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Friday, November 14, 2008
David Harsanyi :: Townhall.com Columnist
Baseball, Apple Pie and Corporate Welfare
by David Harsanyi
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The public already has cast a landslide vote on the nation's automotive industry. They hate it. And why shouldn't they? The Big Three automakers have generated a level of consumer satisfaction not seen in America since the English started taxing tea in Boston.

The Republican Party also has been peddling a highly disagreeable product. And if they have a desire to regain relevancy, it is incumbent on them to use whatever meager power they still possess to stop the Democrats from passing a bailout of the Big Three.

We should be calling this a bailout of incompetence, corporate cronyism and unionism, actually -- and a step toward nationalization, as Congress wants a stake in these companies in exchange for, you know, helping out. (Does anyone remember the Trabant?)

What is one to make of Democrats' enlisting the genius who helped bring about the Freddie and Fannie mess, Barney Frank, chairman of the House Financial Services Committee, and a senator from Michigan , Carl Levin, to craft the Detroit bailout legislation? It's a shame Jack Abramoff is too busy to chip in with his thoughts.

Though Congress already has approved $25 billion in loans to prop up a defective auto industry, one wonders whether anyone in Washington has asked whether this near corpse is worth saving in its present form. If it is, surely other corporations and investors will excavate the facets of the business that work.

Yet if you happen to listen to backers of a car bailout, you may be led to believe that the Tahoe is a pillar of American life. "It is critical that the nation understand this isn't just a Michigan problem, that 1 in 10 jobs in the country are impacted by the auto industry," Michigan Gov. Jennifer Granholm recently proclaimed in an interview.

We still are going to buy cars, Madame Governor, but perhaps we will buy them from companies that have the temerity to say "no" to unions and don't have crushing legacy costs associated with them. These corporations may not even be headquartered in Michigan.

Nancy Pelosi is worried that if General Motors declared bankruptcy, the union would lose power and executives would make off like bandits. So she would like taxpayers to help General Motors pay for the nearly 450,000 retirees who live off extravagant pensions and free medical care.

Now, unions claim they simply want "working" families to make livable wages. But Dr. Mark J. Perry, a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan, calculates that employees of the Big Three automakers' average compensation is $73 an hour. The U.S. employees of Toyota are at $48, a 52 percent differential.

GM, after all, is the company that caved to an idea that only a union or government agency could possibly concoct: a "jobs bank" program.

A jobs bank is not about jobs, per se. No, in a jobs bank, employees are paid nearly their full salaries (SET ITAL) to avoid all work (END ITAL) and hang out. Sounds more like a think tank than a job bank. And no taxpayer should be on the hook for either of those enterprises.

Now, we were warned that allowing the banking system to fail would result in a credit crunch that would turn New York City into a dust bowl. But GM shares are already worth an amount between absolute zero and the price of newspaper stock. That's what investors think of the company.

So this bailout is about taxpayer money being handed to a rotting business-union partnership that engaged voluntarily in agreements they can't honor. Let them go bankrupt and work it out among themselves like everyone else.

I, for one, have been punished enough. I already own an American car.

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About The Author
Sad but true
I have to say, however, that I purchased a Chrysler PT Cruiser in October of 2001, and have had one tune up, one brake job and one set of new tires. That's it. I can't complain about the car which has been a joy to own and drive.

Not "corporate welfare"
Its a union bailout.

you overstate your case
The bailout is a dubious proposal, but where has there been a "landslide vote" against American cars? One problem for American car manufacturers is the MPG requirement, which foreign car makers find much easier to reach because of the smaller vehicles they sell. BTW, my last car was an Oldsmobile that I sold with 303,000 miles and running well. My present vehicle is a Windstar, 273,000 miles and still going strong.

It's really sad that
the big three will get their bailout whether we like it or not. We are powerless to stop it. It's a done deal. Trust me, the fix is in. The good news is that the infusion of our tax money is only a temporary life support. The big three will ultimately go belly-up because their last-century-business-models are unsustainable.

