auto makers and their union, the United Auto Workers, keep insisting that bankruptcy would be the kiss of death. Not so: a Chapter 11 bankruptcy filing will likely result in a stronger domestic industry.

To understand why, consider that the fundamental question to ask of any firm facing bankruptcy is whether it is "economically failed" or simply "financially failed."

...

General Motors looks like a financially failed rather than an economically failed enterprise -- in need of reorganization not liquidation. It needs to shed labor contracts, retirement contracts, and modernize its distribution systems by closing many dealerships. This will give rise to many current and future liabilities that may be worked out in bankruptcy. It may need new management as well. Bankruptcy provides an opportunity to do all that. Consumers have little to fear. Reorganization will pare the weakest dealers while strengthening those who remain.

So why do the Detroit Three managements and the UAW insist that "bankruptcy is not an option"? Perhaps because of the pain that would be inflicted upon both.

The UAW doesn't want to take the strong medicine that would be required under bankruptcy.  Its leaders know that Congress is not inclined to force major concessions on the union or to scrutinize it too closely.  Management has more to fear from Congressional oversight but it would still be considerably more pleasant than facing a bankruptcy judge:

Those Washington politicians who repeat the mantra that "bankruptcy is not an option" probably do so because they want to use free taxpayer money to bribe Detroit into manufacturing the green cars favored by Nancy Pelosi and Harry Reid, rather than those cars American consumers want to buy. A Chapter 11 filing would remove these politicians' leverage, thus explaining their desperation to avoid a bankruptcy.

In short, Detroit and the public has little to fear from a bankruptcy filing, but much to fear from the corrupt bargain that is emerging among incumbent management, the UAW and Capitol Hill to spend our money to avoid their reality check.

Management might be in for a few surprises, however.  Congressional Democrats are notorious for mandating burdensome regulations on employers. As Zywicki points out, by handing over "free taxpayer money" they will dramatically increase their leverage.  To the detriment of us all.

This bailout will give more power to self-interested politicians in Washington.  The hammer will be aimed at management, UAW will operate pretty much as ususal, and the Big Three will continue losing market-share to those dastardly foreign automakers in the South.

And this is just the beginning.  In the not so distant future we'll be hearing how we must give the Big Three another loan, and another.  "Taxpayers have too much money invested to let the automakers fail" will be the story line.  A nationalized automobile industry will be the result.  It's starting now.

North-South smokescreen?

Divide and Conquer.

Headlines: Views on Auto Aid Fall on North-South Divide

       It's North vs. South in Big Three bailout fight

       Auto Bailout:  North vs. South

And on and on it goes.  I guess some folks haven't noticed that senators from Colorado, Wyoming, Montana, Utah, Minnesota, Idaho, Nevada, Iowa, New Hampshire, Arizona, Alaska, Kansas and South Dakota voted against the bailout.  Oklahoma and Texas too but sometimes they get lumped in with us. 

Southern Senators plot against UAW and Main Street:

"What this is is the Southern conservative senators trying to destroy the United Auto Workers, trying to destroy unions," said Mike O'Rourke, president of a UAW local at a GM factory in Spring Hill, Tenn., (Senator Bob) Corker's home state. "It's a sad day in America when the senators turn their back on Main Street."

Southern senators are being singled out because many foreign automakers have plants in the south.  (There are three foreign plants here in Alabama:  Honda, Mercedes-Benz and Hyundai). So the senators must have had an ulterior motive for opposing the bailout, right?  Protect the foreign companies at the expense of Mom, Apple Pie, and Chevrolet.  The problem with that theory is that the failure of the Big Three would harm the entire automotive industry, foreign and domestic.  And there's some irony at work here, too.  If the UAW were to agree to some of the concessions proposed by Senator Corker, the Big Three would become more competitive and sell more cars, thus cutting into the market share of the foreign companies.  At any rate it is outrageous that union leaders and members of Congress, among many others, are accusing these senators of intentionally trying to kill the Big Three and millions of jobs with it.  That's a pretty harsh accusation with nothing to back it up.  Their motives are being questioned simply because of where they live.  Those senators from other parts of the country who also voted no don't seem to be taking quite the heat that southerners are.  Why is that? 

(Speaking of ulterior motives.  Has anyone questioned the motives of the Democrats who voted for the bailout?  Since 1990, the United Auto Workers union has contributed almost $25 million to Democrats.  During the same period the union gave $180,200 to Republicans.  Quite a gap.  Of the 35 Nay votes on the cloture motion only 4 were Democrats.  One of those was Senate Majority Leader Harry Reid who voted no in a procedural move.  Here is a link to the roll call).

Turning this into a North vs. South issue serves no good purpose.  Besides, polls consistently showed a majority of Americans opposed the bailout.  This southerner opposed the bailout and never gave one thought to the automakers here in Alabama.  Regardless, there are GM, Chrysler and Ford dealers across the state.  Many Alabamians work at these dealerships and for companies that supply them.  Many more Alabamians drive the cars they sell.  If any one of the automakers fails it would affect jobs here.

