January 2012

General Motors Now Admits It Didn’t Repay Bailout Money

by Hans Bader on September 20, 2010 · 1 comment

in Bailout Watch, Deregulate to Stimulate, Economy, Employment, Energy, Labor, Legal, Mobility, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Zeitgeist

Contrary to its claims in TV ads earlier this year, General Motors has now admitted that it did not repay its government bailout. In light of this new admission, the Competitive Enterprise Institute today filed a supplemental complaint with the Federal Trade Commission, drawing attention to this new information.

CEI’s original deceptive advertising complaint to the FTC, filed in May, noted that General Motors misleadingly claimed in a national TV ad that the company had paid back taxpayer bailout loans.  On September 16, 2010, General Motors admitted to the media that it did not in fact repay what it received from the government, and that its repayment of its bailout may take years:

It will take a couple of years for taxpayers to get back the billions they spent bailing out General Motors, but the company has a goal of returning the money, GM’s new CEO said Thursday. CEO Daniel Akerson told reporters that the government won’t be repaid with the company’s initial public stock offering, which could happen later this year, but couldn’t answer more specific questions about the sale.

In its original complaint, CEI urged the FTC to investigate the 2010 GM ad campaign entitled “GM Repaid Government Loan Ahead of Schedule.” The ad featured GM’s then-Chairman and CEO, Ed Whitacre declaring that “we have repaid our government loan in full, with interest, five years ahead of the original schedule.”

That claim, CEI explained in the May complaint, “gives the false impression that GM has used its own funds to pay back all the bailout money that it received from the federal government. In fact, GM has only repaid a fraction of those funds—barely ten percent. Moreover, GM apparently repaid its loan by using other federal funds.” Such misleading claims could dupe consumers into having excessive confidence in GM and its products and warranties.  CEI urged the FTC to investigate GM’s advertising claim, to “serve the American public on this issue of major consumer and taxpayer importance [and] “discourage other beneficiaries of government bailouts from falsely misrepresenting their status.”

> View the CEI Complaint of Deceptive Advertising by General Motors Company

> View the GM Ad on YouTube

To date, General Motors has “repaid” only $7 billion of the $50 billion it got from taxpayers — and used taxpayer money to make the purported “repayment.”  The only reason GM had enough government money to do that is because of Toyota’s recent safety issues and recalls, which drove car buyers away from Toyota to GM and Ford.  But that turning away from Toyota may only be temporary, now that the Toyota crashes turn out to have been caused by driver error.

In addition to the $50 billion, GM received billions in additional handouts through programs like the incredibly wasteful Cash for Clunkers (which cost taxpayers and used-car and car-parts businesses billions), and $17 billion given to its finance arm, GMAC — which no one expects GM to ever repay.

Ironically, GM would never have needed a bailout if it had just received relief from costly regulations such as CAFE rules (which wipe out at least 50,000 jobs) and dealer-franchise laws. That’s so despite GM’s self-inflicted wounds from mismanagement, excessive union wages and benefits (worth up to $70 an hour), and rigid union work rules.

The Obama administration left those wasteful work rules and excessive benefits largely intact, and gave the United Auto Workers Union (UAW) a big chunk of General Motors’ stock, even though the UAW helped bankrupt the company, and the company has value today only because the federal government pumped billions of taxpayer dollars into the company (and engineered the wiping out of General Motors’ bondholders, some of whom were non-union employees who had invested their life savings in the company).

Veteran political commentator Michael Barone called the Obama administration’s treatment of Chrysler and GM bondholders “gangster government.”  Law professor and bankruptcy expert Todd Zywicki called it an attack on “the rule of law.”

Back in 2008, Zywicki warned that a bailout might prove worse for the auto industry than for automakers to quickly file for bankruptcy without first seeking a bailout. Zywicki noted that by enabling automakers to get rid of expensive union contracts and red tape, a “Chapter 11 bankruptcy filing will likely result in a stronger domestic industry.” It would provide “a mechanism for forcing UAW workers to take further pay cuts, reduce their gold-plated health and retirement benefits, and overcome their cumbersome union work rules.”  Nobel Prize winning economist Gary Becker also argued that a bankruptcy filing would have been better than a bailout in achieving “needed reforms.”

