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Unconstitutional auto bailouts do nothing but delay the inevitable says The John Birch Society
The John Birch Society directs members to pressure Senate to not pass auto bailout

APPLETON, WIS. — December 11, 2008 — Scheduled for a vote tomorrow, the U.S. Senate is debating the automaker bailout bill that passed the House of Representatives yesterday. The John Birch Society has asked its Alert Network subscribers to pressure their Senators to vote no to the bailout.  “Regardless of the industry we’re bailing out, it’s unconstitutional,” remarked John F. McManus, JBS President and Publisher of The New American.  "The founding fathers spoke in favor of limited government. They saw government as a negative force to be chained down by the Constitution. Nowhere in the document does it give the legislative and executive branches any power to bail out industry.”

Industries in the free market rise and fall.  Unfortunately the U.S. government constantly stands in industry’s way with so much regulation that many firms find they cannot compete on domestic soil, forcing many overseas.

The New American reports that Senator Jim DeMint, Republican from South Carolina, recently said, "This is what happens when you bail out one industry: five more get in line. Some auto manufacturers are struggling because of a bad business structure with high unionized labor costs and burdensome federal regulations. Taxpayers did not create these problems and they should not be forced to pay for them."

Bailout supporters, such as UAW president Ron Gettelfinger, are painting apocalyptic scenarios should there be an auto industry bankruptcy.  He and others note that the domestic auto industry and its suppliers account for one out of every 10 jobs in the U.S. economy.  But those who dispute that a cataclysm would occur argue that bankruptcy would not be nearly as traumatic as Gettelfinger claims.  Under bankruptcy protection, an automaker could renegotiate labor contracts, trim the health and pension benefits costs that undermine its competitiveness against foreign automakers, and override state laws that make it difficult to close unprofitable dealerships.

Analysts claim that, just as the airlines have done, automakers could carry on with minimal disruption. Michael Levine, a former airline executive who has worked as a consultant for bankrupt airlines, says, "It is quite possible the auto industry is not thinking in truly contemporary terms. A couple of generations ago, the word bankruptcy meant liquidation.  Now it very often means reorganization."

Supporters of a Motor City bailout point to the alleged success of the Chrysler rescue back during the Carter administration because Chrysler ultimately repaid the loan and the federal government made money out of the deal. But all that the Chrysler bailout did was allow the company to ignore the problems within both itself and the auto industry, virtually guaranteeing another crisis down the road. History shows that bailouts merely serve to encourage the continuation of bad policies, which ultimately lead to even bigger problems in the future, as we are now witnessing again.

“The situation in which the American auto industry presently finds itself is a disaster of its own making,” claims McManus.  The executives who have managed the Big Three have refused to accept the fact that their marketing and production strategies for long-term viability have been off the mark for decades. U.S. automakers laid claim to 90 percent of the domestic car market in 1960. Today their market share stands at less than 50 percent. And the UAW has refused to accept the fact that the market for its members has changed, as well. UAW membership peaked in 1979 at 1.5 million but has dropped to less than 500,000 today.

A taxpayer bailout of the auto industry would further expand the reach of the federal government into the private sector, following on the $700 billion rescue package intended for the stabilization of the U.S. banking system. This is not something that the taxpayers seem eager to swallow, judging from a recent USA Today/Gallup poll, which found that helping the car companies and other big corporations ranks low on the public's list of economic priorities, with just 20 percent saying that such assistance is "critical" or "very important."

The free market has been telling the Big Three and the UAW that it is not willing to bear the extravagant pay, bonuses, and benefits packages that the American auto industry has been lavishing on itself, in return for products that do not give good value for the money that customers have to pay. If consumers are not willing to support such excesses, then neither should the taxpayers support such excesses by way of a federal government bailout.

The long-term consequences of removing failure as an option in a free-market economy is that the federal government would also be undermining the conditions that create greater wealth and more jobs in our economy. Capital and labor should be allowed to flow to where it will be used most productively, because that will provide the most benefit to society. If that means letting capital and labor flow to nonunionized car factories in Tennessee, rather than unionized car factories in Michigan, then the federal government should not stand in the way.  McManus adds, “The free enterprise system means that there will be successes and failures.  Preventing failures with government meddling is un-American.”

McManus joined the staff of The John Birch Society in August 1966, and by 1991 was named its President and Publisher of its official magazine, “The New American.”  He has appeared on hundreds of radio and television programs and has written and produced numerous videos and DVDs, including the popular "Overview of America," a moving survey of America’s remarkable roots.  He also wrote and narrated Dollars & $ense, a DVD that clearly explains money, inflation, free market economics, and sound currency while offering solutions to help America reclaim its financial footing.  Originally from Brooklyn, New York, he is a graduate of Holy Cross College in Massachusetts.  He served on active duty as a lieutenant in the U.S. Marine Corps for three years.  For six years before accepting a staff position with the Society, he was employed as an electronics engineer.

Founded in 1958 and headquartered in Appleton, Wisconsin, The John Birch Society is dedicated to restoring and preserving freedom under the U.S. Constitution.  Members come from all walks of life and are active throughout the 50 states on local, regional and national issues.  United by a strong belief in personal freedom and limited government, plus a sense of duty, members have played a continuous and pivotal role in halting legislation and federal policies that threaten the independence of our country and the freedom of American citizens.  Visit www.JBS.org for more information.

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