General Motors and Chrysler verge on bankruptcy. Literally millions of jobs across America – auto workers, parts makers, dealers, suppliers – are at risk. Bankruptcy would be a body blow to an economy that is already in trouble. Yet, the Congress and the President are making political points rather than making sense.
After getting scorned last month, auto executives returned to Washington with comprehensive plans on downsizing the companies and moving to fuel efficient vehicles. The autoworkers announced truly brutal sacrifices on wages and benefits. The CEOs agreed to work for a buck a year and drove to Washington to display the public modesty the Congress demanded. And still the Congress balked.
Does this make sense? The auto companies are asking for a bridge loan of $38 billion to stave off the effects of an economic downturn that is soon to be the worst since the Great Depression. $38 billion is a lot of money.
But consider: the Federal Reserve and the Treasury Department have pumped out over $8 trillion (that's with a "t" trillion) in loan guarantees, debt swaps, and direct capital infusions into propping up otherwise bankrupt banks and investment houses. The vast bulk of this was done without any vote or discussion in Congress. If Treasury Secretary Paulson had agreed to pay for the bridge loan out of the $700 billion Congress gave him to spend essentially at his will to save the economy, no one would have blinked. Instead we witness a lot of posturing – much of it by Senators from states that have handed over massive subsidies to entice non-union foreign automakers to set up shop.
Multi-millionaire bankers weren't asked to give back the millions they pocketed in the irresponsible speculation that drove the economy off the cliff. Citibank got $50 billion in capital and another $300 billion in guarantees for its toxic paper without any requirement that it change its business plan. Clearly, the "masters of the universe" on Wall Street are being treated very differently than the blue collar union workers on Main Street. Of course, Wall Street is a big time contributor to both political parties. But there seems a special animus towards union workers earning a middle class salary. The victims of the current crisis are getting more grief than the perpetrators.
This is tied to a range of myths that as widespread as they are false. The autoworkers aren't living high on the hog. They've already agreed to wage concessions that lower their pay to the levels of non-union plants. The companies don't make lousy cars. Independent assessments rank the cars of the big three among the safest and best made in the business. The companies made SUVs and trucks in large numbers because consumers wanted them, when gas was cheap. And getting consumers to buy smaller fuel efficient cars will be difficult if oil prices continue to drop.
Moreover this crisis isn't simply about America's auto industry. Across the world, the economy is sinking and auto companies are in trouble. Other governments are coming to their aid. If America fails to do so, other nations will be happy to capture the markets for their workers.
Over the weekend, it was reported that House Speaker Nancy Pelosi had accepted Bush's insistence that the loan money be taken out of the funds Congress had allocated to pay for retooling the industry to make the high mileage vehicles of our future. It seems possible that a smaller bridge loan will be arranged, designed to tide the companies over until the Obama administration can come up with a comprehensive plan.
That makes sense. Taxpayers' dollars should be part of changing the industry. That shouldn't be about forcing auto workers to make more sacrifices – after all we want industries that provide middle class jobs. We need an industrial policy that drives a transition to high efficiency cars, setting the standards and the taxes that make those cars both competitive and desirable. We need a trade policy that demands a level playing field. Creditors need to take on some of the risk, turning some of their notes to stocks. New supervisory boards that include representatives from labor and from communities are needed to insure the companies keep their promises.
Two things should be clear. We need a strong industrial base in this country – and a vibrant auto industry – if we are to sustain a broad middle class. And it's time for Washington to understand that bailing out Wall Street simply won't work if the real economy keeps sinking.
Reverend Jackson can be contacted at JJackson@rainbowpush.org