Billions More for Wasteful Auto Bailouts

The auto bailouts keep expanding. Billions more are going to be spent on wealthy auto-dealers, cash-for-clunkers, politically-correct cars few people will buy, and excessive benefits for autoworkers who are richer than the average American.

The Administration’s cash-for-clunkers program has already run out of money, burning through the $1 billion it was supposed to cost. The program rewards people who bought ancient gas-guzzlers, giving them, and not more environmentally-responsible people, federal tax credits for trading them in to buy new cars. The new cars purchased can be almost as gas-guzzling as the ones being traded in, getting as little as 2 miles a gallon more than their old gas-guzzler. The new purchases are supposed to boost the Detroit automakers that the Administration recently bailed out at a cost of $70 billion.

Although the money has run out, the Obama Administration says that it will keep running this wasteful program anyway, at taxpayers’ expense. During the Bush Administration, lawmakers of both parties said the government cannot spend money unless it has been legislatively appropriated, and that such limits are the “tap root of Anglo-American liberty.” But now, with a Democrat in the White House, liberal Congressional leaders are happy to see Obama spending money he doesn’t have, so that the cash-for-clunkers program can continue until Congress gets around to passing a bill that will authorize more spending.

House Democrats hope to vote today on a measure to authorize $2 billion more in spending on the program. But Senate approval isn’t expected soon. So there’s talk of using federal “stimulus money” to pay for cash-for-clunkers. (The $800 billion stimulus package is already full of welfare and waste. It is expected to cut the size of the economy “in the long run.” Although it was supposed to give the economy a short-run “jolt”, it actually destroyed thousands of jobs in America’s export sector, and increased unemployment. It also ended welfare reform.)

Taxpayers and businesses are expected to pay billions as a result of the Obama Administration’s decision to make a federal pension-insurer take over the massive pension liabilities of an auto-parts maker once owned by General Motors, so that General Motors, which was responsible for them, will have more money left over to maintain the extraordinarily generous pension benefits of the United Auto Workers, whose pay is much higher than that of the average American.

Meanwhile, in a move expected to cost General Motors around $2.5 billion annually, “the House has passed a bill reversing GM’s decision to shutter 2,000 auto dealers. Taking advantage of bankruptcy protection, GM undertook the cost-saving measure because state franchise laws had crippled its ability to reduce its bloated, 7,000-dealer network. By contrast, Toyota — with the same market share as GM — has fewer than 1,500 dealers.”

Henry Payne lists some of the many ways that the Detroit automakers have been mismanaged by the federal government “in just the last 90 days” of the bailouts: “At the request of the UAW, the President’s Auto Task Force forced GM to build its new “small-B segment” compact car in the United States instead of in the Far East. This despite the fact that not one manufacturer — not even the Asian companies — builds a small-B in the U.S., due to lack of market demand and high labor costs. GM likely would not build a small-B at all (since companies just emerging from bankruptcy usually try to build profitable products) were it not for the president’s personal distaste for GM’s lineup of ‘bigger, faster’ cars. To correct this, Obama has mandated the cars Detroit automakers “still refuse to make” — that is, a fleet of vehicles that average 35 mpg by 2016. After a one-on-one meeting with Rep. Barney Frank (D., Mass.), GM chief executive Fritz Henderson will delay the closing of a parts-distribution center in Norton, Mass.”

Payne also notes that the cash-for-clunkers program harms the economy by containing provisions that make “used-car and parts businesses suffer.”

The auto bailouts were funded primarily through money contained in the $700 billion bank bailout law passed last year. Diverting money from the bank bailout to auto bailouts was illegal or unconstitutional, agree many commentators, like the Heritage Foundation, Clinton Administration Labor Secretary Robert Reich, and liberal journalist Andrew Sullivan. The bailouts ripped off taxpayers, pension funds for public employees, banks, and non-union retirees, in order to enrich the United Auto Workers Union, whose excessive pay helped bankrupt the Detroit automakers. But the courts have avoided dealing with those serious legal issues by claiming (erroneously in my opinion) that the bailout’s critics were not the correct people to bring legal challenges.

The stimulus package may not be stimulating the economy, but maybe it’s not the economy it was designed to stimulate: “The National Endowment for the Arts may be spending some of the money it received from the [stimulus] to fund nude simulated-sex dances, Saturday night ‘pervert’ revues and the airing of pornographic horror films at art houses in San Francisco.” Meanwhile, unemployed blue-collar workers in construction and transportation were largely excluded from the stimulus package because helping them was viewed as politically-incorrect.