Here's a thought
If John McCain wants to be remembered for something truly heroic in his waning political career, he ought to lead the charge on Capitol Hill and be willing to "die" there defending us against a Democratic illuminati-led corporate welfare bailout of the Big Three that would be a huge mistake.

It is irrational...
...to expect leadership from McCain. When it comes to selling out the interests of the American people, he will fall in line with the Democrats.

Overwhelming argument!
"Now, we were warned that allowing the banking system to fail would result in a credit crunch that would turn New York City into a dust bowl."

What better reason could there be for allowing the banking system to fail?

great reply
To Granholm's worry that 1 in 10 jobs in America could be impacted by bankruptcy in Detroit, Harsanyi notes that someone else will build those cars, although it is not clear that they will do so in America.

I have mixed feelings about bailing out the big 3 given their history of bad decision making. But it is not hard to recognize that someone who considers a threat to 1 in 10 American jobs as beside the point is not the person to go to in order to decide whether the bailout is a good or bad idea.

gepaza
I gather that you're not a Giuliani supporter.

Missplaced blame
Many Iraq war critics chose to underestimate the enemy with a specious idea of mismanagement of the war. Likewise, they have engaged in abject self abnegation instead of giving the Democrats their due. This keeps them from claiming their success, as they should. If they would just acknowledge that they got beat, they could jump back on their horse and join the battle, again, instead of running away from themselves.

You hate to think about all of the
families who will be impacted by the loss of auto industry jobs, but these employees' bosses have made their bed and now they have to lie in it....unless the government bails them out. The illuminati government leaders should just let these auto makers pay for the decades of mismanagement.

Misplaced Blame?
I guess I need to dust off the old bong, chill out, then reread your post to see if there is anything in it relevent to this subject.

Nope, that did'nt help either. Oh well, the bailout for the auto industry is a very bad idea. Even President Bush is against throwing money down that black hole, never to be seen again by the taxpayers.

If, as stated in the article, wages and benefits average $73 per hour for auto workers then I don't feel sorry for them at all. $584 per day, $2920 per week, $11,680 per month, $140,100 per year, and the unions say they only want the auto workers to earn a "livable" wage? Let them go bankrupt, I don't care. When I have to pay $30,000 and up for a good, heavy-duty work truck, built out of tinfoil and plastic, and just one of the fools that help build it makes twice the money per year that I do, I am supposed to feel sorry for him? Riiiight.

Let the big three go bankrupt. They won't go anywhere, they will reorganize, let a few people go, renegotiate their contracts with the unions, and move on. Maybe then they will start building vehicles in America again instead of merely assembling parts made all over the world and shipped here.

Blame the unions
The difference between the bank bailouts and the car maker bailout is the unions. The banks weren't unionized; the car makers are.

Until the UAW recognizes the part it has played in crippling the auto makers, let them go jobless. Let the unions bail out the car makers.

I'm not surprised
that the US automakers need a bailout. From 1985 to 1992 I was married to a GM autoworker. I was stunned at the amount of his salary and his benefits were unbelievable. In 1988, I began practicing law at a substantially lower salary than my husband who was working on the line at a GM plant. I saw, among other things, friends of his who faked injury to get out on workers comp; men and women who deliberately went back to drugs and alcohol twice a year so they could take month long paid vacations while drying out; and cars that were deliberately vandalized on the line so they would be rejected and available to purchase at a substantial discount by employees. At the time, I could not conceive of how GM could stay in businss with things such as these indemnic among its workers. Now, nearly twenty-five years later I see the fruits of the union's labor. If we bail out GM to perpetuate this travesty of a company we deserve what we get.

sjpatejak
I don't have a lot of feeling about him one way or the other, although I think he has his strong points.

It's the clearing out of the UN and Wall Street and television nests that would be a major victory for the country.

And, maybe it would do a lot of those folks good to have to go find a real job.

barry and motown!??????
nancy polisi cant sing like the pointer sisters!but she does want her free buick!

motown !
mo taxes,mobig government,mo obama kool-aid!mo money for nancy polosi!

