Bush as Bankrupt as GM
President Bush is now as bankrupt politically as GM is financially. He spent the last week lobbying Senate Republicans to bail out GM, Chrysler and Ford and succeeded only in alienating the people he needed most.
Among the senators and Republican staff I spoke to, none agreed with the president and most resented the White House’s strong-arm tactics.
Senate Minority Leader Mitch McConnell (R-Ky) summed up their reason in a single sentence: “We simply cannot ask the American taxpayer to subsidize failure.” The failure of the automakers’ management to retain any control of the situation — coupled with UAW President Ron Gettlefinger’s refusal to budge on real reform of the union’s industry-killing labor agreements — were only two of the foundations of the White House’s political bankrupcy last week. The biggest one was the Bush administration’s approach to its presumed allies.
The White House, according to one Senate member, riled the Republicans by refusing to even discuss the bankruptcy option for the Big Three carmakers. As I have written repeatedly, a structured bankruptcy is the only legal means by which the Detroit companies can shed the burdens of the labor agreements. And unless they do, they cannot compete.
Vice President Cheney and White House Chief of Staff Josh Bolton met mid-week with Senate Republicans in a private lunch. As several sources told me, the discussion was heated, with the White House insisting on the Democrats’ principal ground rule for a deal: no bankruptcy for the automakers.
Republicans objected to the bill because it didn’t go far enough to ensure the companies’ future competitiveness. The proposed “car czar”, many said, had too little power to force the needed restructuring. Only a bankruptcy judge could have that legal power.
The White House’s adoption of Democratic talking points pushed the Republicans too far. Cheney’s statements were particularly offensive to the senators. At one point, Cheney said that if the automaker bailout didn’t pass, it would be “Herbert Hoover time.”
That was President Bush’s last big push. He spent every bit of the small cache of political capital he had left, and Senate Republicans didn’t buy it. The bailout bill failed to gain cloture. With 12 senators not voting, the bill was refused by 52-35. Only ten Republicans voted with the President.
Republicans were skeptical of any bailout that didn’t bring UAW wages into line with the wages paid to the “transplant” autoworkers at foreign automakers’ US factories such as Nissan, Toyota and Honda. The UAW was in direct negotiations with the senate, and most senators left the companies’ managers sidelined. Among the UAW demands was a seat on the GM board of directors.
Sen. Bob Corker (R-Tn) offered the UAW a plan, part of which required pay parity with the “transplant” workers, but the UAW rejected Corker’s plan, saying it would renegotiate wages to bring them down at some unspecified future date, meaning never.
UAW President Ron Gettlefinger took an accusatory tone, first acknowledging that the UAW was a political force supporting Democrats and then saying the Republicans were just trying to break the union. Gettlefinger continued to insist that bankruptcy — even a structured plan to ensure the companies’ future viability — was off the table. This despite the Congressional Research Service’s report saying that structured bankruptcy was likely to increase consumer confidence in the automakers.
The president is now apparently ready to let Treasury Secretary Hank Paulson use some of the $700 billion financial industry bailout money to prevent the carmakers from going into bankruptcy. If he does this, Senate conservatives may be able to block any payments.
Paulson has already spent the first half of the bailout money (labeled the “Troubled Asset Relief Program” or “TARP”), about $350 billion, without noticeable effect in reviving the economy. But Congress has to give permission for the other $350 billion to be used.
Congress is now in recess, and could come back — again — to authorize use of the second half. If part of that money is to be used to continue the UAW’s effort to block pay parity with pay at foreign automakers’ US plants, the conservative senators should block it just as they blocked the bill on December 11.
In a December 12 CNN interview one of the Senate’s most vocal fiscal conservatives, Sen. Tom Coburn (R-Ok), hinted at what could happen if the White House tries to use the financial bailout package to help the automakers. Coburn said, “And what’s going to happen now, if they use the TARP funds, is two things. One is you’re going to put another $9 billion on GM’s debt. You will have not solved the debt problem, which is their biggest problem. And number two is you’ll never see the money back, and you will create an opportunity for us to spend a whole lot more money.”
And the $14 billion sought for automakers by the White House will, conservatives can show, only be a down payment. Unless the industry is forced into a structured bankruptcy now, it will be back again and again for more bailout billions.
If Bush and Paulson try to use the financial bailout money to aid the autoworkers they will be giving the lie to the rationale for bailing out the financial community. In September, when the bailout was being debated in Congress, Paulson repeatedly said that bailing out the financial industry was fundamentally different from bailing out any other part of our economy. He and the White House were arguing stridently that the financial sector’s ability to extend credit was threatened, and without it, the entire American economy would fail.
By applying that money to one manufacturing industry the whole argument for it fails. Conservatives will argue that other industries — both manufacturers and service industries — are equally important, and that the UAW should not be bailed with taxpayer money. The government has already gone too far in nationalizing our economy. It is not outrageous to call what the White House and Treasury have done so far is a creeping socialism of the American economy.
President Bush’s job approval rating still leads that of Congress by 26%-18%. But those low numbers show that neither has the confidence of American voters. President-elect Obama is apparently aiming to sink to their levels.
Obama is promising an economic stimulus to create 2.5 million jobs in two years. According to one Washington Post report, that “stimulus” will put “routine repairs” ahead of major New Deal-like projects.
Obama apparently wants to be known as President Pothole. But the American economy is in a government-dug sinkhole. Pouring tax money down the holes won’t lead to economic recovery. It will turn a deep recession into a long-term depression.
Cartoon by Brett Noel.