This week Congress meets to consider giving away another $25 billion of taxpayers’ money to dysfunctional corporations. With a renewed sense of urgency, others are forming a line at the Capitol seeking to take money out of the wallets of America’s working families to further support dysfunctional ways. This line now includes cities and even a state, all of which are far more politically significant than handout-seeking corporations. All of this is building a culture of dependency that is rapidly expanding the scope of the federal government, ruining competitive markets, and creating a massive debt that will burden our children and even our grandchildren. This must end now.
The Big 3 automakers—General Motors, Ford and Chrysler—are asking Congress to give them $25 billion of taxpayer money. These companies recently had $25 billion earmarked to them by the federal government to pay for retooling and redesigning to make more advanced and more marketable products such as hybrid vehicles. Yet now they want more, making them 21st-century welfare queens.
The Big 3’s woes are largely self-created. For years now their management has been criticized as ineffective. But two numbers tell the story of the primary cause of their insolvency: 73 and 48. The average hourly cost of an hourly wage worker for the Big 3 cost $73 per hour, while the average cost at Toyota and other foreign automakers with production facilities here on American soil is $48 per hour.
What accounts for this disparity? It’s the massive healthcare and pension costs and other benefits that the workers at the Big 3 get through their union-negotiated contracts. These contracts, primarily secured through the United Auto Workers, have created massive obligations. Consequently, the Big 3 either offer a product that is equal in quality and features to their foreign counterparts, but several thousand dollars more expensive per car, or they offer a product for the same price but with fewer features.
There’s no way to escape the plain truth. The costs unions have written into their contracts with the Big 3 must be passed along to consumers. As this either increases prices or decreases value, the Big 3 lose sales to foreign competitors, and so revenues for the Big 3 have dropped. As revenues drop it becomes even more difficult to pay these union-created obligations, so the situation worsens.
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