Economy & Budget

Detroit Bailout Hurts Everyone Else

Last week, Congress voted against using taxpayer dollars to bail out the Big Three automakers. I am disappointed that the Bush administration has decided to use taxpayer funds allotted to the Troubled Asset Relief Program (TARP) to bail out Chrysler and GM.

It’s all too likely that the criteria set by the President on Friday can’t and won’t be met for two reasons. First, the tests they have to pass are too vague. What plan for the future could they present that would fail in the eyes of a Democratic congress and administration? And, second, that’s the rub: this $17 billion will almost certainly just be a down payment on future “loans” that will only delay essential industry reform and may or may not be repaid.

I assure you no one wants to see these automakers fail, and there is little doubt that their collapse would be tragic for our economy. However, I am concerned with throwing billions of taxpayer dollars at the same failed business model. Despite some recent improvements, consumer reports show customer satisfaction ratings rank the Big Three automakers at the bottom of the list in comparison with their more successful competitors.

In addition, their labor costs are two-thirds higher than their competitors. An analysis of the total labor costs for the Big Three shows that United Auto Workers average $75 an hour in wages and benefits — almost three times higher than the average worker in the private sector. The 2007 UAW contracts won’t do this job: they affect only new workers and don’t bring current workers into a competitive wage and benefit range. I would hate to see any of the automakers fail, but the federal government will not undo decades of mismanagement simply by handing over billions of taxpayer dollars to domestic auto companies.

When Congress debated whether they should bail out the auto industry, I asked the chairmen of the Big Three automakers to name three industries that are not hurting in this economy that could not be helped, sustained, and made more profitable by the infusion of $14 billion. There was stone cold silence at the witness table.

Everyone in every industry is hurting in this economy. Why are the automakers entitled to taxpayer funds? Why not the airlines? Why not the homebuilders? Why not the restaurants and the hotels? Unfortunately, the auto industry does not have a monopoly on economic misery.

If the purpose is to preserve jobs, why is the money not destined for the small businesses of America? I’m don’t support using your hard-earned dollars to bail out any failing company, but if government is going to get into the business, half a million small businesses that are employing an average of 10 workers will fail in the coming year. It’s important to realize that three out of four new jobs in America are created by small businesses — they are the job engines of America, but they are not being considered for assistance merely because Congress has not heard of them. During this holiday season, unfortunately hundreds of thousands of small business are struggling to stay afloat, and I wonder why this money is not destined for them instead. This gift to the auto industry means that the real job creators are having to go without this year.

Indeed, it would be one thing if we knew that this money would somehow solve the problem, but we do not. Independent analysts in the auto industry tell us that if demand does not pick up for the domestic auto industry, $14 billion, $34 billion, $74 billion, or even $104 billion will not solve the problem.

The hard reality is that American taxpayers cannot afford to save every company that finds itself in financial jeopardy. At what point do we finally bail out the American taxpayer from the unconscionable burden he or she faces from out-of-control Washington spending?

Another bailout at taxpayer expense is not the answer. There is a better way. The automakers must reorganize, reduce their labor costs, and produce a product worthy of the American consumer’s investment.

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