No Runny Eggs

The Whitehouse continues to try and find a way to funnel money to the automakers.   They continue to focus on using Tarp funds, an approach that some claim may be illegal/unconstitutional.   In the meantime, the war of words about whether or not to save Detroit, and why, continues to escalate.

In  the far corner, we have an  Op Ed piece in the Washington Post, Harold Meyerson claims that the UAW is the cornerstone of the liberal movement and middle class America.   For this, he claims, Republicans are out to destroy the group and are willing to sink the country into a depression to sate their political bloodlust:

Over the past several weeks, it has become clear that the Republican right hates the UAW so much that it would prefer to plunge the nation into a depression rather than craft a bridge loan that doesn’t single out the auto industry’s unionized workers for punishment.

In the near corner we have an editorial in the Investor’s Business Daily.   IBD not only refutes Meyerson’s claim that UAW is responsible for the existence of the US middle class, but identifies not only why the UAW’s position is unsustainable but unknowingly, why the Detroit as a whole is unworkable:

History teaches a couple of lessons here. One is that, as the labor movement boasts, wages and benefits did indeed rise in the late 1940s and 1950s, when private-sector unions were at their maximum strength.

No fact makes this point better than the UAW’s own dramatic shrinkage, from 1.5 million members in 1979 to fewer than half a million today. Such is the downside to a strategy of raising wages through collective muscle. When labor gets priced to a point where a machine can do a job more cheaply than a worker, the worker is out of a job.

But another lesson is that American industry had unusual advantages during that time, when Europe and Japan were still rebuilding and offered no serious competition. It was a phase that could not last, and unions could not stem the drain of jobs out of the U.S. manufacturing sector.

Like the star high school quarterback, both the UAW and the Big 3 are unable to look at today’s reality and adjust to it.   Rather, they look to their glory days of old and pull out the home town paper’s articles of their game winning touchdown throws, thrusting it in front of us as evidence that because they were once stars, they can be stars again.   Unfortunately, few high school quarterbacks find that a winning touchdown pass defines their success 20 years after the fact.

Both the UAW and auto executives are to blame for the situation the Big 3 are in.   Neither have been forward looking enough.   The UAW believes that they can hold on to wages and work conditions that worked in times of lower competition and management has failed to adjust the business model to reflect the same reality.

I’ve ranted a fair amount about all the things I don’t like about the auto bailout.   However, I don’t think it’s fair to just be anti everything.   As Conservatives we need to be more about answers not Monday morning quarterbacking.   So here’s my answer to the bailout.

Fronting the Big 3 a bridge loan and “hoping” that things will change is the definition of insanity.   Once money is provided and the government is on the hook there will be all kinds of political reasons to “look the other way” and as a result, end up making the auto industry look like Amtrak and providing unending subsidies.   Rather, the Big 3 need to enter a prepackaged bankruptcy.  

Contrary to some chicken little pundits, bankruptcy will not drive consumers away from the Big 3.   Indeed, where else would someone go to buy a light truck?   By going to bankruptcy, all interested parties get tossed into the same pot i.e. all contracts are null and we renegotiate from the facts of today.   This puts management, bondholders, vendors and the union on the same level field.   I would also be in favor of the government providing debtor in possession guarantees to allow the bankruptcy procedure to transpire.

My solution will cause some to banish me from the Conservative parade as a non purist.   Maybe so.   However, not everything in life is black and white and this is particularily so in politics.   There are times where pragmatism i.e. the Dems are going to put this money in Detroit’s pocket…do you want no say or to try to find the best possibility of success, needs to be taken into account.  

It seems like the bail out is going to continue to roil in Washington politics.   It’s hard to see how it will end.   One thing I’ve become fairly certain of is that regardless of how this moves forward, the winner will be no one.