Better late than never: McConnell assails auto bailout, failure subsidies; Update: Corker amendment link added
Act II of Kabuki Bailout Theater begins.
GOP Sen. Mitch McConnell finally discovers that subsidizing failure is a bad thing.
His Senate floor statement today (should I make it Duh of the Day?):
“These are turbulent times for the U.S. economy. Over the past several months, Americans have seen giant companies fail, significant job losses, and, after unprecedented problems in the credit markets, the frightening prospect of total disarray within our nation’s Main Street economy.
“The crisis in the credit markets came at us quickly. We were told that urgent government action was needed in order to shore up the broader economy — and that failure to act would lead to a complete collapse of consumer credit, the very lifeblood of our nation’s economy.
“Under ordinary circumstances, I would have opposed such a measure. Government intervention in the marketplace cuts against all my ordinary impulses. But this was not an ordinary event. I, and many others, believed that extraordinary action was needed to protect millions of ordinary Americans from the colossal and far-reaching mistakes of a few. And action was taken.
“The systemic breakdown that some envisioned has not occurred, so there is reason to believe that the medicine has had some effect. But, on the whole, the overall economy continues to struggle. Some industries have been hit harder than others. And one of them is the auto industry.
“The problems in the auto industry have been long in the making. But last month the situation grew so dire that American automakers came to Washington with an urgent appeal for federal help. Over the past few weeks, lawmakers have taken the time to examine the problems at these companies and the solutions that they have proposed. And now the American taxpayers are being asked to put their money behind a plan that is aimed at helping these companies survive.
“Republicans received that plan late yesterday morning. We reviewed it closely to see if it meets the criteria that I have laid out repeatedly for taxpayer-protections and an effective strategy for securing the long-term viability of these companies. In the end, I concluded that it does not.
“In some ways, the proposal that was worked out by the White House and Congressional Democrats appears tough. It calls on struggling auto companies and autoworkers to make the sort of sacrifices they have not been accustomed to making in the past. It also includes time limits as a way of hastening necessary reforms. But in reality, this proposal isn’t nearly tough enough.
“A primary weakness relates to the so-called ‘Car Czar,’ who has nearly unlimited power to allocate taxpayer dollars but limited ability to force the kinds of tough concessions that long-term viability would require.
“Another problem lies outside the proposal itself. And here I’m referring to the type of government action that’s being contemplated. Somewhat lost in the recent debate over the auto industry is the fundamental difference between it and the financial rescue plan that Congress approved in October. While that plan was intended to rescue the entire economy, this one is intended to save a single industry. That plan was intended to help everyone — from small business owners to college students; and every lawmaker who voted for it acted on the belief that that is what it would do.
“A failure to appreciate this distinction has caused a number of other industries and even a number of municipalities across the country to prepare their own proposals for a government rescue as all Americans weather the tough economy. It has also created the impression in some minds that the federal government is picking favorites, and that favored businesses get help while others don’t.
“A lot of struggling Americans are asking where their bailout is. They wonder why one business would get support over another. When it comes to the auto industry, many Republicans in Congress have asked these same questions.
“There are many principled reasons to oppose this bill. But the simplest one is also the best: ‘a government big enough to give us everything we want is a government big enough to take everything we have.’ This is as true for individuals as it is for business. It’s the primary principle on which American industry, including the auto industry, was built. And even in turbulent moments like this — perhaps especially at moments like this — it’s a principle well worth defending.
“Some argue that the effects of an auto industry collapse would be too acute and far-reaching for an already-struggling economy to bear. This is impossible to know. And even if we grant that these companies would fail without taxpayer help, we would still have to ask ourselves whether the proposal before us achieves the goal that everyone claims to embrace — namely, the long-term viability of ailing car companies — and, in my view, it does not.
“I have already enumerated some of the weaknesses in the plan. But in the end, its greatest single flaw is that it promises taxpayer money today for reforms that may or may not come tomorrow. And we would not be serving the American taxpayer well if we spent their hard-earned money without knowing with certainty that their investment would result in stronger, leaner auto companies that would not need additional taxpayer help just a few months or weeks down the road.
“We simply cannot ask the American taxpayer to subsidize failure.
“All Americans, including myself, are worried about the future of our nation’s automakers. These companies have a venerable place in the story of modern America. They continue to provide hundreds of thousands of jobs across the country, including nearly 50,000 auto-related jobs in my own home state of Kentucky.
“But many Americans are also worried about the prospect of the government intervening on behalf of some industries and not intervening on behalf of others — especially when there is no guarantee it that the interventions will work. They wonder when the spending stops. If I were to vote in favor of this bill, I would not have a good answer for them.
“The best route for the long-term viability of ailing car companies may be a rocky one. Government help is not the only option. It’s not even the best option. Long-term viability is still possible. But it’s only possible if these companies are forced to make the tough choices necessary for their survival.
“Senator Corker has proposed an amendment that would go a long way toward improving this bill. In keeping with the principles I’ve outlined, the Corker Amendment does not just encourage reform, it requires it. And it does so with crucial specificity. First, participating companies would be required to reduce their outstanding debt by at least two-thirds through an equity swap with bondholders.
“The Corker Amendment also requires that labor costs at participating companies be brought on par with companies like Nissan, Toyota, and Honda — not tomorrow but immediately — because it is delusional to think that a company which spends $71 per labor hour could compete with a company in the same industry that spends $49.
“The Corker Amendment would improve the liquidity and cash-flow of automakers by requiring that a portion of the payments made to union accounts consist of company stock.
“And finally, the Corker Amendment would require participating companies to file for Chapter 11 reorganization if any of these conditions aren’t met by a fixed date.
“The Corker Amendment forces necessary reforms, holds companies accountable, and assures taxpayers that these companies won’t be back for more. If legislative action were necessary, the Corker proposal would make many much needed and dramatic improvements to the underlying bill.
“I, like all of my colleagues, want the U.S. auto industry not only to survive but to thrive. And by cutting costs, streamlining production, increasing fuel efficiency, and investing in new technologies and attractive, more competitive designs, American auto companies will once again make cars that people all over the world will want to buy. Then Americans will be able to say again with pride that our cars are the best.
“In addition protecting the taxpayer, this is a goal that Republicans have been fighting hard for in this debate. And in my view, it’s a goal that is well worth our efforts.”
Here’s the text of the Corker amendment McConnell backs.blog comments powered by Disqus
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