An Opportunity for "Fundamental Change"

By Phil Fraietta
Fraietta@Fordham.edu

Throughout this election season President-elect Barack Obama constantly hammered the idea of “fundamental change” and bi-partisanship. With the current American automaker crisis, President-elect Obama has the chance to bring this “fundamental change” and bi-partisanship to life by finally rejecting the political wishes of lobbyists and those in his own Party.

Prominent Democratic leaders in Congress, in particular, Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid, have lobbied for a federal bailout of the auto companies. This is not the way to restore the auto companies. Contrary to their belief, the current troubles the auto companies face are not due to the current credit crisis, but are instead due to the all-powerful labor union United Auto Workers (UAW). To give an example of the power of this union we can compare data on the average labor cost per U.S. hourly worker reported by General Motors (GM) and Toyota.

In the year 2005, this data was as follows: General Motors $73.73, Toyota $48. Anybody familiar with economics should immediately take note that in a free-market equilibrium system, such a drastic difference in these statistics would not be possible. It is the power of the UAW that allows for such a drastic difference. Also, American auto laborers belonging to the UAW are often times paid to not work! In fact, according to The Detroit News, as of 2005, 12,000 UAW workers were paid to not work.

In addition, current federal mileage standards also force American automakers to produce small cars that make almost zero profit, at plants organized by the UAW. This is why we see American automakers continually produce cars that do not sell. These are just a few of the problems American auto companies suffer, but what is most important is that none of these problems have to do with people being unable to receive credit to purchase automobiles.

In fact, even when the economy was thriving in 2005, GM reported a third-quarter loss of $1.7 billion, according to The Washington Times. What this data tells us is clear—American automakers are hammered by their labor contracts. One would think that Pelosi and Reid would recognize this and demand that the bailout will only be provided if these labor contracts are re-written. However, we are talking about the far-left ideologues of the United States. What have they decided to do to ensure the taxpayer money goes to good use? Place limits on executive pay. What a shocker!

Also, not by coincidence, Pelosi and Reid are only fighting for bailouts for the American automakers stationed in the blue-state of Michigan and controlled by the largely Democratic union, the UAW. This despite the fact that nearly 113,000 Americans work for “foreign” auto companies, which are not doing so great right now either. In fact, Toyota is reporting a 70% fall in profits in the third-quarter according to The Guardian. So then if the proposed auto bailout is meant to protect American jobs, why not provide money for companies such as Toyota as well? This answer is simple; these companies are stationed in the red-states of Alabama, Kentucky and Tennessee. This proposed bailout bill by Pelosi and Reid is entirely partisan-based and has been created in order to please the lobbyists for the UAW, as well as, the voters of the blue-state of Michigan.

Assuming President Bush decides to end his term as a conservative (which is a broad assumption) and veto this bailout proposal, it will be the first piece of legislation before President-elect Obama. If Obama truly wants to bring fundamental change and bi-partisanship he should stand-up to Nancy Pelosi, Harry Reid, the UAW and partisan-based politics in general and veto this proposed bailout for failing to address the issue of labor contracts.