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Friday, December 12, 2008

GOP Blocks Bailout

Senate Republicans have, for now at least, blocked the automaker bailout. The deal is "deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union":

Republicans and Auto Bailouts: Sara Binder looks at patterns in House GOP support for the auto bailout package:

And which Republicans were most likely to support pumping emergency loans into the Big Three? Location, location, location. ...Republicans from Rustbelt states were disproportionately (though not surprisingly) more likely to vote with the auto manufacturers, even controlling for ideological predispositions. Republican moderates were also more likely to cross the double yellow line to vote with the Democrats, just as they were for the Wall Street bailout package in October. ...

What lesson should the Big Three draw from the House vote as they seek roughly a dozen GOP votes to break Senator Richard Shelby’s promised Senate filibuster? Fill your tanks and buckle up for a bumpy ride. The geographic concentration of the domestic auto industry in the Rustbelt radically limits the industry’s voting power in the Senate. Nor has the spread of foreign automakers in search of lower labor costs into the South helped the Big Three’s cause, as southern senators—already ideologically predisposed to shun direct government support for the auto industry—seem unswayed by the potential for a heavily-unionized domestic industry in the Midwest to go bankrupt. And unfortunate for the Big Three, few of the remaining Senate GOP moderates yet appear to be on board for the bailout package. ...

Robert Reich explains further:

The Politics and Economics of the Auto Bailout, by Robert Reich: ...There's a new Civil War going on when it comes to automaking in America. Japanese, Korean, and German automakers are now building 18 auto assembly plants in the United States, none of which is unionized. Kentucky (Senate Republican Leader Mitch McConnell) already has Toyota's biggest auto assembly plant outside Japan. Tennessee (Senate Rep. Bob Corker, who came up with the "chapter 11" bailout amendment) houses Nissan's North American headquarters. Alabama (Senate Rep. Richard Shelby) hosts Mercedez Benz and several other foreign automakers.

So there's no reason to suppose the good citizens of Kentucky, Tennessee, or Alabama are particularly excited at the prospect of handing over their taxpayer money to competing firms and their workforces.

Besides, southern Republican are not particularly enamoured with the UAW, which has steadfastly bankrolled Democrats who have taken on Republicans. (The new Congress will have at least six new Democrats from formerly Republican districts, all of whom received at least $40K from the UAW.)

Corker's compromise -- which would force the UAW to match the wages of foreign, mostly non-unionized autoworkers in the South -- would essentially make the UAW irrelevant. Why have a union if you can get the same deal without one?

But Republicans also know that the Big Three and their suppliers are spread out over the battle-ground states of Michigan, Ohio, Pennsylvania, Indiana, and Minnesota. Republicans don't dare give up these states or alienate their citizens. ...

The dirty little secret is that, bailout or no bailout, the Big Three will have to lay off thousands of workers over the next few years, as the foreign non-union automakers take market share away from them.

    Posted by on Friday, December 12, 2008 at 02:43 AM in Economics | Permalink  TrackBack (0)  Comments (64)


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