But the federal government ignored their wise advice, and chose to embark an incredibly costly bailout instead. The federal government used money from the $700 billion bank bailout for the auto industry bailout. Legal scholars at the Heritage Foundation, Clinton administration Labor Secretary Robert Reich, and many other commentators have argued that using the bank-bailout money for auto bailouts was illegal.

CEI in Europe: Travelblog 6–Berlin, Germany

by Nicole Ciandella on September 20, 2010

in CEI Projects, Coalitions & Outreach, International

One of the teachers at the recently-completed Language of Liberty camps was fond of telling students a certain joke: “Do you know what the most frightening sentence in the English language is? I’m from the government and I’m here to help.”

The students in Portugal and Poland didn’t laugh. They didn’t really see the humor in government trying to help people.

We’re in Berlin now. The Sulejow Language of Liberty camp has ended, and we’ve stopped in Berlin for one night before returning home to D.C. The ghost of the wall that once separated this city is eerily memorialized in the fragments still here. The East Side Gallery is a kaleidoscope of political art and irreverent graffiti. The Brandenburg Gate stands solemn, alone, like a doorway to a room that no longer exists.

We have lunch with the director of Berlin think tank. He asks us if we’ve noticed anything interesting about the police in Berlin. “Their priority is de-escalation,” he explains. “That’s what they’re trained for — de-escalating situations before they become violent.” He says policemen try to avoid making arrests whenever possible, even when they’re insulted or threatened. “More or less, they really are just there to help,” he says. “It’s a bit different than in America, no?”

If the American government is a paternal government — a strict, protective disciplinarian — then most European governments are decidedly maternal. They provide care. They nurture. They purport to do for the people what the people cannot or will not do for themselves.

Cities across the European continent are scarred by the vestiges of fascist and communist regimes. There is a real and recent memory here of what it means to be truly frightened of one’s government. There is also a collective memory of revolution. It’s a memory made manifest in monuments, museums, and cemeteries. It’s permanently sewn into the fabric of political language. American Tea Partiers may have taken their name from revolutionaries, but in Europe, revolution is more than a story of national origin. It’s something many of these cities experienced in the 20th century. The memories of oppression and revolution, so patent in the urban landscape of Berlin and other cities, are a constant reminder of what happens when state power ceases to be a tool of the people.

Europe’s history of tyranny is what sets the tone for the current citizen-government relationship here. Governments are careful not to dictate or demand. Instead, they guide; they de-escalate. And with the experience of oppressive paternalism now largely behind them, the new European generation gladly accepts democratic maternalism. The students we met at the Language of Liberty camps think that their governments are flawed, but essentially good. They don’t really understand the anti-nanny-state angst of Americans. Most of these students don’t want to scale back state power; they just want to fix state power. They want to help their governments to better help their people.

This is why there’s a disconnect between American and European political discourse — why the classical liberal movement is floundering in the home countries of Friedrich Hayek and Frederic Bastiat. European governments don’t wear heavy boots anymore; they wear kid gloves. When the people and the state are in tandem — finally happy with each other after an unhappy past — the people are overwhelmingly and dangerously tempted to allow the state to suffocate them with maternal care.

Insurance Regulators Approve Increases Based on Obamacare

by Hans Bader on September 19, 2010 · 4 comments

in Health and Illness, Healthcare, Insurance, Politics as Usual, Regulation, Sanctimony, Zeitgeist

In Connecticut, insurance rate regulators have approved hikes in insurance premiums of up to 20 percent, agreeing with insurers that Obamacare increased their costs. Some people will now pay thousands of dollars a year more as a result.

This contradicts claims made by President Obama and his aides that the new health care law would cut health care costs and bend the cost curve down.

Employers like AT&T, Caterpillar, John Deere, and Verizon have already reported major cost increases due to the new health care law.

