It's Payback Time

As was widely expected, the Democrat-controlled House of Representatives passed the $14 billion bailout bill for the auto industry on a largely party-line vote of 237-to-170. But there is little that indicates the current business model is workable, and given that the Big Three were asking for more than twice that amount, it also seems highly likely that this $14 billion is just a down payment. 

And while the bailout is described as assistance for the auto industry, it is in many respects a bailout of the United Auto Workers union, one of the most militant unions the nation has ever had. Now, I realize a lot of good people are at risk of losing their jobs, and I am not cavalier about that. 

But the UAW has saddled the industry with tremendous debts and obligations that far exceed those of other industries. As much as anything else, this bailout appears to be political payback by liberal politicians to their big union donors. According to the Center for Responsive Politics, the UAW gave 99% of its 2008 campaign contributions to Democrats, and in return 86% of House Democrats voted last night for the UAW bailout. 

Another major problem confronting the auto industry is liberal government policies. Over the years, Big Government has saddled the industry with regulations that just don’t make economic sense. California environmental regulations, for example, require cars sold there to meet a higher standard than cars sold in other parts of the country. How does Detroit do that? And the idea that a government bureaucrat – the so-called “car czar” – is supposed to fix the problems that the auto executives could not is laughable. Moreover, this bureaucrat would have the authority to veto major business decisions. 

Sadly, the auto industry is the prime example of what can happen to American entrepreneurship when leftwing idealism from Big Government, Big Labor and the radical environmentalist movement gets in the way. Just as we saw during the subprime mortgage meltdown created by Congress, crises ensue when liberal politicians think they know better than the free market. 

This situation reminds me of one of Ronald Reagan’s favorite quotes: “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Big Government has taxed and regulated the auto industry to death, and now we’re about to subsidize it. 

The bill is now before the Senate, where several conservatives, including Senators Shelby (R-AL), Sessions (R-AL), DeMint (R-SC), Ensign (R-NV) and Vitter (R-LA), are fighting hard against its worst aspects. I commend them for defending free market principles and for taking a stand against Big Government nationalization schemes. 

I do know conservative economists who say that allowing the auto companies to fail would have unintended consequences. But at some point, the focus has got to shift to how we will bail out the taxpayer, rather than every industry that comes to the door holding a tin cup.