Welcome to the Lesser Depression. With a procedural vote of 52 to 35 the Senate voted to not proceed to consideration of the $14 Billion Big 3 auto loan package passed by the House on Wednesday. As seems always the case these days, 60 votes were needed to move the bill forward. Although 10 Republicans joined 40 Democrats and 2 independents (including Sen. Joe Lieberman (I-CT)) in favor the bill, it crashed and burned. More precisely, it was crushed by the GOP for little more than their craven insistence on driving a deal that would force more and more concessions upon the United Auto Workers, particularly insisting on UAW's agreement to wage cuts before their current contract expires in 2011.
For the details on the bill passed by the House, see the House Financial Services Committee bill summary and bill text. Note that on the Senate procedural vote, a "yes" was a vote to formally consider the House bill, and a "no" was a vote to stop its progress. See below for the Senate roll call voting record. Also note that Senator Reid, a staunch supporter of the bill, voted "no" for procedural reasons only. Also note that only 87 Senators were available for the vote, but even if all had been available the 60 votes needed had only a remote chance of being mustered.
Any legislative approach to the problems of the Big 3 appear dead for this Congress. Supporters of aid for the industry now hope that the Bush administration will move quickly to release Troubled Asset Relief Program (TARP) funds. For its part, the White House issued a statement:
It's disappointing that Congress failed to act tonight, We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable.The prospect of TARP for Big 3 has been generally discouraged by the White House, although according to some inside reports this evening, due to the Senate vote, use of TARP funds is not altogether remote. Politically, it might be particularly attractive to a President trying desperately to leave office with something akin to a legacy project. Despite his wreckage of the economy and most everything else he's touched, a move by Bush to use TARP for the Big 3 bridge loan would give him some possibility of leaving office with a gram of dignity.
However, for tonight, we are left with regrets. Said Sen. Chris Dodd (D-CT), who led negotiations on the package, "In the midst of already deep and troubling economic times, we are about to add to that by walking away." Yes, that's very apt since, metaphorically, they will not be driving away in any Big 3 vehicle.
Majority Leader Harry Reid (D-NV) continued:
"Given the unhappy choice between a bridge loan and bankruptcy, Democrats have always believed that we must give the Big Three and the millions of Americans they employ every possible chance to succeed. By rejecting every good-faith bipartisan compromise – including those from the White House and Senator Bob Corker (R-TN) – it is now abundantly clear that Republicans have no interest in keeping the Big Three from collapsing.Absolutely. In fact, this may be one of those moments to which historians will assign the greatest import. The Republican Senatorial party, despite its recent electoral losses, insisted upon using its ideological posturing and regional fanaticism to put the knife to the Big 3, in particular to the United Auto Workers. And this, coming one week after the worst employment losses in more than three decades. History may very well mark this time as a moment of classic mistake, of playing with fire while the fires raged. Depending upon whether the White house frees up TARP funds for the Big 3, this week may be remembered as the moment when our worst post-WWII recession transformed, Frankenstein like, into what I'll call for now the Lesser Depression.
Because Republicans failed to act, three million Americans are more likely than ever to lose their jobs and our economy is at risk of suffering even greater damage. Our hearts go out to those families who will now have to deal with this burden as the holidays near. Republicans may think that rejecting this legislation sent a message to the auto industry. Instead, they sent a message to every single American that they are more interested in settling scores than solving problems."
The Employment Engine's Low on Gas. Employment figures released just last week by the Department of Labor show that the economy shed jobs like leaves from trees in late Autumn. In November, 533,000 jobs gone, the largest monthly loss of jobs in more than three decades. Unemployment rose to 6.7 percent, the highest level in 15 years, and should the auto industry and its subsidiaries collapse, that percentage will stand among the better ones in the Lesser Depression years to come. And job losses were greater in September and October by 200,000 than first reported. In addition, in a statistic not given as much media attention, the average workweek for blue collar workers fell to 33.5 hours. Imagine adding a significant portion of the auto industry work force to those numbers. You can begin to visualize the results by looking at the chart of total direct auto industry employment. It indicates the number of employees in motor vehicles and parts manufacturing, and the number is in the millions with, note, far more employees in the parts sector. This does not include dealerships, etc.