As noted earlier, the health care law raises taxes on the middle-class and investors in future years. Obamacare will cause many harms, such as reducing life-saving medical innovation and increasing state budget deficits. It is based on accounting gimmicks that will increase the federal deficit, as even some Obama supporters have admitted — like David Brooks, who in a moment of candor called arguments for the bill ““unbelievable” and “insane.””

President Renominates Radicals and Oddballs for Judgeships

by Hans Bader on September 17, 2010

in Legal, Personal Liberty, Politics as Usual, Zeitgeist

President Obama has just renominated four controversial men to judgeships, even though they previously failed to get confirmed by the Senate because of public opposition.  Those nominees are Robert Chatigny, Goodwin Liu, Louis Butler, and Jack O’Connell.

Obama renominated Robert Chatigny, who unsuccessfully tried to block the execution of a serial murderer and rapist known as the Roadside Strangler based on the ridiculous argument that the murderer’s “sexual sadism” was supposedly a mitigating factor.  Doesn’t sadism make a crime worse?  Even the strangler admitted his death sentence was appropriate.  Chatigny presided over that case as a trial judge even though he had briefly represented the Roadside Strangler, creating an obvious conflict of interest.  A judge can’t be impartial in someone’s case when he earlier represented that person in a case involving the same crime!  Yet Obama wants to promote Chatigny to an appeals court.

The President also renominated radical law professor Goodwin Liu, who wrongly thinks that some forms of welfare are constitutionally mandated, which is at odds with the Supreme Court’s state-action doctrine.  Liu has no experience trying cases at all, even though judges are supposed to have “substantial courtroom and trial experience.”  Liu claims that “’free enterprise, private ownership of property, and limited government” are right-wing concepts and ideological “code words.”  (It’s hard to square this claim by Liu with the fact that you find lip-service to such concepts even in President Obama’s books and speeches, which praise private property rights — suggesting that the President, unlike Goodwin Liu, recognizes that these concepts are widely approved of by mainstream Americans.)

He also renominated Louis Butler, who was so extreme that he was removed from the Wisconsin Supreme Court by voters.  His empathy for criminals was summed up by his nickname, Loophole Louis.

Also renominated was John J. “Jack” O’Connell, who got himself hired, in an unethical fashion, to bring a futile paint lawsuit that “achieved nothing, other than waste thousands of hours of attorney time.”  (He made contributions to politicians like Rhode Island attorney general Patrick Lynch; the lawsuit was a failure, although it resulted in lots of work on both sides for trial lawyers).

Senators Challenge Administration’s Big Labor Giveaway

by Ivan Osorio on September 17, 2010 · 1 comment

in Deregulate to Stimulate, Economy, Employment, Labor, Regulation

Despite all they have gotten from the Obama administration, many union leaders have vented their frustration over Democratic lawmakers’ failure to enact the unions’ top legislative priority: the so-called Employee Free Choice Act (EFCA).

As a result, they are seeking to do a run around Congress by trying to get something similar to EFCA’s unpopular card check provision imposed through the regulatory process. This provision would amend the National Labor Relations Act to effectively eliminate secret ballots in organizing elections.

Last May, unions and their Democratic allies did a similar end run by amending the Railway Labor Act (RLA), which regulates labor relations for railways and airlines, to skew voting rules in unions’ favor. The change was enacted through the National Mediation Board, which oversees labor negotiations under the RLA.

Under the previous interpretation of RLA voting rules — which dated back to 1934 — a union needed to get a majority of all members in the bargaining unit — that is, the majority of all members the union sought to represent — to vote for unionization.

Under the new interpretation, unions only need to get a majority of votes cast, which can lead to a union being certified as the monopoly bargaining agent for a group of employees with only a minority of those employees having voted for the union. For example, if union is trying to organize a company that has 1,000 employees and on the day of the election only 500 show up to vote, the union would then need only 251 votes to win.

