Auto bailout back from the dead
December 12, 2008 | By Nathaniel Ward
Yesterday, the Senate rejected a plan to spend $14 billion of taxpayer money to bail out the struggling Big Three automakers. The House passed the legislation, brokered by the Bush administration, on Wednesday.
But even though lawmakers refused to act on the legislation, taxpayer money could still be used to prop up the Detroit companies, which dug themselves into a financial hole. The Bush administration today announced plans to give money from the $700 billion financial rescue fund, known as TARP, to the Big Three.
"Such action would be wrong legally, wrong economically, and counterproductive to turning around these troubled businesses," Heritage Foundation legal scholar Andrew Grossman writes. "And by opening the door to such open-ended use of taxpayer money for virtually unlimited uses, a unilateral decision to employ TARP funds would jeopardize George W. Bush's legacy as a friend of the taxpayer."
Conn Carroll explains why bankruptcy is a viable option for the Big Three:
- Bankruptcy Does Not Mean Death: The auto nationalization cheerleaders keep claiming bankruptcy proceedings for the Big Three automakers would cause a loss of 3.3 million jobs. This is a completely fictional number that assumes all three automakers would go bankrupt simultaneously and that all three companies would then immediately cease all operations entirely. Both assumptions are completely false. Read more.
- Bankruptcy Is Designed to Resolve Complex Problems: GM and Chrysler are not suffering from a short-term liquidity problem. They are suffering from a long-term structural problem that includes uncompetitive labor costs, a bloated dealership network and a short-term credit crisis. All three of these issues are best addressed through bankruptcy. Read more.
- Bankruptcy Pulls Politics Out of the Process: In exchange for a $15 billion down payment and the promise of more bailout money in a few months, the auto companies must agree to report to a "car czar" and have their long-term business plans approved by Congress. Do we really trust people like Sen. Chris Dodd (D-CT) and Reps. Jesse Jackson Jr. (D-IL) and Charlie Rangel (D-NY) to put the economic viability of the auto companies ahead of their own short-term political interests?
In another post on Heritage's blog, the Foundry, Heritage expert Nick Lorris explains that a bailout distorts market operation. "Good business decisions are rewarded with profits and bad business decisions are punished with losses. Good business decisions create jobs while bad business decisions lose them. And now the government wants to provide taxpayer money to reward the bad business decisions made by Detroit."
— David Talbot
Why families prosper
FamilyFacts.org's December Top Ten Findings reveal consistent links between family structure and economic well-being.
Experts in Heritage's Devos Center for Religion and Civil Society compile social science data supporting traditional American values. www.FamilyFacts.org
Here is what the experts concluded from their findings.
1. Cohabitation and Poverty. On average, married couples are less likely than cohabiting couples to be in poverty. full details
2. Income Trends. Over time, married couples-with or without children-have a higher family income, on average, than all other family structures. full details
3. Net worth/household wealth. Married-couple households have, on average, substantially greater net-worth than households with other types of living arrangements. full details
» Read the rest of the FamilyFacts findings on MyHeritage.org
— David Talbot
Other Heritage work of note
- A new age of piracy is threatening the safety and profitability of major shipping lanes off the coast of Somalia. Writing in Armed Forces Journal, Heritage expert Peter Brookes writes about the overlap between this new piracy and terrorism. "While [piracy and terrorism] aren't the same," he said, they share much in common, "especially when it comes to targets and techniques." Worryingly, he explains that analysts are "concerned al-Qaida has a number of hijacked, re-registered and renamed 'phantom' ships in its possession, including tug boats, which could be used for attacks on ports."
- The perfect present — a Heritage necktie by Vineyard Vines. These elegant ties feature The Heritage Foundation bell on navy, red, green or raspberry. Made of hand-woven silk at a standard 56 inch length, these ties are a wonderful addition to any wardrobe. Order your tie online today for $35, or call (800) 544-4843. Order by December 18 to receive your tie in time for Christmas.
In other news
- President-elect Obama's administration has offered Israel a "nucular umbrella" in the event of an Iran nuclear strike.
- An Associated Press profile of the nominee for Secretary of Health and Human Services, former Senator Tom Daschle, explains that he is "exceptionally well qualified to bring people together in support of universal coverage."
- Fourteen suspected Al-Qaeda members were arrested in Belgium, where European leaders were meeting. The detainees are suspected of plotting attacks.
- The United Nations will spend funds to help poor countries adapt to global warming. The AP explains that "the fund is derived from a 2 percent levy on offset investments that industrial nations make on green projects in the developing world."
- Deflation fears were roused by a fresh drop in wholesale prices.
- The Bush administration has revised regulations on endangered species to limit their use as a back door to harmful global warming regulations.
Coming up at Heritage
To attend these or any other events at Heritage please RSVP at Heritage's website. Or you can view these events live online. All times are Eastern.
- On Tuesday, December 16 at 10:30 a.m., Secretary of Commerce Carlos Gutierrez speaks on the costs and consequences of the Cuban revolution.
- On Tuesday, December 16 at 11:00 a.m., a panel of experts will discuss the future for U.S. - Africa relations.
- On Thursday, December 18 at noon, the President's Special Envoy to Sudan Ambassador Richard Williamson will discuss the possibilities for peace in Sudan.
Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. David Talbot contributed to this report.
