Sunday on NBC’s “Meet the Press,” President-elect Barack Obama told Tom Brokaw, “We don’t want government to run companies. Generally, government historically hasn’t done that very well.” Obama is right. Government has a miserable record as a corporate manager. We shouldn’t want politicians or federal bureaucrats managing private companies.
Unfortunately, that is exactly what liberals in Congress are poised to do. Under the latest plan to come out of Speaker Nancy Pelosi’s (D-CA) office, Congress “would mandate, or at least heavily influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make.” Yale management professor Jeffrey Garten told the New York Times:
I don’t know that we’ve seen anything like this since the government told the automakers what kind of tanks to make during World War II. And that was just for the duration of the war — this could be for much, much longer.
The latest bailout plan, which the Senate hopes to vote on today, calls for an initial $10 billion for General Motors and another $4 billion for Chrysler. But everybody knows these payouts are just a down payment. The car companies would then have to submit a business plan by March 31, and the plan would have to be approved by Congress before any additional funds could be released. As Harvard Business School professor emeritus Malcom Salter asks: “Think about this: Who in the federal government would have the tremendous insight needed to fix this industry?” Remember, almost half the members of Congress are lawyers.
Detroit’s problems are structural and cannot be cured by an injection of taxpayer money. There are plenty of other “more nimble” automakers (such as Toyota, Honda and BMW) building cars on American soil and making a profit doing so. The biggest problem for GM and Chrysler is their completely uncompetitive labor costs, which come to more than $70 an hour. Some have disputed this number, but have offered no evidence to refute it. Here is how the numbers break down: about $30 in hourly base pay becomes $40 an hour after average overtime pay is included; then another $33.58 an hour is tacked on benefits that include health care, dental, life insurance, disability, unemployment insurance, pension payments and payroll taxes. These numbers come from GM itself. All of these costs are for current employees and do not include any payments or benefits for current retirees. If you factor in the $4.9 billion GM paid to retirees and surviving spouses in 2006, the hourly wage goes up another $31, leaving GM with labor costs of $100 an hour! Contrast that with the $43 an hour Honda pays its workers.
Hungering for taxpayer money, the Big Three continue fear mongering. They keep pushing an “analysis” of the employment impact of bankruptcy, which completely disregards the fact that firms protected by bankruptcy proceedings continue to operate and provide jobs. For example, yesterday the Tribune Co. filed for bankruptcy and yet somehow the Chicago Tribune still put out a paper today. Nor does the 3.3 million job losses the Big Three claim would occur take into account how other industries would respond. Using the much more detailed Global Insight Short Term U.S. Macroeconomic model, Heritage’s Center for Data Analysis estimates the bankruptcy of the Big Three automakers would cause a loss of 453,000 jobs. Every single job loss is extremely unfortunate, but ask yourself: How much worse will job losses be after Congress is done running the auto companies into the ground?
- According to Gallup, 51% of Americans say they oppose a taxpayer bailout of Detroit.
- According to a study by ICF International, the development of America’s vast domestic oil and natural gas resources that had been kept off-limits by Congress could generate more than $1.7 trillion in government revenue.
- Five of the men accused of planning 9/11 attacks said they wanted to plead guilty to murder and war crimes but withdrew their offer when they learned a plea might deprive them of the death penalty.
- With Congress poised to vote on a rescue for the nation’s auto industry and Obama promising to launch a massive public spending program, Capitol Hill has once again become the scene of a lobbying free-for-all.
- Obama will meet with Al Gore tomorrow in Chicago to discuss global warming.