Lessons from the Auto Bailout Controversy

This past week, the US Senate failed to concur with the House of Representatives in passing a bailout package for the nation’s large domestic automakers. This bailout had the support of the Democratic leadership in Congress as well as the Bush White House. Already, doomsayers are bemoaning this lack of financial infusion from an already depleted federal budget. However, I applaud this decision as a victory for principle over pragmatism. Hoping that conservatives will learn from this effort to continue enlarging government, consider some lessons from the bailout controversy.

The Craziness of the Auto Bailout

Tonight, the U.S. House of Representatives voted 237-170 to use taxpayers funds for a downpayment on a recovery program for the failing auto industry. Alabama’s US Senator Richard Shelby is leading the opposition to the bailout. Shelby declares that the total cost of the bailout will easily exceed $100 billion. The late Samuel Francis often quipped that the United States has two political parties: the Evil Party and the Stupid Party. Occasionally, you see a true bi-partisan effort and you can count on that bi-partisanship involving both evil and stupidity.

Ron Paul Discusses Auto Bailout with Neil Cavuto

See Video

Surprised that Dr. Paul didn’t make it to the recent hearing Congress had with the automaker CEOs, Neil Cavuto questions Congressman Paul about the impending auto industry bailouts.  Dr. Paul’s answer as to why he wasn’t there-

“I know all the answers they’re going to give me, and they’re not going to entertain a serious approach to what they ought to be doing.”

Shelby Stands Tall Against Automakers Bailout

Displaying both passion and courage, GOP Senator Richard Shelby of Alabama has been leading the charge against a taxpayer bailout of the automobile industry.  With pressure from both corporate interests and the White House, Senator Shelby is standing firm and leading the opposition to this big-government bailout.

Shelby won his seat in the US Senate in 1986 as a Democrat, defeating Republican incumbent Jeremiah Denton. In his initial Senate campaign, Shelby had maximum support from organized labor, groups now clamoring for attention in the bailout legislation. Shelby’s home state of Alabama is home to major Toyota, Honda, and Mercedes plants. Yet, this Senator has chosen to face the special interests and stand for principle in opposing a giant step toward socialism.

Tennessee Volkswagen employees reject United Auto Workers

Volkswagen Chattanooga plant

United Auto Workers attempt to unionize workers at a Tennessee Volkswagen plant was defeated in a close vote on Friday, delivering a blow to the union’s attempt to organize in a right-to-work state, despite the endorsement of auto maker:

Workers at a Volkswagen factory in Tennessee have voted against union representation in a devastating defeat for the United Auto Workers union’s effort to make inroads in the South.

The 712-626 vote released late Friday was surprising for many labor experts and union supporters who expected a UAW win because Volkswagen tacitly endorsed the union and even allowed organizers into the Chattanooga factory to make sales pitches.

“This is like an alternate universe where everything is turned upside down,” Cliff Hammond, a labor lawyer at in Detroit, told The Wall Street Journal, noting that companies usually fight union drives.

“This vote was essentially gift-wrapped for the union by Volkswagen,” said Hammond, who previously worked at the Service Employees International Union.

The setback is a major defeat for the UAW’s effort to expand in the growing South, where foreign automakers have 14 assembly plants, eight built in the past decade, said Kristin Dziczek, director of the labor and industry group at the Center for Automotive Research, an industry think tank in Michigan.

Lax youth enrollment could bring Obamacare bailout

Now that the Department of Health and Human Services (HHS) had shed some light on the low percentage young people who are selecting health plans through the Obamacare exchanges, worries of a taxpayer-funded bailout for the insurance industry have become more real.

Through the first three months of open enrollment, just 24% of Obamacare signups were from 18 to 34 year-olds, meaning that enrollees are older and, likely, sicker. The Obama Administration had anticipated that nearly 40% of enrollees would be in this age group, a necessity if the math behind the law is to work.

