Mon, 01 Jun 2009 13:46:22 +0000 – By Peter FerraraDirector of Entitlement and Budget Policy, Institute for Policy Innovation/General Counsel, American Civil Rights Union
With the federal government emerging from the GM bailout owning 60% of the company, the new GM will be run by the politics of the Obama Administration, not economics. That means it will be run to serve the interests of the UAW and the environmentalist groups that are major players in Obama's political coalition, not consumers.
Taxpayers will just get the bill. And don't expect that to end with the $50 billion the Feds have already committed to the company (apparently without legal authorization, Congress approved TARP funds for banks, remember?).
The new politically driven GM will never return to profitability, and will stay alive only with a permanent taxpayer pipeline.
Already the UAW has rightly bragged that its workers have given up nothing in wages and health and pension benefits. And who is going to say no to UAW demands at the next contract negotiation? The politicians in Washington?
They will just send the bill to the taxpayers again, hoping they won't notice. Are you going to oppose a good deal for the working people of Detroit?
But even worse, far worse, is what is happening to consumers. What the Obama car czars have hatched in the GM and Chrysler bailouts is a major decline in the standard of living for the middle class.
Gone will be the big, spacious, powerful, luxurious cars Americans drive now. In their place, Americans will be allowed to choose only among weak, tiny, matchbox cars like those now driven by the European working class. This is what the environmentalist groups are exacting from the auto bailouts in return for taxpayer funds.
Do you think any auto executive is going to dare promote production of a big new SUV like the Cadillac Escalade in this political environment? Forget about it. What is in now is that hot Fiat "technology" we have heard Washington lusting over. Have you ever seen a Fiat? It is what makes Mercedes so legendary in Europe.
American consumers would never choose to buy the tiny, two door, Sierra Club cars we are now going to see out of Detroit. But the Obama plan is not to allow them a choice. That is what the new 39 mpg CAFE standard is all about. That doesn't mean your next SUV is going to get 39 mpg, dummy. It means your next car will look like it is competing with a John Deere lawnmower.
Closing the deal will be the new cap-and-trade taxes Democrats are now ramming through Congress. Those taxes will impose massive penalties on anything but Detroit's new Fred Flintstone cars designed by the Environmental Defense Fund. So will the $5 per gallon gas we are going to see because the Obama administration is so busy shutting down new oil production.
Take good care of those big, powerful, luxurious cars you are driving now. They are going to be worth a lot more on the resale market than you thought.
Expect to see also the eventual rise of a new gold rush business in Americans flocking to Mexico and Canada to buy their new, big, powerful, luxurious cars there from foreign companies that will not produce or sell in America and not be subject to the CAFE standards. Take a vacation, buy a new car, drive it home. Maybe Disney will put its next Magic Kingdom in Toronto, who knows?
The next political battle will then be over attempts by the government to make driving all these big powerful cars, new and old, illegal in the U.S. Watch instead for a revolt by voters demanding repeal of the CAFE standards so consumers will be free to choose the cars they want.
As for the taxpayers, the sooner the plug is pulled on both GM and Chrysler, the better.
Peter Ferrara is Director of Entitlement and Budget Policy for the Institute for Policy Innovation, and General Counsel of the American Civil Rights Union. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.