But I think there's something else at work here.  The UAW has long tried to unionize the automobile plants in the South.  And has failed miserably:

The southern auto belt from South Carolina to Texas, home to eight German, Japanese, or Korean plants (plus three more under construction), is right-to-work country. In these states, workers can't be compelled to join a union or pay dues, and not many are inclined to sign a union card anyway. The result: The UAW has failed miserably to organize workers. No Mercedes, VW, Honda, Toyota, Hyundai (KIA's parent), BMW, or Nissan plant in the South is unionized.

Unionizing these plants is a top priority for UAW.  Come January the union is going to get a little help from its Democratic friends in Washington.  The Employee Free Choice Act, commonly referred to as "Card Check" would abolish the secret ballot now used when employees vote on unionization:

The act would effectively strip workers of the protection of secret ballots in union certification elections. Replacing the privacy of the voting booth, workers would be asked to publicly sign cards indicating support for a union, exposing them to harassment and intimidation. Unions could badger workers repeatedly, at work and at home, to sign a card acquiescing to representation and, in most cases, employers would have limited ability to give workers their side of the story.

Thus making it easier, and cheaper, to drag these plants down to Detroit's level and, of course, increase union dues.  Barack Obama and congressional Democrats support this legislation (see contribution figures above) and when the new Congress takes over in January it will be a priority (see contribution figures above). The legislation will certainly be opposed by most Republicans, including the ones who voted against the bailout.  It serves UAW's purpose to paint the senators as anti-union, anti-little guy, anti-America, possibly gaining sympathy from the voters and intimidating fence-sitters in Congress - although workers in the South might not be intimidated.  Kathy Ward works for Nissan in Smyrna, Tennessee:

"Some were wholehearted for the union, I was wholehearted against," she recalled of the last union vote in 2001.

"I don't need anyone to speak my mind for me. And I certainly don't want to pay someone to do it for me."  

One could take a look at what's happening today with the Big Three automakers and come to the conclusion Kathy Ward has a point.  Bottom line though, UAW wants this legislation passed and has paid big money to get it done.  Demonizing those who might stand in the way could serve a greater purpose down the road.  And framing the debate as North vs. South could be nothing more than a calculated scheme to further serve that purpose.  That would be an ulterior motive. 

UAW's Ron Gettelfinger's ad hominem attack on southern senators

AP headline:  Angry UAW members lash out at Southern senators:

...autoworkers remain angry with the senators who tried to negotiate wage and benefit concessions from the union, then scuttled the House-passed bill that would have granted the loans and set up a "car czar" to oversee the nearly insolvent companies and get concessions from the union and creditors. Their top targets were Senate Minority Leader Mitch McConnell, R-Ky.; Sen. Bob Corker, R-Tenn., who led negotiations on a compromise; and Sen. Richard Shelby, R-Ala., who has been a vocal critic of the loans.

Kentucky, Tennessee and Alabama all house auto assembly plants from foreign automakers, and union officials contend the senators want to drive UAW wages down so there would be no reason for workers at the foreign plants to join the union.

"They thought perhaps they could have a twofer here maybe: Pierce the heart of organized labor while representing the foreign brands," UAW President Ron Gettelfinger said at a Friday morning news conference in Detroit.

As a resident of Alabama I'm proud of Senator Shelby's vote and his vocal opposition.  Alabama senator Jeff Sessions voted against the bailout as well. Both senators also voted against the financial bailout.  Bottom line, they are against taxpayer bailouts, period:

...Jonathan Graffeo, Shelby's spokesman on the Senate Banking Committee, said the senator has consistently opposed taxpayer-funded bailouts.

"He opposed the Chrysler bailout in 1979 when there were no foreign auto manufacturers in Alabama, and he opposed the recent $700 billion bailout of the banking industry," Graffeo said.

Gettelfinger might also take a look at his own culpability.  He could start here:  22 Pounds of UAW Rules and Regulations.  The contract with Ford is 2,215 pages:

I’ll tell you this much, those 2,215 pages don’t include much regarding efficiency and competitiveness. What you’ll find are hundreds of rules, regulations, and letters of understanding that have hamstrung the auto companies for years.

Gettelfinger refuses to accept any responsibility for the failures of U.S. automakers.  He makes his living demanding this and demanding that and when the chickens came home to roost, he demanded that we bail him out.  Our southern senators, with a little help, did not submit.

Mr. Gettelfinger, you do not own the American taxpayer.  You might own the Democratic party but you do not own the rest of us.  We do not have to hand you billions of dollars just because you demanded it.  As we say down here in the South:  You made your bed hard.  Now go lie in it.

Taxpayer Heroes in Washington

The National Taxpayers Union:

Thanksgiving is over, but there are 14 people that you NEED to thank if you oppose bailouts. 14 is the number of Senators who voted against the $700 billion Wall Street bailout AND the auto company bailout that failed last night. From an email I got from a policy friend here in DC, these are the few Senators that managed to get both votes right and stand up for taxpayers...