Get down, get down,
1

DC, get down!

WE are at the door of the new and FUNKY White House!

Help Big 3 For Free
The US enviromentally controlled government could help the Big 3 simply by signing a contract that says the following: "We will get out of your business for the next 10 years. You may build your product like you see fit without our interference." I think they would jump at that offer! I understand the mandated costs from our government to them is around 80 billion dollars. This is rediculous and the ONLY reason I could accept to the bailouts.

Voltage
I know everybody just can't wait for the new VOLT so we can gas up and then go home and plug it in and all this for, oh, around $40,000. Remember Obama wants to put a million of them on the road, less than 1% of cars.

How far do we have to sink before people realize the "greenies" are all insane and the whole thing is a scam? People don't want these cars and GM will come back to square one again..bankruptcy, if we bail them out.


danr27
You are absolutely correct.

The Big Three's current predicament is totally and directly traceable to three root causes: The exorbitant demands of the UAW, the unreasonable and uninformed meddling of federal bureaucrats and politicians and thirty years of bad press.

Personally, I have never bought the canard of "Japanese-built = superior quality; Detroit-built = junk" that has been parroted by the automotive press ad nauseam over the last thirty-odd years, and which David Harsanyi apparently subscribes to. It was never as true as the Big Three's detractors claimed in the first place, and to the extent that it ever WAS true, it's less true now than it ever was. Right now, Detroit is putting out products that are on a par with, and in many cases, even better than, its Japanese competitors in terms of build quality and durability.

The notion that Japanese cars are infinitely superior to American ones is more perception than reality.

To illustrate: In the mid-1980s, General Motors marketed a car they called the "Chevrolet Nova". Although Chevrolet had previously sold a model called the "Nova" from 1962 through 1979, the mid-1980s "Nova" had nothing in common with the 1962-79 "Nova" except its name.

A market research firm conducted a survey of prospective car buyers in the San Francisco Bay area. They asked the question, "Given the choice between a Toyota Corolla and a Chevrolet Nova, which car would you be more likely to buy?" The overwhelming majority indicated a preference for the Toyota. When asked to give a reason, they all said, "Better quality.".

The only problem was, the mid-1980s Chevrolet Nova was the EXACT SAME CAR as the Toyota Corolla! It was the product of a joint venture between GM and Toyota, built at a plant in Fremont, CA.


danr27 (Continued)
Where the Big Three are at the worst disadvantage to foreign manufacturers is in the area of production cost per vehicle. It costs GM, Ford and Chrysler an average of $3000 more for each vehicle they produce than it costs their foreign competitors.

The lion's share of that cost is due to the so-called "legacy" payments--health care, pensions, etc.--that are part of the labor contracts the Big Three made, in most cases, more than thirty years ago, and which they are being compelled to honor, despite the radical changes that have taken place in society, the economy and the automotive marketplace since those contracts were negotiated and ratified.

The rest of the increased production cost is due primarily to the costs of complying with federal regulations concerning vehicle safety, fuel efficiency and environmental protection.

In both cases, these are constraints that foreign manufacturers--including those that are operating plants here in the US--don't have to operate under.

Given the makeup of the current and incoming Congress and the incoming Obonzo regime, this isn't likely to happen, but estimates have shown that a rollback of Corporate Average Fuel Economy standards ALONE would save the Big Three more than $50 billion a year.

Think for a moment how much more money a comprehensive two-year "regulatory holiday" could save them. Now THERE'S an idea: A bailout that really ISN'T a bailout, and one that wouldn't cost the taxpayers a dime.

But again, given the makeup of the current and incoming Congress and Obonzo's ultra-leftist ideological tendencies, this novel solution is unlikely to ever see the light of day.

danr27 (Continued)
Measured solely in economic terms, if the Big Three did--may Heaven forbid--go out of business, it probably wouldn't have as significant an impact as those urging a government bailout would have us believe.

