It is getting to the point where Congress will need to pass legislation to protect itself from money grubbing shysters. First, it was the Paulson/Bernanke Crime Syndicate (their specialty is counterfeiting) that told Congress they needed a cool $700 billion or the sky would collapse on the United States. Now, it is the poor automobile industry (that just got $25 billion from Congress in October) that needs another $25 billion lest the unemployment rolls in this country will swell by 13 million or 4 million (they haven't decided on a number yet). Next month, Congress will probably hear from the airline industry and how it needs billions. After that, look for the agriculture sector to weigh in and then who knows, cigarette companies?
The fact is, soon there will be no end in sight to the steady stream of industries and groups that will lobby Congress for federal largess unless they put an immediate halt to the giveaways. Congress has a golden opportunity to do just that right now by saying no to the automobile industry. No matter what the costs, Congress must say in the words of Roberto Duran "no mas" to billions in bailouts for Detroit.
For one thing, all of these bailouts are unconstitutional and thus illegal. Article 1 Section 8 of the U.S. Constitution clearly specifies the powers delegated to Congress. Nowhere in those roughly 17 powers is Congress given the authority to transfer money from one constituency to another. Nowhere in there does it say Congress can use the federal Treasury to prevent corporate bankruptcies. Critics of this position will say, "but what about the general welfare clause in the same section?" The answer is, if the general welfare clause gives the Congress the power to bailout corporations with taxpayer funds then why did the authors of the Constitution not delineate that power among the 17 powers in that section of the Constitution? Why did they delineate any powers at all if the general welfare clause includes any power? According to the general welfare clause logic of the statists, the Congress can do whatever it wants under that one clause. That is why we are in the mess we are in.
Another reason Congress must put an end to its handouts is because it is investing in losing propositions. The Big Three automakers are a perfect example. Their stock has plummeted by 75 percent since the beginning of the year and all three are on the brink of bankruptcy. If investors are bailing on the Big Three in droves and each has one foot in bankruptcy court and the other on a banana peel, why in the world would our elected representatives even consider putting billions of dollars in them. Would you?
Of course there is a good reason why the carmakers are collapsing. Like other industries that have disappeared from the American landscape, the automobile companies have been the victims of collective bargaining laws passed by Washington and the State of Michigan. It has been estimated that the average GM worker makes $81.80 an hour in wages and benefits. In comparison, non-union Toyota pays $48 per hour in wages and benefits. The legalized extortion that the UAW is allowed to hold over GM puts the company at a competitive disadvantage costs wise by about $1000 per vehicle produced.
So, if Congress should not bail out these broke companies, then what should be done? The same fate should befall the automakers that should have befallen the failing banks. They should be allowed to go bankrupt. "But they are too big to fail." "Many people will lose their jobs, their homes, and their healthcare." The bottom line is that the Congress cannot solve our economic problems by throwing good money into unsustainable enterprises. The more than $2 trillion the government has already injected into the economy has proven that. Besides, at the right price, entrepreneurs will buy the assets of the bankrupt firms and start a new American auto industry. There is a market for cars in the U.S. and it is only a matter of time before some American(s) fills that market need. Then the millions of workers who lost their jobs with the Big Three bankruptcies will have an opportunity to work for a competitive company.
Kenn Jacobine teaches History, English, and Information Technology in a Global Society for the American International School of Lusaka, Zambia. Visit his website at: The View from Abroad.
©2008 Kenn Jacobine, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Saturday, November 22, 2008
Last modified: Saturday, November 22, 2008
The views expressed in this article are those of Kenn Jacobine only and do not represent the views of Nolan Chart, LLC or its affiliates. Kenn Jacobine is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
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Reader Comments:
Posted By: trd
Date: 2008-11-22 08:48:28
Don't get me wrong, I am completely opposed to all fomrs of bailouts from Congress. However, I do get pissed off at the double standard between the banking and the auto.
The Automakers are asking to divert $25B in the form of a loan from the already approved $700B. Therefore they are not asking for additional funds, they are asking to divert a small fraction (1/28th) of the already approved bailout to their side. As bad as that is, the Congress is giving them a hard time and a lot of conditions that were never questioned when approving the initial $700B for the failing banking industry which does not produce anything as the automakers do.
And that is the main problem with these corporate socialistic giveaways: If you give X to them, why not give Y to me?
It is like if your next door neighbor was screwing up financially and was also pissing money away in smoking weed, drinking and parties while you do your best to keep afloat in your own tough times, then the government gives your neighbor $28,000 to correct his erratic behavior with no conditions so that he can have another great party and when you ask for just $1,000 of his $28,000 they give you a lot of hassle.
No bailouts should be approved!!! EVER.
Posted By: trd
Date: 2008-11-22 09:05:56
Although the UAW have been cohersing the execs at the 'small 3' (not big 3 anymore), these execs have a form of unwritten union of their own. As long as they can keep their perks, they approved these contracts last year that shouldn't have been approved. Both he UAW and the execs who approved their luxury contracts are to blame.
And don't get me started on the UAW's 'job banks' where workers who had their positions eliminated will go to a warehouse for 8 hrs per day to get paid 90% of their previous wages and benefits to do NOTHING. That's right: NOTHING, until their position becomes open again. There are people in the job banks collecting money for nothing for over 10 years because their position of 'wood modeler' is not available anymore. Until GM finds a position for a wood modeler they must keep paying them for no wood modeling.
Here in Michigan, only politicians and UAW members like the UAW. Even members of other unions hate the UAW. Engough is enough!
With regards to the auto workers in Toyota: They don't hire former UAW workers because they don't want any kind of union mentality influence in their workforce. The UAW go to their plants every year for their workers to vote on unionizing and the majority always vote NO. They want to keep it that way and for good. They rarely hire former white collar workers from the 'small 3' because they don't want the entitlement mentality that comes with them. Therefore, not only has the UAW brought down their company, they have also made ther members non-employable and less skillful.
Posted By: Master C
Date: 2008-11-22 18:03:27
Dear Kenn,
This is NOT a BAILOUT. It's what's called a "bridge loan" which helps the auto makers temporarily. The Chrysler loan was paid back EARLY!
I wish those who instantly say "No help for the Auto Makers" would look at how much money has been spent to help California with all these FIRES they've had, and Louisiana with their HURRICANE damage, and Florida with their repeated help from storm damage. Not to mention all the help for FLOODING, CROP DAMAGE, even those states who want elaborate and costly FENCES to keep out immigrants. There isn't a DOUBLE STANDARD here, it's a MULTIPLE STANDARD!
Master C
Posted By: Kenn Jacobine
Date: 2008-11-23 01:41:03
Dear Master,
Unfortunately, it is a bridge to nowhere. As I stated, the automakers got $25 billion already from the economic central planners in DC in Sept. They want $25 billion more now. GM alone is burning about $5 billion per month now. What happens when the real depression hits? It is all over, but for the crying.
Kenn