Wayne Allard (R-CO) - Call Allard and thank him at (202) 224-5941
John Barrasso (R-WY) - Call Barrasso and thank him at (202) 224-6441
Jim Bunning (R-KY) - Call Bunning and thank him at (202) 224-4343
Thad Cochran (R-MS) - Call Cochran and thank him at (202) 224-5054
Mike Crapo (R-ID) - Call Crapo and thank him at (202) 224-6142
Jim DeMint (R-SC) - Call DeMint and thank him at (202) 224-6121
Mike Enzi (R-WY) - Call Enzi and thank him at (202) 224-3424
Jim Inhofe (R-OK) - Call Inhofe and thank him at (202) 224-4721
Pat Roberts (R-KS) - Call Roberts and thank him at (202) 224-4774
Jeff Sessions (R-AL) - Call Sessions and thank him at (202) 224-4124
Richard Shelby (R-AL) - Call Shelby and thank him at (202) 224-5744
Jon Tester (D-MT) - Call Tester and thank him at (202) 224-2644
David Vitter (R-LA) - Call Vitter and thank him at (202) 224-4623
Roger Wicker (R-MS) - Call Wicker and thank him at (202) 224-6253

I am happy to see both Alabama senators on this list.  Senator Shelby did the heavy lifting required to defeat the auto bailout.  Senator Sessions, while not as visible, was a solid opponent. 

Republican Congressman Thaddeus McCotter wants TARP money for UAW

From the in-box:

Washington - Congressman Thaddeus McCotter (R-MI), the only Michigan member on the House Financial Services Committee and Chairman of the House Republican Policy Committee, released the following statement:

"Senators Levin and Stabenow did everything they could, but no one can reason with unreasonable people.

"With the legislative opportunities now exhausted, I urge the President of the United States to immediately release Wall Street TARP funds to the domestic automakers to avoid their impending bankruptcy and its consequent devastation of working families and the depression of our American economy.

"I believe President Bush will understand that in America, the only thing too important to fail is a working family, and by releasing the Wall Street TARP funds, he will not fail them now."

Rep. McCotter is right.  No one can reason with unreasonable people:

The group came close to agreement, but it stalled over the UAW's refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

The UAW union wants taxpayer money NOW.  But they won't accept necessary wage cuts until 2011.  Pretty unreasonable to me. 

Bailout money now in exchange for wage cuts to be named later.

It's kind of funny when you think about it.  McCotter wants to give automakers & UAW money from TARP funds.  Considering he voted against the Wall Street bailout that created those funds.

Think I'll un-subscribe from McCotter's emails.

President Bush considers using TARP funds to bailout UAW

White House Press Secretary Dana Perino:

Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary - including use of the TARP program -- to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time.

The Examiner:

Nothing more perfectly illustrates the real story of the campaign for a federal bailout of the Big Three U.S. automakers in Detroit than this – United Auto Workers union representatives were in the room for the climatic final negotiating session with Senate leaders, while the company executives were outside.  The negotiations failed for one simple reason – UAW leaders refused to set a date certain for when they would free GM, Ford and Chrysler to pay workers compensation equal to that paid by Toyota, Honda and other foreign automakers with plants here in the U.S.

President Bush to the rescue:

Now it appears President Bush will agree to fund a $15 billion Detroit bailout using funds previously approved by Congress in the $700 billion Wall Street bailout. Two things are clear:  First today’s bailout is merely a bridge to a much more expensive bailout in 2009, and, second, without UAW concessions and new business models, GM and Chrysler are  ultimately headed to extinction, with or without the temporary bailout. So Bush is simply buying time for the UAW till the Obama administration arrives to save the union for good (they think).

The President is selling out the rest of the country to save UAW and its overpaid workers.  These workers are employed by all of the Big Three automakers but Ford is not seeking a short term bridge loan. 

Say NO to GM and Chrysler cars.  Take a second look at Ford.  And check out Operation Ford Motor.

H/T: Red County

UAW refuses to accept wage cuts, auto bailout fails

Associated Press:

A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.

The collapse came after bipartisan talks on the auto rescue broke down over GOP demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

...

The Senate rejected the bailout 52-35 on a procedural vote -- well short of the 60 required -- after the talks fell apart.

The implosion followed an unprecedented marathon negotiations at the Capitol among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.

The group came close to agreement, but it stalled over the UAW's refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

This is one of the reasons the automakers are in such trouble:

 

No way the Big Three can be competitive with such a disparity in compensation.  If this disparity had been addressed years ago, Detroit might not be in such sorry shape now. 

Pick a day, any day:

Sen. Bob Corker (Tenn.), the lead GOP negotiator, said the sides were on the brink of a deal on the amendment he had offered. Representatives from the United Auto Workers -- who were present for most of the negotiations -- would not agree to a specific date, Corker said.

"We offered any day -- any day -- in 2009," Corker said.

...

The negotiations were based on a plan advanced by Corker, the most junior member of the Banking Committee. His proposal sought to reduce the wages and benefits of union workers by requiring the automakers' total labor costs to be "on par" with Honda and Toyota.

...

But no agreement could be reached on the wage reductions. "It sounds like UAW blew up the deal,"  Sen. Jim DeMint (R-S.C.) said afterward.

Here's the roll call vote on the UAW bailout cloture motion (Motion to Invoke Cloture on the Motion to Proceed to Consider H.R. 7005. )