Fortunately, some Republican Senators are confronting this Big Labor power grab, through a resolution (S.J. Res. 30) sponsored by Sen. Johnny Isakson (R-Ga.). They are doing so by dusting off a needed law that, if used more, could help curb many government excesses: the Congressional Review Act of 1996, which allows Congress to review — and repeal — agency-promulgated rules.

The Act has only been used once, in early 2001, to repeal a Clinton-era ergonomics rule. It’s good to have it back. It would be even better still for new regulations to meet this kind of scrutiny on a routine basis.

CEI Weekly: Regulations Discourage Small Businesses from Hiring

by Charles Huang on September 17, 2010

in Economy, Energy, Environment, Features, Regulation, Zeitgeist

CEI Weekly is a compilation of articles and blog posts from CEI’s fellows and associates sent out via e-mail every Friday. Also included in the weekly newsletter is a brief description of CEI’s weekly podcast and a feature on a major CEI breakthrough made during the week. To sign up for CEI Weekly, go to http://cei.org/newsletters.


CEI Weekly
September 17, 2010


>>Shaping the Debate
Clearing the Way for High-Tech Jobs
 Ryan Radia and Ryan Young’s op-ed on Real Clear Markets

The War Between SEIU and NUHW: What it Tells Us About Card Check
 Vincent Vernuccio’s op-ed on Big Government

Upstream Battle for Genetically Engineered Salmon
Henry Miller’s op-ed in The Los Angeles Times

A Real Small Business Assist
John Berlau and Andrew Kwiatkowski’s op-ed in The American Spectator

Don’t Blame BPA on Lobster Decline
Angela Logomasini’s op-ed in The Cape Cod Times

Al Gore, Iain Murray and the ‘Tea Party’
Iain Murray’s citation in The Christian Science Monitor

Greens Want Their McCain Back
Myron Ebell’s citation in Politico


>>Best of the Blogs
Tricks Against Trade
by Fran Smith

The Dead Weight Loss of Union Disputes
by Ivan Osorio

Obama to Insurers: Stop Telling the Truth
by Michelle Minton


>>CEI Podcast
September 16, 2010: Creating High-Tech Jobs
Ryan Radia, CEI’s Associate Director of Technology Studies, talks about obstacles and opportunities for job creation in the high-tech sector. Regulatory uncertainty is making companies wary of making long-term investments. The sheer number of regulations makes it very expensive to hire workers. According to an article Radia coauthored at RealClearMarkets, rolling back the regulatory state could pave the way for more jobs.
>>Support CEI

Like what you read?

The Competitive Enterprise Institute’s 26-year record of success is made possible by our over 3,000 supporters. Please be sure to stop bywww.cei.org/support to make a donation today.  Curious about all the possible ways to donate to CEI? Contact Al Canata at acanata@cei.org or 202-331-2280 to find out more.

Regulation of the Day 150: Toy Guns

by Ryan Young on September 17, 2010

in Nanny State, Personal Liberty, Regulation, Regulation of the Day

Samuel Burgos is 8 years old. One day he brought a toy gun to school in his backpack. That got him expelled from his Miami school for two years. Toy guns violate his school district’s zero-tolerance policy for weapons.

The district offered to place Sam in a correctional school; his parents opted to home-school him instead. His father told the local NBC affiliate, “I can’t sit here and allow them to send my kid to a school where students have committed actual crimes,” Burgos said. “He hasn’t committed a crime.”

Sam misses his friends. And he may have to repeat the second grade. All because common sense has gone missing from Broward County’s schools. That’s what makes the school board’s response especially galling:

The school board says it’s common sense to know that this kind of item can’t be allowed on school campus and that responsibility also falls on parents to know what their children have in their backpacks.

The Burgos family has suffered enough. Toy guns are not weapons. They are toys. The school board should exercise a bit of common sense and reinstate Sam immediately.

