Wednesday, September 28, 2011

Bailing out the bailout

Detroit News has an article on their website about Ford's decision to pull its TV add in which a customer explains that he bought a Ford at least in part because Ford didn't take government bailout money. 

Supposedly the decision came as a response to pressure from the White House.

. . . Ford pulled the ad after individuals inside the White House questioned whether the copy was publicly denigrating the controversial bailout policy CEO Alan Mulally repeatedly supported in the dark days of late 2008, in early '09 and again when the ad flap arose. And more.

With President Barack Obama tuning his re-election campaign amid dismal economic conditions and simmering antipathy toward his stimulus spending and associated bailouts, the Ford ad carried the makings of a political liability when Team Obama can least afford yet another one. Can't have that.

The ad, pulled in response to White House questions (and, presumably, carping from rival GM), threatened to rekindle the negative (if accurate) association just when the president wants credit for their positive results (GM and Chrysler are moving forward, making money and selling vehicles) and to distance himself from any public downside of his decision.
I will leave it to my readers to draw their own conclusions about what it means for our democracy when the president can seemingly order a private business to pull an advertisement in which they simply tell the easily documented truth.  What I want to draw your attention to is the authors repetition of a myth which has been promoted aggressively by the Democrats and their left-wing allies in the media.
. . . a sizable cadre of current and would-be customers oppose the notion of taxpayer bailouts for automakers, whatever the economic costs to the industrial Midwest and the nation of letting them collapse. Meaning there's an advantage Ford can press to remind folks that it didn't receive direct payouts from Treasury.
The myth is that the choice for the government was between letting the auto makers "collapse" or bailing them out with taxpayer money.  In real life a business which is losing money not because it can't make or sell its product but because of something like excessive debt doesn't collapse absent a bailout.  What it does is seek the protection of a bankruptcy court while it restructures it debt under the authority of a bankruptcy judge.

In the big automakers case the problem was the massive costs of servicing the pension and healthcare costs of retired employees.  In GM's case something like $6000.00 in these legacy costs were attached to every car that rolled off of their assembly lines.  If the car companies had entered bankruptcy they would have been able to rewrite the deals that they made with the United Auto Workers Union and reduce these costs significantly.  This would have been bad for retired auto workers but when you allow your union to force your employer to agree to costs which it cannot possibly sustain you don't deserve a lot of sympathy.

The real reason for the bailout of the auto makers was to rescue the retired UAW members from having to pay the price of their union's bad conduct in the years when Detroit car companies were making money hand over fist because all their foreign competitors had either been bombed to ruins (Germany and Japan) or had been ruined by their government's decision to embrace socialism (the UK). 

The UAW used the threat of strikes to arm twist the auto makers into agreeing to contracts which offered employees the chance to retire at 55 and live the life of a modern lotus eater at company expense.  That this would eventually bankrupt the auto companies was not something that the union cared to consider.  The bill eventually came due and the union called upon their great socialist benefactor in the White House and an ocean of taxpayer money was poured down upon their heads.

I don't wonder that the Administration and its lickspittles in the media are so desperate to conceal these facts.  If the average voter was made aware of the fact that the bailouts were never about keeping GM and Chrysler from closing their doors and laying off all their employees and devastating the economy of the Midwest.  But were instead about keeping a bunch of retired union thugs' snouts firmly embedded in the gravy train - at taxpayer expense.  Then there would be even more hell for Obama and his party to pay next year then there already is.