Added together, industry employment is in the area of 3,000,000. Fully knowing the many flaws in this reasoning, it's still interesting: the rescue package proposal was $14 Billion; the industry-wide number of workers is 3,000,000, including supporting industries, dealers, etc.; thus the cost per worker for the rescue plan would have amounted to $4,667 per worker . . . I know, reasoning big enough to drive a Ford F-150 through, but . . . just how much have we thrown at AIG, Bear Stearns, and nearly every bank one can name? And did Congress require enormous wage reductions for the average workers in those industries?
The GOP War on the Unions. As I wrote here a month ago in "Ford's Better Idea":
The recent furor over the Big Three and the supposed money hungry UAW and, in particular, the now debunked "$70.00 per hour" distortion represents a desperate attempt of the predominantly Republican and Blue Dog Democratic anti-union forces to continue a decades long war against unions, and against income distribution fairness in general.The war on the Big 3 has a highly regional flavor, specifically, as southern as pecan pie. Michael Kranish's Boston Globe story of 12-10-08 provides an excellent summary of the North-South regional battle that underlies the self-serving "principled" posturing by the likes of Senator Richard Shelby (R-AL):
. . .
Henry Ford understood that pushing workers into near penury did not serve business interests. How this obvious lesson was lost in the Dubya years simply boggles the mind. In any event, Ford, among of the greater wealth mongers, union haters, and classic meddlers in his worker's private lives, at least understood, to the harsh criticism of his peers, that the interests of his family, his class, and the country, were best served if his Model T's were affordable to his own workers. Ford shocked Wall Street by more than doubling the industry standard by paying his workers $5.00 per day, and shortening the workday as well. In the Dubya years, however, the "Fordism" of decent wages was purposely starved, continuing with a vengeance decades of Reagan inspired "no holds barred" deregulated vulture capitalism aimed at disabling unions.
Shelby's position is not merely that of a fiscal conservative. His home state has provided millions of dollars in taxpayer subsidies to lureAnd it was Shelby, no stranger to hypocrisy, who on November 16th's Meet the Press, criticized the proposed Big 3 rescue plans, "We don't need government - governmental subsidies for manufacturing in this country. It's the French model, it's the wrong road. We will pay for it. The average American taxpayer is going to pay dearly for this, if I'm not wrong." Alabama, by the way, provided Mercedes a nearly $300 Million package of subsidies, offering, among other spices to the deal, to train their workers, and purchase thousands od Mercedes vehicles for the state. This package cost the state about $200,000 per job.
Honda, Hyundai, and Mercedes-Benz to build huge plants there. Indeed, some critics believe that without the incentives from Alabama - and similar tax breaks given by a number of other states to a dozen foreign automakers - the Detroit companies would not need a federal bailout.
No More Concessions! Lest one believe the wingnut mantra that the UAW caused the implosion of the rescue bill, note the following December 5th excerpt from David Madland's and Nadla Kazzi's article for the Center for American Progress:
So, pushed to the brink by the Senate wingnuts, the UAW stood up and said, loudly, "No more!" It's a lesson the House and Senate Democrats need to learn as well. There are compromises that can be made, but with the Republican party as it is presently comprised, bipartisanship is a ticket to nowhere, Democratic civility a sign, to them, of weakness.
Contract negotiations between the Big Three and the UAW occurred most recently in 2007, during which the union agreed to drastic reductions in its members’ benefits. On salaries, the union approved the creation of a two-tiered wage structure, allowing management to pay newly hired workers just less than half of the current average workers’ wages. The UAW accepted a reduction in the cost of living adjustment, or COLA escalation, an elimination of base wage increases, and an elimination of hundreds of skilled trades job classifications, another move intended to reduce workers’ pay.
