President Obama’s GM Bailout Bailed Out the UAW not GM

Posted by PITHOCRATES - August 19th, 2012

Week in Review

GM got into trouble because they couldn’t sell cars competitively.  Because they had higher labor costs than the foreign competitors taking their market share.  And they simply couldn’t sell enough cars at their high prices to pay their labor costs.  Which led them to bankruptcy.  But President Obama saved GM.  By bailing them out.  And putting them on the road to prosperity.  Or did he (see Morning Bell: Taxpayers’ Auto Bailout Losses Mounting by Amy Payne posted 8/14/2012 on The Foundry)?

Taxpayers will lose even more on the auto bailout than previously thought, as the Treasury has just revised its estimate upward to $25 billion. This may still underestimate the losses to come—yet President Obama plans to tout the auto bailout as a key accomplishment of his Administration…

Heritage labor expert James Sherk and co-author Todd Zywicki found that all of the taxpayer losses occurred because the Administration manipulated bankruptcy law to shelter the United Auto Workers’ (UAW) compensation. None of the losses were necessary to preserve jobs, and taxpayers spent billions to prop up the compensation of some of the most highly paid workers in America. They write:

We estimate that the Administration redistributed $26.5 billion more to the UAW than it would have received had it been treated as it usually would in bankruptcy proceedings.…Thus, the entire loss to the taxpayers from the auto bailout comes from the funds diverted to the UAW.

The union workers, who were making more than $70 an hour in wages and benefits, received preferential treatment when their companies had to restructure. GM and Chrysler owed billions to a trust fund they had created to provide UAW members with gold-plated retiree health benefits—and taxpayers ended up paying right into that fund. That doesn’t happen in a normal bankruptcy.

Even Stephen Rattner, President Obama’s “car czar,” has admitted that “We should have asked the UAW to do a bit more. We did not ask any UAW member to take a cut in their pay.” As a result, even after the reorganization, GM still has higher labor costs ($56 an hour) than any of its foreign-based competitors.

So this wasn’t so much a bailout of GM as it was a bailout for the UAW.  Lovely.  More debt for the rest of us so a privileged few can live better than we can.  And to add insult to injury this didn’t even fix GM’s original problem.  Their high labor costs.  Which prevents them from selling their cars competitively.  So the bailout did nothing to help GM.  Which means they’ll probably need another bailout later.  Or special treatment from the government.  Such as a pass on paying their federal income taxes.  So the American taxpayer is not benefitting at all from the GM bailout.  Unless he or she is a member of the UAW.

So in other words, the GM bailout basically screwed the American taxpayer.  So the president could reward a political ally.  That will repay his kindness in campaign contributions.  And votes.  Which he desperately needs because his stewardship of the economy is worse than Jimmy Carter’s.

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