Federal Financial Aid for Domestic Auto Industry Blocked

By December 12, 2008Economy, Labor Unions

The motion to invoke cloture on the $14 billion financial aid package for the domestic auto industry failed in the Senate late Thursday on a 52-35 vote. (Roll Call No. 215.)

Detroit News coverage:

We’ll highlight the Detroit News editorial, expressing sharp criticism all the way around and calling for the Treasury now to provide the aid to keep the domestic auto manufacturers operating. Now, not all disagreement is partisan squabbling; some of it may well be philosophically grounded. But otherwise, a sharply argued opinion piece:

Loan deal’s failure a loss for everyone

The collapse of the automotive bailout loan legislation is indeed, as Senate Majority Leader Harry Reid said Thursday night, a loss for the country. What should have been a simple package to lend existing funds to Detroit’s automakers turned into a political nightmare.

The task before Congress was to move $14 billion in emergency loans to keep the automakers operating for the next few months until their turnaround strategies could kick in, and to provide reasonable protections for taxpayers.

Instead, Congress chose partisan squabbling and political agendas over good public policy.
In the House, Democrats saw the loan package as an opportunity to saddle the automakers with strict fuel economy and emissions standards, limits on executive compensation and strict guidelines for how they run their businesses.

In the Senate, Republicans from southern states that host foreign auto manufacturers saw an opportunity to do a little union busting, insisting that the United Auto Workers negotiate concessions directly with senators.

And politicians from both sides of the aisle through this entire grueling process continued to spout the nonsense that Detroit’s automakers had “their heads in the sand,” in the words of President-elect Barack Obama.

After the failed vote in the Senate, Sen. Dick Durbin, D-Ill., took the floor to excoriate General Motors, Ford and Chrysler one last time for building big trucks and sport-utility vehicles instead of hybrids and electric cars.

Answering these myths gets wearying. Detroit’s automakers do build hybrids — Durbin apparently hasn’t heard of the Ford Escape. And General Motors last year offered more models that get 30 mpg or more than any other automaker in the world. Together, the three Detroit companies spend $12 billion annually researching alternative fuel vehicles.

But the congressional critics of the industry were never interested in inconvenient truths.

They smelled a chance to punish an industry that has been Congress’ favorite whipping boy for a decade and they pursued that goal with relish.

How ludicrous that a Congress that has overspent its own budget by $500 billion this year and will double that amount — at least — next year felt confident in lecturing automotive executives about fiscal responsibility and sound management.

The Big Three are in this dire situation in large part because Congress’ failure to anticipate and head-off the collapse of the financial industry has frozen credit markets.

And yet, as usual, lawmakers will accept no responsibility for their own mistakes.

Congress will soon see the result of its work. General Motors expects to run out of cash within a few weeks, and Chrysler is not far behind.

If the companies fail, they will take with them 4 million jobs throughout the economy, and 4 percent of the nation’s Gross Domestic Product will disappear. Lost revenue to the federal government will be roughly $50 billion a year.

No amount of government manipulation will be able to keep the economy afloat.

Congress apparently is willing to take that risk. President George W. Bush must not. The administration today must find a way to get the loan money to these automakers.

The president still has the option of using funds from the already approved $700 billion Troubled Assets Relief Program to save the domestic auto industry.

Bush should put an end to the Congressional circus and direct Treasury Secretary Henry Paulson to step in.

What’s needed now is enough money to get the automakers into January when a new administration can negotiate a long-term stabilization plan.

If the automakers fail before then, it will be very likely that Congress will have many more industries to save.

Saving the automakers would be a heroic final act for the Bush administration.

 

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