On retiree health care benefits, the UAW agreed to assume responsibility for the management of a newly created trust fund, the Voluntary Employee Benefit Association, or VEBA, which is scheduled to take over retiree health care obligations in 2010. The Big Three agreed to endow the fund (which they have yet to do); in return, all retiree health care liabilities, for both current and retired workers, would be removed from the companies’ books. As a result of these changes, General Motors is expected to save $3 billion annually while Ford is expected to save $2 billion annually.
On active workers’ health care coverage, the UAW agreed to new terms requiring workers to assume a higher burden of the costs through monthly premiums, copayments, and deductibles. On job security, the union agreed to restrict the duration of eligibility of JOBS Bank benefits, a program that allows laid-off workers to be paid up to 95 percent of their salaries for up to 24 months.
As recently as last week, UAW President Ron Gettelfinger announced further concessions in light of the circumstances, agreeing to suspend JOBS Bank entirely, and agreeing to allow delays in the Big Three’s contributions to VEBA. In sum, the UAW’s conciliatory gestures demonstrate that they are, in fact, invested partners in the industry’s efforts to cut costs and restructure operations.
Hullabaloo's Digby put it well:
Running on Empty. Should the White House fail to authorize the use of TARP funding for the Big 3, there are other possibilities for assistance, among them the rumor of Chinese interest in acquiring one of the Bog 3. Whether even Richard Shelby would consider that in our overriding national interest one can only speculate. Other funds are available through the Federal Reserve, but it has been even more reticent about offering its services than the White House has been about releasing TARP funds.
Republicans spent the last eight years like drunken sailors on their first shore leave after years at sea. They wantonly drained the treasury of billions and billions of dollars on harebrained schemes to induce "birthpangs of democracy" around the world, chasing phantom enemies and enriching their defense contractor contributors. They created a lobbying culture so corrupt it finally collapsed of its own weight. They deregulated the financial industry so thoroughly that it created an elaborate ponzi scheme that has just about destroyed the world economy.
They have no standing to lecture anyone about responsibility, fiscal or otherwise, and no right to obstruct the cure for the problem they created.It's true that Democrats have, over the years, enabled Republicans and helped their ideology to run amock. But right now they are all we've got and their intentions, quite clearly, are to keep the economy from tanking, if only out of self interest. The Republicans are blocking this bridge loan for both narrow parochial reasons and longterm partisan gain. There's no other way to interpret this otherwise inexplicable unwillingness of the Republicans to even grant a short term bridge loan. They want the economy to fail.
It does seem inconceivable, though, that the country would allow the Big 3 to flounder further, or to fail. Yet, we are in times where credit is less than scarce, and investors are willing to take 0% interest on T-bills just to be assured of receiving their principal in three months. The Fed, other than direct assistance to the Big 3, has little ammo in its monetary arsenal - with the fed rumored to be considering cutting the fed funds rate to 0% next week, there is little that monetary policy can do to grease the credit wheels further. Thus, we may be in a time when the financial system and its cogs and wheels are so impaired that the most dire consequences cannot be avoided, as in the Great Depression. President-Elect Obama, though, promises a hefty and robust fiscal package that may stimulate the economy, although, by then, it may be too late for the Big 3. Barring an infusion of cash from TARP or a sale to a foreign sovereign entity, the Big 3 is on life support, and we are staring into an unemployment abyss. Bankruptcy on such a huge scale, often touted by wingnuts, would do little to stem massive layoffs, and would also likely lead to the severe impairment of pension rights and benefits for hundreds of thousands of retirees who earned their little slice of the American dream of a safe and secure retirement.
Good News. Bad News. The good news: we're out of recession. The bad news: we're in the Lesser Depression, for now. To avoid worse, we need a stronger and more stridently vocal Democratic party. No more concessions. Make the Senate Republicans actually filibuster rather than immediately moving to a cloture vote. Make them thereby show their anti-working class colors to the American public. More than ever the people are ready to really "see" who they are . . .
Lights are dim tonight, but as Henry Ford once said,
remember that the airplane takes off against the wind,
not with it.
Senate Vote, 12-11-2008:
Grouped By Vote Position
|Murray (D-WA) |
|McCracky (R-AZ) |
|Not Voting - 12|