National Review editor Rich Lowry, who mistakenly supported the financial system bailout because he trusted the Bush Administration, now realizes that he was deceived by Treasury Secretary Hank Paulsen, and that the bailout was sold to the public under false pretenses.
Having promised to use bailout money to buy up troubled assets, the Bush Administration instead used the money for completely different purposes, and now wants to use some of it to bail out an entirely different industry — the automakers. The Bush Administration reads the bailout bill as giving it almost limitless discretion as to who to bail out and how. That interpretation of the bailout statute should be rejected, because such a vast grant of discretion would be unconstitutional.
The proposed bailout of the automakers would itself be a grave mistake, costing taxpayers billions while avoiding the painful reforms to the auto industry needs to enable its long term survival and failing to make inexpensive deregulatory reforms that would allow the auto industry to recover. The bailout would repeat the mistake England made in the 1970s, when it completed the ruin of its failing auto industry by attempting to bail it out, at a cost of billions of pounds, making it uncompetitive and dependent on welfare instead.
There are hundreds of regulations that Congress and agencies have imposed on the auto industry, driving up their costs unnecessarily. As an illustration, these are the new rules from the DOT identified by Wayne Crews in the 2008 edition of Ten Thousand Commandments:
– Reform of the automobile fuel economy standards program.
– Light-truck Corporate Average Fuel Economy standards (2012 model years and beyond).
– Upgrade of head restraints in vehicles.
– Rear center lap and shoulder belt requirement.
– Monitoring systems for improved tire safety and tire pressure.
– Automotive regulations for car lighting, door retention, brake hoses, daytime running-light glare, and side impact protection.
Plus these from the EPA:
– Rulemaking to address greenhouse gas emissions from motor vehicles.
– Clean air visibility, mercury, and ozone implementation rules.
– Review of National Ambient Air Quality Standards for lead, ozone, sulfur dioxide, particulate matter, and nitrogen dioxide.
– National emission standards for hazardous air pollutants from … auto paints.
These rules and all those from previous years need to be reanalyzed in the light of the industry’s troubles to see whether they should be repealed, suspended or weakened. In particular, attention should be paid to their aggregate effect on the industry. A deregulatory bailout would save the industry billions, and also save thousands of lives.
Apple's 1984 "Big Brother" ad
An article over at Ad Age brings up an angle on the whole auto industry bailout probably not considered much before. The fact that a yet-to-be-appointed “car czar” will have control over a multibillion dollar advertising budget for the big three. Under the guise of “oversight,” this would effectively “Create World’s Most Powerful Marketing Exec[utive].”
The draft rescue plan for Detroit sent to the White House by Congress yesterday calls for the appointment of a “car czar” who will oversee the Big Three automakers’ expenses over $25 million — which, by extension, would include media buys. Based on Advertising Age’s estimates of spending by General Motors Corp., Chrysler and Ford Motor Co., that would give the as-yet-unnamed car czar control over some $7.3 billion in marketing spending in the U.S. alone.
The most disturbing thoughts about this (particularly to those concerned with liberty) are provoked here:
The car czar would wield a budget more than double those of AT&T, Verizon, Unilever and Johnson & Johnson, which round out the nation’s top five marketing spenders, and give the car czar more clout with media and agencies than such famed names in marketing as Walmart Chief Marketing Officer Stephen Quinn and Anheuser-Busch VP-Marketing Dave Peacock.
…If the bailout goes through, agencies that work for the Big Three will essentially be toiling on a government account, with all the associated red tape and strictures that involves.
So there you have it. We should all be concerned about this for many reasons. As mentioned, the large ad budget that comes with a czar-controlled U.S. auto industry will allow a government bureaucrat to wield unbalanced and unchecked influence over not only who gets ad contracts, but what media outlets get ad money. The czar can simply refuse to give business to an advertising agency who works for a foreign competitor of the big three (or a “non-compliant” corporation), or refuse to pay money to show ads on outlets that they deem “unfriendly” to the administration or its mission. This will be an unequivocal disaster. We have already seen the lengths to which administrations (and pre-administrations) have gone to influence and/or silence media they do not like. What kind of power plays do you think are possible when the administration’s appointee controls a major source of media outlets’ ad revenue? Whatever it ends up being, it won’t be pretty.
Mickey Kaus, a moderate Democrat, explains how the proposed auto bailout contains little leverage for the proposed “auto czar” to really cut the excessive labor costs that threaten the automakers’ survival, and how it is unlikely that the government will “get its money back,” contrary to what the bailout’s (mostly Democratic) supporters claim.
We earlier noted that auto workers at American-owned plants are paid $70 an hour in compensation, while workers at the U.S. factories owned by foreign car markers get paid less than $50 an hour. The U.S.-owned automakers will not be competitive until that disparity is reduced, but that is unlikely to happen, because any auto czar will be accountable to the Obama Administration and Congress, which are dominated by liberals supported by the United Auto Workers union. State dealer franchise laws in states like New Jersey, which fleece automakers to perpetuate underperforming auto dealerships, also need to be preempted by federal law to reduce the U.S. automakers’ costs.
Nobel Prize-winning economist Gary Becker explains why bankruptcy would be better for American consumers and taxpayers than a bailout, since filing for bankruptcy would allow the automakers to cut their inflated labor costs.
Failure to cut labor costs will make any bailout an exercise in futility, as the British government found when it foolishly spent billions of dollars in the 1970s in an abortive effort to bail out the failing British car industry. (Today, Europe’s largest auto plant is in England, but it’s owned by the Japanese automaker Nissan. So even if American automakers were to not only go bankrupt (like the airlines, which keep operating even in bankruptcy), but also stop producing cars, the cars still might be produced in the U.S. by a foreign car company).
In the Wall Street Journal, Holman Jenkins argues that even a multibillion dollar bailout will simply be wasted, without turning around the auto makers’ fortunes, if federal CAFE (fuel-economy) regulations are not repealed or reformed. He notes that a gas tax would be a less economically burdensome and more effective way of increasing cars’ gas mileage than CAFE standards, and would place American automakers at less of a disadvantage relative to their foreign competitors.
Manhattan financial analyst Eric T. Singer argues that the bailout and the proposed “Car Czar” will harm the auto industry by giving political priorities like “union jobs and green initiatives” priority over producing affordable cars motorists actually want, resulting in the auto industry limping along on “life support,” at a tab of billions of dollars a year in taxpayer subsidies.
While lawmakers consider whether or not to bail out an industry they holed beneath the waterline, perhaps they could learn from the history on another once-thriving auto industry, that of Great Britain. It’s a salutary tale.
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