When talk of a bailout for automakers started, Democrats in Congress wanted Treasury to fork over $25 billion out of the $700 billion they have to invest in saving the financial markets. The Bush White House wanted Congress to make $25 billion available by taking the restrictions off of already approved Energy funds that are supposed to go toward retooling factories to make more fuel efficient vehicles. As public opinion against any type of bailout heated up, Pelosi became the first to say that without a detailed plan from automakers, there would be no bailout money. With that statement, she may have driven the Democratic Party into a huge political trap.
Bush offered up the Energy money because he knew Pelosi wouldn't go for it. But there is a very important political reason why Democrats in Congress should not make the loan based on turnaround details.
A realistic plan will call for eliminating thousands of dealerships -- small businesses that impact every community -- and union concessions. If a plan like that is approved and funded, hundreds of thousands of Americans will be looking for work or making less money and blaming Democrats for putting for their misery.
I would prefer to see them do the following:
- Lend the automakers only enough to get them through March, so that the new administration can take control. Somewhere in the range of $10 billion should do. Make the loan without conditions. Even if it never gets paid back, it's less than the costs of millions of people out of work.
- As part of the economic stimulus package, create a piece called RAMP - Reinvigorate American Manufacturing Project. Fund RAMP with $100 billion. Stipulate that half the money should be used to help new manufacturing ventures (that can't get funding in the current lending climate) get off the ground. The other half should be used to help existing manufacturers weather the economic crisis. This is where the automakers (and other struggling manufacturers) should get the funds they need to borrow. This would take congress out of the business-closing/job-cutting business. Make RAMP a bi-partisan entity to share the glory and the blame.
- A lot of people here and elsewhere say that the American automakers pay their workers too much, and that the UAW contracts should be renegotiated. I think they've got it backwards, especially in a time when deflation is a real threat to our economy. I would like to see Congress pass, and Obama sign, legislation that says that foreign companies who manufacture in the U.S. must pay their workers the prevailing wage and benefits paid by American manufacturers. It makes no sense for U.S. companies to establish markets and take on massive legacy costs only to be undercut by foreign upstarts who locate in non-union/low-wage parts of the country. If we are really progressives, we should be looking out for union workers, not throwing them under the collective bus.
- Finally, I'd like to see a bill passed to make the interest on a car loan deductible (for the next few years only), as long as that vehicle is rated as fuel efficient in its class. This will not only stimulate the automotive retail business, it will create incremental improvements in air quality and gas consumption.
I'm sure these ideas could be made better with some tweaking, but I'd hate to see Democrats fall into a political trap so quickly after such a great victory, I'd hate to see union workers give up so much that they've worked to achieve, and I'd hate to see the American automotive industry die. On the other hand, I would love to see manufacturing in this country become a larger share of the economy.