Insurers could react to the disproportionate risk pool by increasing premiums for plans available on the exchanges in 2015. But it could also mean that taxpayers will bear the costs of their losses this year, thanks to two provisions buried in Obamacare.

While it hasn’t received a lot of attention in the media, the “risk corridors” provision of Obamacare guarantees payments from the from the federal government to insurers for losses incurred. That could be a big problem for taxpayers if young people don’t enroll in droves in the final three months of the open enrollment period.

“This is an unlimited taxpayer liability that compensates insurers in the exchanges for medical costs in excess of 103 percent of the target costs for each plan,” wrote John R. Graham of the National Center for Policy Analysis in November. “For costs between 103 percent and 108 percent of target, taxpayers compensate the insurers half the excess loss.”

Taxpayers lose billions on GM bailout

General Motors

President Barack Obama staked his re-election bid partly on the notion that he rescued struggling automakers through expensive bailouts and, thus, saved Detroit. But what was one of America’s great cities has plunged into bankruptcy and taxpayers have been left on the hook for billions of dollars as the federal government seeks to unload its stake in General Motors (GM).

The Treasury Department has quietly revealed this week that taxpayers lost $9.7 billion in the Obama Administration’s bailout of GM, which was more of a bailout for the auto manufacturer’s labor unions that support President Obama than anything else:

Study: Cash for Clunkers didn’t help the environment, cost $1.4 million per job

Cash for Clunkers

Remember “Cash for Clunkers”? This 2009 program allowed people to trade in older vehicles for a rebate of $3,500 or $4,500 so they could purchase a new, fuel-efficient car. The Obama Administration had hoped that it would stimulate the auto industry and, at the same time, help reduce emissions by taking gas guzzlers off the roads.

Ex-Obama Administration official wants to bailout Detroit


Writing at The New York Times, Steve Rattner, who served as President Barack Obama’s “car czar” in 2009, made the case for a taxpayer-funded bailout of Detroit, which has for years been plagued by crime, corruption, and fiscal mismanagement:

Michigan Gov. Rick Snyder has capably overseen Detroit’s march to Chapter 9, neither the state nor the federal government has evinced any inclination to provide meaningful financial assistance.

That’s a mistake. No one likes bailouts or the prospect of rewarding Detroit’s historic fiscal mismanagement. But apart from voting in elections, the 700,000 remaining residents of the Motor City are no more responsible for Detroit’s problems than were the victims of Hurricane Sandy for theirs, and eventually Congress decided to help them.

America is just as much about aiding those less fortunate as it is about personal responsibility. Government does this in so many ways; why shouldn’t it help Detroit rebuild itself?

At some point cities and states are going to have to learn that they are responsible for the messes that they create. This isn’t some unexpected natural disaster that came along and reeked havoc on the Motor City. This mess, this need for bankruptcy was manufactured by corrupt politicians who cozied up to Big Labor and didn’t live within their fiscal means.

More Unintended Consequences of Obama’s Auto Bailouts

The United States government has taken China to the World Trade Organization. They’re complaining about auto import tariffs China has imposed for a couple of years.

The United States launched a trade complaint Thursday against China at the World Trade Organization, accusing Beijing of unfairly imposing duties on more than $3 billion in exports of American-produced automobiles. The announcement came as President Barack Obama hit the campaign trail in the battleground state of Ohio, where automakers have been affected by the tariffs imposed in December. It underscored how America’s trade relations with rising economic power China could color the political debate ahead of the November presidential election. Under WTO rules, countries are allowed to impose punitive tariffs to offset damage from both subsidies and dumping — selling products at below market value — but the U.S. contends that in this and other cases, China has used those remedy measures in an unfair and retaliatory way to hurt American exporters.

Obviously this complaint being made public, while Obama is in a campaign trip throughout the Rust Belt, is pure coincidence I’m sure. Which auto manufacturers are the most harmed by these tariffs:

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