Obama’s Broken Pledge to Cut Wasteful Spending

by Hans Bader on September 16, 2010

in Bailout Watch, Deregulate to Stimulate, Economy, Politics as Usual, Sanctimony, Zeitgeist

When Obama was elected, he claimed he would “go through our federal budget– page by page, line by line–eliminating those programs we don’t need.” But as president, he seems to have forgotten about this pledge. The Cato Institute reminds him of it in a full-page advertisement in today’s Washington Post and other newspapers, identifying $525 billion he could cut annually from the federal budget by eliminating unnecessary or harmful programs.

For example, it notes that “Federal interference in housing markets has done enormous damage to our cities and the economy at large. HUD subsidies have concentrated poverty and fed urban blight, while Fannie Mae and Freddie Mac stoked the financial crisis by putting millions of people into homes they couldn’t afford. Getting the government out of the housing business will save $45 billion annually.” It also notes that “Federal workers enjoy far greater job security than their private sector counterparts—and far better total compensation: an average of $120,000 a year in wages and benefits. Cut federal compensation by 10 percent to save $20 billion annually.”

In 2008, Obama pledged to implement a “net spending cut,” but he has instead exploded government spending.  Federal domestic spending increased by a record 16 percent in 2010.  In 2010, the Congressional Budget Office concluded that “President Obama’s policies would add more than $9.7 trillion to the national debt over the next decade.”

The Obama administration’s housing spending is particularly wasteful.  It is now using regulations and billions in tax dollars to promote more of the risky lending that led to the financial crisis.  It is ratcheting up affordable-housing mandates that created markets for junk sub-prime mortgages (thus spawning the mortgage meltdown, as even the liberal Village Voice has conceded), and it is increasing regulatory pressure on banks to make risky loans.  A $75 billion federal mortgage bailout program harmed the very real estate markets it was supposed to help.

New CEI Podcast: Creating High-Tech Jobs

by Ryan Young on September 16, 2010

in Deregulate to Stimulate, Economy, Regulation, Tech & Telecom

Have a listen by clicking here.

Ryan Radia, CEI’s Associate Director of Technology Studies, talks about obstacles and opportunities for job creation in the high-tech sector. Regulatory uncertainty is making companies wary of making long-term investments. The sheer number of regulations makes it very expensive to hire workers. According to an article Radia coauthored at RealClearMarkets, rolling back the regulatory state could pave the way for more jobs.

CEI Weekly: CEI Stars in “The Green Swindle”

by Charles Huang on September 16, 2010

in Economy, Energy, Features, Legal, Regulation, Zeitgeist

CEI Weekly is a compilation of articles and blog posts from CEI’s fellows and associates sent out via e-mail every Friday. Also included in the weekly newsletter is a brief description of CEI’s weekly podcast and a feature on a major CEI breakthrough made during the week. To sign up for CEI Weekly, go to http://cei.org/newsletters.


CEI Weekly
September 3, 2010


>>Shaping the Debate
[Video] Chris Horner on Fox News discussing new car stickers

[Video] Vincent Vernuccio sets out to prove unions hire non-union labor

No More Ethanol for America, Please
Brian McGraw’s op-ed in The Hill’s Congress Blog

Lobsters Should Fear Mother Nature More than Plastics
Angela Logomasini’s op-ed in The Providence Journal


>>Best of the Blogs
Antibiotics and Meat DO Mix
 by Gregory Conko

Obama’s EPA: School Marms R Us
 by Marlo Lewis

Expensive Jobs
 by Ryan Young


>>CEI Podcast
September 2, 2010: How Zoning Laws Affected Hurricane Katrina’s Victims
CEI Policy Analyst Marc Scribner talks about his recent Forbes article, explaining how urban central planning made it harder to rebuild after Hurricane Katrina — and how well Houston, which has no zoning laws, coped with 260,000 Katrina evacuees.


>>Support CEI

Like what you read?

The Competitive Enterprise Institute’s 26-year record of success is made possible by our over 3,000 supporters. Please be sure to stop by www.cei.org/support to make a donation today.  Curious about all the possible ways to donate to CEI? Contact Al Canata at acanata@cei.org or 202-331-2280 to find out more.

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