Dispassionate analysts have indicated that the newly-vacated automobile factories would likely be snapped up at bargain-basement prices by the foreign carmakers that have established beachheads in this country. And those who make their living assembling automobiles would likely find work, albeit at significantly lower pay and with less generous fringe benefits.

The analysts characterize this potential development as a "win-win" situation for everyone--except, of course, the stockholders, management and die-hard customers of the Big Three as well as the UAW.

But these analysts grossly underestimate the impact a collapse of the American automakers would have on our national psyche. If the Big Three were to lose out to Toyota, Honda, et al, it would be just more evidence that the United States is no longer the industrial titan she once was. Such a collapse would imply that, while American workers are indeed among the world's most productive, that America lacks business acumen and managerial know-how.

Furthermore, these analysts also ignore the fact that if our automakers do go out of business, the foreign manufacturers who would swoop in would take the profits from the sales of their vehicles back to their native countries, as opposed to having that money stay here in the US, as it would with the Big Three. That impacts our balance of payments in a negative fashion.

Finally, the analysts also ignore the fact that the Big Three are significant contributors to America's defense programs. They build tanks, armored personnel carriers, command vehicles and trucks for the armed forces. Do we really want to entrust some foreign company with that responsibility?

DISASTER AID
Just how much money over the last several decades has America 'given' in 'disaster aid' to other Countries?
So let the companies and any Americans facing disaster go try and get these Countries to reciprocate. Yeah right!

danr27 (Continued)
This is not the first time GM has stared down the barrel of imminent bankruptcy. It happened twice within the company's first decade of existence. In both cases, it was the result of GM founder William C. Durant's reckless, free-wheeling approach to automotive empire-building. Durant bought companies left and right, some of which had connections with the auto industry that were tangential at best. And many of Durant's acquisitions turned out to be horrible money losers. The Samson Farm Tractor Company of Janesville, WI was a prime example.

The one Durant acquisition that turned out to be the biggest winner was the Chevrolet Motor Company; and even that acquisition took almost ten years to realize its worth. In fact, it almost didn't. The management consultants who were working on GM's reorganization in the early 1920s actually recommended that Chevrolet be liquidated!

Fortunately, cooler heads--among them Alfred P. Sloan--prevailed.

In both instances, GM was able to stave off bankruptcy--with some outside help. The Morgan Bank came to GM's rescue in the first case; in the second case, it was the DuPont Family (that's right, the chemical people) riding in on the white horse. In both cases, however, assistance came with the proviso that Billy Durant leave the company. He did; and the second time, for good.


danr27 (Conclusion)
Having said all this, I'm not sure what the solution to the Big Three's problems is. But I would not be in favor of a taxpayer-funded bailout, and if I were Rick Wagoner or Bill Ford, I wouldn't be asking for one.

Letting the automakers file for Chapter 11 reorganization appears to be the best option. The benefits of this option far outweigh the drawbacks.

The only negatives to bankruptcy are purely psychological. First, too many people have the mistaken notion that when a company files for bankruptcy, it's going out of business. That's not true. All it means is that the company's creditors control its assets.

Under Chapter 11, the company can continue to operate as it reorganizes itself, which right now is the critical concern.

The other negative to bankruptcy is the "stigma" that has been attached to it. The automotive executives insist that bankruptcy can't be an option for them because car buyers would be reluctant to buy cars from manufacturers that they aren't confident will still be in business two or three years down the road.

They have a point, but if they handle their reorganizations intelligently, this doesn't have to be a concern.

The best result of the Big Three declaring bankruptcy, as far as I'm concerned, would be that the UAW would be destroyed. That development alone would solve a MULTITUDE of problems, once and for all.

Now, if they could just come up with a way to get the federal government out of the business of automotive design.

Hey, if you're going to dream, dream big!

To my Senator
Dear Senator XXXXX,
Since so many executives at Morgan Stanley, Fannie Mae, Freddie Mac, et al, (not to mention the upcoming bailout of the auto industry) received huge compensations and kept their jobs even though their companies' failed financially, I believe that I, too, should receive some government money to bail out my company.

