The Auto Bailout

The Republicans in Congress successfully thwarted the auto industry bailout package the other night, as there were not enough votes for cloture (sixty votes are required to end debate on a bill in the Senate).  Now, the UAW is calling upon the White House to use the funds alloted to aid the financial industry (TARP funds) to bankroll the failing auto industry and blaming Republicans for the failed measure.

Republicans, in turn are shifting blame to the UAW for not agreeing to mandatory wage cuts. This proposed provision was intended to bring the cost of doing business for domestic manufactures in line with the cost of doing business for foreign transplants in the American 

labor market (Honda, BMW, Nissan, etc.).

The UAW president stated:

“This arbitrary requirement was not imposed on any other stakeholder groups. Thus, the U.A.W. believed this was a blatant attempt to make workers shoulder the lion’s share of the costs of any restructuring plan.”

My response: yes, this is a blatant attempt to make workers shoulder the lion's share of the costs of restructuring, and it should be.

First and foremost, I do not think that Republicans should have to "shift the blame" at all.  In fact, I would take full accountability for this bill failing to pass if I were in leadership.  Someone said the other day that in order for Republicans to "win" on this issue they must pass better legislation.  The majority of the American public thinks this bailout is a bad idea.  The majority of informed informed commentators think that restructuring these corporations through bankruptcy is the best way to get them on their feet.  Sometimes, doing nothing and letting the economy take its natural course is the best thing to do.  To my mind, the Republicans should be proud of NOT passing legislation in this instance.

Additionally, while I can be sympathetic to the plight of workers of Republic Windows because an ineffective union didn't go to bat for them until it was too late, the same cannot be said of the UAW workers.  Indeed, it could be argued that if the UAW didn't demand an average salary equaling $70 per an hour for a line worker, GM, Chrysler and Ford would not be in the present situation. (This is especially convincing when one considers that foreign automakers producing in the United States pay on average around $40 per an hour for a line worker). To support this reasoning, comments from the Volokh Conspiracy show how higher wage costs on the Big Three helped create an inferior product and have led to their demise.  Essentially, if you have to sell a car at the same price as competitors who have a lower cost of labor, your product will be necessarily inferior.

While it is debatable whether or not the proposed bailout will even save jobs or retain more quality jobs than would otherwise be destroyed but for the bailout, this is not the point.  The point is that the UAW helped put The Big Three in this hole - in my opinion because the UAW is a monopoly auto workers union - so, their workers who have reaped the benefits of these detrimental practices should now have to pay. Short of the UAW agreeing to mandatory wage reduction and other concessions, no bailout bill should see the light of day.

Rarely do I agree with Speaker Pelosi on anything, but she said it best:

"[A]utomakers and their unions need to stop acting like little socialist countries, and start behaving like businesses again."

Happily, Republicans in the Senate have helped prevent the UAW from escaping the consequences of its ill advised actions.  If the White House were to skirt this by twisting TARP funding in an unintended direction, and coddle the "socialist countries" of Big Business and monopolistic unions, not only would it circumvent the market but it would be an unforgivable breach of conservative trust.