Friday, November 21, 2008

The Big Three Bailout – Socialism's Redux

The R.C. Blog is pleased to publish the first, in what we hope are many, regular opinion pieces on current economic and political issues from one of the most knowledgeable and charismatic Conversatives in No. Va. -- Christian Stockel.

Mr. Stockel, to be exclusively featured on the R.C. Blog, has a wealth of knowledge and experience in global economics and financial management and was a senior official in the federal government and worked directly on many of the issues confronting our current economic problems.

The R.C. Blog proudly presents "Thoughts from the Right Side"...

Thoughts from the Right Side - Christian Stockel

Congress continued its inquisition of executives from the Big Three today executed under the pretense of finding a way of "saving" the big three from extinction. Unfortunately, the political narrative being fed to the American public hides the real objective Congress and the political allies of the Democrat party. This objective has nothing to do with the survival of the American automobile industry and everything to do with saving the UAW and paving the way for a more involved Federal presence in the private economy. A brief review and comparison of the questions posed to the executives and union bosses tell the entire story. Now don't get me wrong. I enjoy the irony of having Barney Frank and Co. lecturing Detroit executives on fiduciary responsibility, fiscal discipline, and long term thinking as much as anyone else; however, if the CEOs of General Motors, Ford, and Chrysler knew what was good for them and their companies, they would run and file Chapter 11 bankruptcy before their corporate jets lift their wheels from the runways at Dulles Airport.

Despite the popular myth that 3-4 million jobs will disappear unless the auto industry get a chance to suck at the government teat, the fact is bankruptcy (Chapter 11 style) and restructuring would most likely result in a leaner, meaner, and more competitive industry that doesn't rely on UAW labor. The fact is a total restructuring of these firms will enable to follow a successful model of production employed by foreign manufacturers in the southern U.S. The Big Three wouldn't disappear; in fact, they would thrive, free of Congressional money and control. That strikes fear in Congressional Democrats. A successful U.S. auto industry setting up shop in a southern red state (yes there are still some left) and leaving blue state Michigan to fade further would put an inconvenient crimp in the Democrat model of economic development and be an uncomfortable story line to explain to the American public. It is interesting listening to Rep. Barney Frank bemoan how the the blue collar workers are being overlooked in the Federal bail-out bonanza that favors white collar industries and workers. However his real aim is to keep the UAW relevant and their members in job contracts that have hamstrung domestic auto manufacturers for over 30 years and in the Democrat party's hip pocket.

Currently, UAW workers at GM, Ford, and Chrysler earn an average hourly wage of $71.00 including benefits. In comparison, American workers at Japanese, European, and Korean car manufacturers in the US earn an average of $37.00. This does not include the extravagant retirement benefits and iron clad job protection schemes (e.g., you can't fire people that are poor performers) that have been extorted from the Big Three. Add to that the simple fact that a company like GM supports almost two retirees for every active worker and one can easily visualize the tight spot in which the American companies find themselves. Try being swift and nimble with that anchor tied around your neck. Chapter 11 restructuring would put these contracts and job guarantees in jeopardy. After backing Barack Obama and the Democrats substantially in the past election, the UAW is going to use their leverage to protect their current position – as untenable as it may be. The made their bet and won – they will make sure that they get the pay off. Add the ill-named Employee Free Choice Act and you have a business killing environment we haven't seen since 1929. To be sure, the demands and interests of other liberal interest groups will find their way into this discussion. The environmental lobby, economic justice lobby, and I am sure the gay rights lobby will find a way to interject themselves in this effort.

Congress is looking to put together a bailout package that will not only resolve the Big Three's short term liquidity problem and provide a political win for the Democrat controlled Congress, but maintain the current labor and management model that will inevitably result in the demise of our domestic automobile industry. However, in today's short-term news cycle and public memory – that is not important. As sad as this scenario may be, the long term implications will be worse than a large spike in Michigan's already depressing unemployment rate, a sudden lack of new Corvettes, some worthless stock, and the rapid deployment of executive golden parachutes.

In fact, the scenario being played out in Congress is simply a continuation of the political narrative established in the presidential election by the Obama campaign. A narrative that re-wrote history and planted the false notion of the “failure of capitalism” in the public consciousness and the need for a “responsible role” of the federal government in the private economy. This narrative was unchallenged by the McCain campaign and the leadership of the Republican party. (Remember, “our guy” is the one who talked about having the government pay people's mortgages.) This narrative changed the nature of the public debate and is what gave the Democrat party an image of being more responsible than Republicans when it comes to addressing issues in the economy. With the presidency secured and large majorities in the House and Senate, the Democrats are using the current economic crisis as a backdrop to ram through their agenda. This agenda; however, will be far less moderate than Obama let on in the campaign and will be in fact a far-left. socialist agenda. On the heels of unprecedented government ownership and entanglement in the financial industry, Congress is poised to give the government an unprecedented role in the automobile industry. Ideas that have been discussed so far have included government ownership of stock, government representation on the boards of these companies, and of course significant government input in management-labor relations. One can only imagine what the next Cadillac or Mustang will look like with the design, engineering, and management input of Congress. Envision an all electric Pacer with recycled denim interior in pastel colors with an EPA mandated governor limiting it to 25 mph.

As this circus unfolds in front of us, we conservatives should be asking who on our side in Congress is raising the voice of resistance to the steady march of managed economics and left wing madness. Who is articulating the virtues of free markets and limited government? No – sorry – those are just crickets you hear. After getting bruised in the most recent election cycle – few Republicans are offering any political or rhetorical resistance. It is even more painful to see the Republican Presidential candidate reaching across the aisle and looking to make a deal. It seems many Republicans are only looking at the short term political implications of current economic difficulties and ignore the larger risk and potential disaster that will result from this constant bail-out process. Once this precedent is established – no industry will be safe from federal meddling. As the siren call of federal bail-out funds beckons struggling companies, an ever growing list of American industries will be snared in Congress' grasp and corporate boards headed by the likes of Dodd, Schumer, Pelosi, Reid, and Waxman will be a reality. It signals the death of American free enterprise and the unique American economic model. One day in the near future, many of us who know better will all wake up and realize we are living in a cheap copy of France without the benefit of its food and wine. is an independent site and is not affiliated with any official web sites, associations, or organizations associated with President Reagan. Any views expressed or content included on this site do not necessarily reflect the views, positions, or opinions of any of the organizations or individuals named, linked, or advertised.

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