We began our company while the housing industry was hot, but recent failures in the sub-prime mortgage industry have adversely affected our sales. We were not even responsible for making those loans but now have to pay the price for the bail-out plus all of the equipment we purchased to help the builders build those houses. We do not make millions per year in income and are only asking for a bailout of $200,000 which will not even dent the federal debt. If it's good enough for all of them, why not us? At least I voted for you (twice). I know some of those guys didn't.

In this new administration where the President-elect wants everyone to "share the wealth", I want to share IN the wealth. I think it's only fair.

Sincerely,

Americans hate American cars?
Think you might be going a little too far?

General Motors 17.5% 28.4% 22.1%

Toyota Motor 19.1% 12.3% 16.2%

Ford Motor Co. 10.2% 21.0% 14.8%

Honda Motor Co. 14.2% 9.0% 12.0%

Chrysler LLC 5.2% 16.3% 9.9%

On the retiree health expense topic, I've checked out some of your facts. Salaried retirees 65 or older no longer have health care provided.

Opposing another bailout is certainly understandable, but you need to get the facts straight and try to be unbiased.







Sorry
I forgot to add the headings for those figures above. The first number is percentage of U.S. car sales, the second figure is for truck sales and the third is the total combined market share.

If government
hadn't taken half the operating capitol of every business and industry every year since WWII, We wouldn't have corporate welfare, and the price of everything would be much less.

Union management has been helping politicians screw the rank and file members for years.

Move the UN to Greenland. Send Algore there too.

Vomit
This is how I feel each time I read about more money for this slime!!!

American Policy
1) Companies should pay for health care, not govenment.
2) No universal coverage.

So: Healthcare costs rise way above inflation over the past 30 years. The auto companies (as has been encouraged by American govt policy) pay health care costs for workers, families and retirees.

How is this the fault of either the companies or the unions? Had healthcare costs been limited to the level of inflation -- these companies would be in way better shape. If we had universal healthcare (like Japan or Germany) -- forget it. These companies could compete. This snowballing crippling cycle as particularly killed the industry over the past 10 years.

Ron
"If government hadn't taken half the operating capitol of every business and industry every year since WWII."

Where does this tidbit comer from. Only one-third of public companies pay any income tax at all.

Estimated receipts for fiscal year 2008 were $2.66 trillion. The top three sources are:

* $1.25 trillion - Individual income tax
* $927.2 billion - Social Security/payroll taxes
* $314.9 billion - Corporate income tax

You may casually dismiss Social Security taxes as not a "real" tax, but $927 billion is a real number, and EVERYONE pays that on their first dollar earned.

You'll notice that the taxes paid by individuals is nearly 7 times what corporations pay. What do you think about that?

I don't like the idea bailouts but...
If I had to make a choice between giving the automakers a loan and the abysmal black hole that is the bank bailout, I'd pick the car makers. At least the build something.

The crazy thing about the bank bailout is that it's proported purpose was to get people to borrow more so that the economy wouldn't collapse. Too much borrowing along with insanely stupid unregulated banking is exactly what got us here.

Here's Peter Schiff predicting all of this a couple years ago

http://www.youtube.com/watch?v=2I0QN-FYkpw

Those Other Industries
will still be supplying better automakers who will build better more profitable automobiles by listening to their market and refusing to build cars in union States. When gas is running over $4.00/gal, people don't want gas-guzzling SUV's and pickup trucks. A government that rewards failure and punishes success is a SOCIALIST government.

Greed and competition killed it
for the automakers. Unions wanted more and more. Great pensions. Great healthcare. Mediocre cars. To make it work will mean sacrifice. But, we haven't heard those words, have we? Are the employees willing to give anything up to save their jobs? How many would like to step into those jobs with a little less benefits and a little less pay? Plenty! The days of greed are over my friends. Like Obama said, people are going to have to sacrifice. Prosperity is dying a slow death in America.

Corporate Income tax should be zero

Heres why,

Taxing Corprations is double taxation.

