Subscribe to Breaking NewsRuby-Sachs: Big 3 Bailout Fails
The auto bailout has died in the Senate. Last night, Republicans decided to let GM and Chrysler fall. Now I know that this isn’t a gay specific issue, but it’s an important national issue.
It is clear that Republicans are hoping that this defeat will force the “Big 3” into bankruptcy. That means that the companies will be able to renegotiate their contracts, re-organize and get back into business without the extra baggage.
Well, that’s a pretty rosy picture. But it’s also clear by the 200 point drop in the Dow this morning that economists don’t agree. First, there is the simple problem that people don’t really like buying cars from bankrupt car makers. A car is a long term investment and the warranty on that car is necessary and valuable. Consumers worry that their car from a bankrupt car company will not be supported in the same way as a car from a viable producer.
But more important, bankruptcy might hurt a whole lot of old ladies in and around the Midwest.
When a company goes bankrupt, all contracts go on the table. GM, a company with a very long history in the United States, has huge pension obligations which are a significant draw on their existing capital. One plan floated in the news is that GM could renegotiate those pension plans, dropping some altogether.
My friend’s grandmother is one of those pensioners. She lost her husband almost a decade ago and lives off the money GM pays her from her husband’s pension plan. She’s not the only one. Many older people, especially around Detroit, are supported by a GM pension because either they or their husbands spent their careers at the car maker.
The Federal government is responsible for taking over those underfunded pensions. But that means that the amount of the pension might be greatly reduced, depending on the funds available and the political will to make the full commitment.
Bankruptcy can be a lifesaver. But when everything is on the table, often the most vulnerable are the first to be dropped. As the autoworkers union worries about keeping livable wages for current workers, I worry they won’t spend energy on those who haven’t worked in decades.
Yor happy huh? Well Remember how happy you are when countless families, Mothers, Father, Brothers, Sisters, and maybe even a few Life partners are out on the street because they have no jobs. I agree with you, to hell withthe Wall Street bail out but saving the big three would save countless down home blue coller Americans who have no other way to support their family.
Bravo and once again do take solace in your happiness.
I am happy that the Federal Government refused to bailout the automakers. I wished they would have done the same with the banks.
Giving tax money to the same greedy and currupt corporate managers who created this mess is NOT the answer.
Letting these types of businesses fail and allowing new businesses to be created and fill the market void is the answer.
I do believe that the government should protect innocent workers who had no say over all this greedy decision making. This would include protecting pensions.
If there is no bailout, official unemployment in Ohio will probably be well over 10% by Easter, in Michigan 12% or higher. That’s assuming that at least 2 of the 3 stay alive somehow. If any one collapses, I would expect unemployment to be as much as 15% in Ohio and 20% in Michigan. This matters to the rest of the country. First, unemployment is undercounted, and the true un- and underemployment rate has been estimated at running 50% higher than official numbers in good times. Ohio runs out of cash for unemployment benefits at the end of January. Ohio has already petitioned Washington for a loan to cover this.
Senator Corker of Tennessee is about to get a very angry letter from me. I’m a native Tennessean. My family benefitted from TVA. My father, my mother, my father’s two brothers, and my mother’s brother all worked at the plants in Oak Ridge or at ORNL. We didn’t pay for the Interstate highways that helped Nashville boom. Now, Senator Corker wants to lay blame at the foot of the UAW. He can kiss my ass, because Tennessee and all the rest of the South have been milking Uncle Sam since the Depression. States like Ohio paid. My family are far from poor, and it’s largely due to money that came from richer states. All that money helped bring Tennessee into something resembling the 20th century.
Why bail out the Big 3? It’s not about giving them a free pass. It’s the fact that, not only will those of you outside the Rust Belt wind up paying, but there’s a very good chance many parts suppliers will go tits-up too. But they supply the Big 3–yeah, and they also supply Nissan in Tennessee (soon VW too), Toyota in Kentucky, Benz in Hellabama. No parts means no Nissan, no VW, no Benz. Everybody suffers. So either we Americans suck it up and keep and rebuild our manufacturing, or we let it go and let ourselves depend on foreign companies for all our manufactured goods. We will be a vassal state.