No sooner had Senate Republicans killed a bailout for the Big Three automakers than the Bush administration indicated that it might be willing to tap perhaps $15 billion of the original $700 billion bailout to hand over to the car companies.
Would the Bush administration be doing the car makers or the American public a favor by handing over taxpayer dollars? Manifestly not, and the public agrees. Indeed, a majority of the public opposed the bailout.
And even though the Big Three CEOs—at least GM and Chrysler—are working hard for a bailout, they might be doing their companies more harm than good.
A Chapter 11 bankruptcy would allow the car-company management to void the current labor contracts that cost them so much.
That prospect has the unions denying that auto workers make in the range of $80 an hour. They claim that American manufacturers pay about the same as the foreign companies operating on American soil, about $30 an hour. The rest of that money, well, that’s for benefits, not real income.
Which highlights our poor understanding of economics. Those benefits, whether they are paid to current workers or retired ones, are still part of the total benefits package. The fact that some of those benefits are deferred until the future doesn’t make them any less real costs.
But an even more important reason for refusing the bailout—at least the original version of it—is that the money will come with significant strings attached, as Democrats dictate how “green” they think new cars should be. Any future bailout funds will likely include those strings. Congress designing cars would be an unmitigated disaster.
When gas was $4 a gallon, the public was very interested in hybrids and electric cars. But when gas is $1.50 a gallon … not so much. When the public starts buying new vehicles again—and if gas prices remain relatively low—they will likely go back to buying what they bought before the recent economic upheavals: trucks and SUVs. Even as Detroit is trying to churn out countless small green cars that only Greenpeace could love.
The fact is that the best bailout Detroit could receive is low gas prices—and it’s getting them now.