Andrea Tantaros

The Inevitable Bailout to Bankruptcy

2009-05-01T06:35:00-04:00

Taxpayers have already shelled out roughly $36 billion to the auto industry as the government tries to make a winner out of structurally flawed companies. With the latest news of Chrysler's impending bankruptcy, taxpayers stand to lose about $6-8 billion more in the deal, and that's a conservative estimate. That doesn't take into account that according to the GAO report, government could be on the hook for billions more if Chrysler or GM liquidate. The Pension Benefit Guarantee Corporation might have to intervene to pick up defunct company benefits and pensions. But does it have the funds?

Haven't we learned from history that throwing good money at bad turns up fruitless? All we need to do is look at the British to learn a valuable lesson about failed state intervention. The company became a leach on Britain’s government as well as a source of labor unrest and dissipated by the mid-1980s as its individual divisions were sold off.

Fiat's 20 percent stake in the move is also quite fascinating. Are we going to rely on the Italians and their unions to make a competitive car that people will want to buy in the US? Richmond isn't Roma.

While the UAW is rewarded with this deal the bond holders seem to be the ones really grabbing their ankles. Obama doesn't seem to want to honor their contracts, a growing theme of this Administration.

Though Obama insisted at his press conference on Wednesday night that he does not want to run auto companies or banks (just healthcare, education, energy and our private lives) he certainly appears to comfortable with taking the lead. With Justice Souter retiring, I dare ask what's next.

There's Still Time to Stop the Spendulus

2009-02-10T18:19:26-04:00

First of all, as a Pennsylvania girl I’d like to apologize to every fiscal conservative in America for the actions of Pennsylvania Senator Arlen Specter, one of three Republicans who voted with the Democrats on the “spendulus” bill. Senator Specter is up for re-election in 2010 and I hope the voters in my home state will hold him accountable for his actions.

The actions of the 61 Senators who voted for this bailout plan to funnel money to Democratic constituencies, like unions and blue states, are shameful. But the battle of the bulge has just begun for the Senate and House, who now head into what is known as a conference committee to reconcile the differences between their two versions of the bill. If you thought the measure was bloated before, this stage could balloon the cost as each legislative body fights for its priorities. It should be a good fight. No Republicans supported the House version of the package two weeks ago. House Majority Leader Steny Hoyer “is mindful that too much House meddling could torpedo the entire package.” Hear that Congressional Republicans? It there ever was a time to meddle, it’s now.

A part of what this bill — in its current form — does is funnel money to expand socialized medicine (Medicaid) and welfare programs. Once we pass this expansion it will be like pulling teeth to ever go back. And keep in mind that this is essentially a two year bill. To think that Democrats are actually going to cut funding for these costly programs is unthinkable, particularly in an election year. Yes, if these provisions go through we will be pumping billions into Democratic priorities. Talk about unstimulating.

Passage of a plan allocating almost a trillion dollars in money we don’t have will also give Democrats an excuse to raise taxes. Mark my words America. It’s coming. But tax hikes aren’t just the worst Rx economically, they are exactly what the public can’t afford and doesn’t want.

“We can’t embrace the losing formula that says only tax cuts will work for every problem we face,” President Obama said on Friday. But a recent poll by Investor’s Business Daily shows that Americans would welcome tax reductions with open arms as part of any stimulus plan. Of 568 adults surveyed last Monday through Thursday, 67 percent favored cutting federal taxes on businesses, 79 percent favored cuts in individual income taxes and — despite the fact that only half of Americans are investors — 62 percent even favored cuts in capitals gains taxes.

As the “spendulus” heads to conference it’s imperative we stand tall against Obama & Co.’s trickle up economics. We continue to hear the left talk urgently about the need to “do something.” But the cost of doing nothing isn’t as great as the cost of doing the wrong thing, and this bill is filled with wrong things. Act I of the economic recovery drama was a tragedy. It’s not too late to rectify Act II.

Just Say No to Detroit

2008-12-08T18:15:00-04:00

Congress is poised to dish out billions more to ailing industries. The recipient this time? The troubled auto industry in the form of a bridge loan. (Didn't take long for detractors to title the "rescue" the "bridge to nowhere loan.") The White House today said a deal with the US Congress to help America's failing car industry would "very likely" be reached. If approved, 15 billion could be channeled to Detroit as early as next week.

Too bad the chances of this loan being paid back to the taxpayers should be categorized as "very unlikely."

There is talk of a "car czar" to monitor the auto giants to ensure compliance with the terms of the loan. If government's track record is any indication of keeping an eye on our money, we're in trouble. Washington recently allocated 700 billion to unfreeze the credit markets and the Government Accounting Office (GAO) last week cited in its report that we can't account for $500 billion of the money spent thus far. Further, the massive bailout hasn't helped as Congress predicted.

Can Pelosi and company assure us the auto makers still won't fail if we come to their rescue? And if it does, what then? Credit is still dried up and kitchen tables across America are struggling to pay monthly bills, let alone a new car. If consumers aren't buying cars then it's impossible for the industry to stay afloat. And last time I checked Pelosi wasn't an auto engineer. Her and Harry Reid's efforts to set standards for new cars offer no guarantees that these cars will be competitive.

Nobody wants to see folks lose their jobs, but with high pensions and wages, the crippling effect of unions and no signs of real reform, the loan will do little to help cure the industry's woes. At best the loan could be categorized as a band-aid on cancer.

Washington must just say no to Detroit. Continental Airlines found itself in bankruptcy court twice and was forced to adopt real change. The big three must do the same.

Beware of Government Money & The Strings That Come Attached

2008-12-04T17:58:00-04:00

Another week, another bailout debate.

I suspect, lurking in the background of the Detroit automaker issue, is a burning desire by some to use bailout money as a means to reacquaint America with industrial policy.

Industrial policy is the belief that government officials are better equipped to direct business and consumer decisions than businesses and consumers.

The American public flirted briefly with industrial policy in the 1990’s when it considered adopting Hillary Clinton’s health care plan. Hillary wanted to give the government increased power over the health care industry, including the authority to limit the amount of health care that could be provided by doctors and consumed by patients. For instance, her initial proposal restricted the availability of mammograms. Such proposals were made in the name of fixing an ailing industry.

Industrial policy could come back to life during these bailout talks. The Center for American Progress -- the think tank headed by Obama transition chief John Podesta -- is already putting out paper endorsing a bailout, contingent of course on limitations to executive pay, and the creation of green automobiles. In other words, it wants bailout money to come with a big string attached-- increased government participation in the Detroit manufacturing process.

I don’t like pollution any more than the other person, and I do not need a gas-guzzler. In fact, I drive a tiny car with a manual transmission. This is my preference, and I have made market decision based on this preference. The federal government should not make this decision for me.

Moreover, we should place little faith in the ability of lawyers, policy wonks and career politicians to build a better car, and there is no reason to think that people will rush to buy a Washington, D.C. mandate over an Asian or European competitor. The fear should be that the government will spend billions to satisfy political constituencies at the cost of turning U.S. auto manufacturing into a truly uncompetitive enterprise.

Perhaps this Democratic Congress and The White House will resist the seductive powers of industrial policy. After all, they claim they are for change (a word about which they often talk but seldom define). If Democrats do remain committed to old ideas, we must remember that government meddling in housing finance remains a root cause of current financial crisis, and direct interference in the manufacturing process has the potential of delivering even more economic pain.