If I own a business. I pay individual taxes on the net profits of the business.

If I have an equal partner, we split the individual taxes on the net profits of the business.

If I own part of a corporation through the purchase of stock, I pay individual taxes on the profits I receive as an part owner in dividends. The corporation has already paid taxes on the profits of the corporation before I get paid any dividends.

That is double taxation.

Again
Greedy management who also happen to be very poor at their jobs, and, most importantly, UNIONS.

Yes they raise the workers' pay but they also line their own pockets as if they were preparing for negative 50 degree weather.

I've had it with companies who put out poor products, lose money and then want more of my earnings. Not to mention corporate executives who earn ridiculous salaries and golden parachutes. Tell Pelosi to shove it.

greed and truth
All parties have been greedy and not caring for the American people or America the place. does any party care about America any more or are we to all become slaves and how ironic that a black man is bring it back to America?

Auto Workers=Unions=Crap!!
My brother lived and died a #1 Fan of the UAW!!I can remember many heated, 'unbrotherly" if there is such a word, arguments about the real purpose of not only the UAW but virtually ANY Union..But he believed and right now my Sister-in-Law has to wonder what may or may not happen to her "Guaranteed " health Benefits..
I wish her the best, but as far as I'm concerned Chapter Eleven worked for the Airlines so let the Big 3 give it a go!!

What do other companies do?
It really is not the wages that are killing American auto companies. Because of the falling dollar, American auto workers made much less than any European worker. Japanese workers are fairly similar to American ones. While I admit that unions create some problems (mostly in the assignment of work tasks at a plant). Can anyone rebut my healthcare issue? No. Because it is what it is. Our health care is very, very expensive. We expect companies to pay (not the government) -- so this is what you get. Costs went the direction they did over the past 30 years -- way higher than inflation. Our policy (particularly Republicans policy) says our employer should pay -- and this is the result.

Corporate Taxation is Double Theft
"You'll notice that the taxes paid by individuals is nearly 7 times what corporations pay. What do you think about that?" Zapdoodat

I think that, since almost all individuals who invest in corporations pay income tax, taxing corporations is government stealing from those individuals twice.

Corporate taxes should be zero. Capital gains taxes should be zero. Income taxes should be zero. Government should cost much less and be financed by a tax on what they actually provide - courts, military, and a small amount for government buildings and salaries.

That, of course, would require that they stop spending money they have no right to take in the first place and no right to spend as they have for 100 years.

Roll back the Leviathan.

Jeff from ID

Jeff, You are correct. Unfortunately Liberals see nothing wrong with spending other people's money on programs that we know don't work.

It has something to do with the way their brains are wired. Some people learn from mistakes. Others do not.

After 80 years of the Social Security Pyramid Scheme we see Liberals want to pump more money into it. After 50 years of Liberal Social programs that we were told would reduce poverty, reduce crime, reduce violence, improve education, and strengthen families, we have the reverse.

Any objective thinker can only come to one conclusion. Liberals don't learn from mistakes.

FeargalX from PA

Feargalx,

Healthcare used to be very affordable in the United States. That was before Liberals got the government involved. As you review our history you see we never had a time where people were denied healthcare. There are no historical reports about sick people dying in the streets of america because of lack of healthcare.

Larger communities had community hospitals that would treat the poor or anyone who could not pay. Smaller communities had clinics that would treat minor illness and refer to big cities when required. The Only real gap in healthcare was rural areas where populations could not support a hospital or clinic.

In 1964 Liberals decided a good way to get votes was to pass the Medicare Legislation that was shortly followed by Medicaid. To date both programs have wasted billions in fraud.

The other significate effect they have had was to increase healthcare costs on everyone not covered by these two programs. Hospitals were not fully reimbursed under these programs which resulted in Hospitals passing on the cost to people with Insurance. That insurance was usually paid by employers. Over the years employee paid healthcare became so expensive that many employers dropped coverage. As they did that then drove up the costs even higher because less people were insured.

Again another social problem caused by Liberals.
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