First, the good news: The version of the $14-Billion auto bail-out passed last night in the House appears dead in the Senate.
Now the bad news: An alternative plan sponsored by Bob Corker (R-Tenn.) is on the table. Sen. Corker’s bill would require some real concessions by the United Auto Workers and force the companies into bankruptcy if they don’t reduce their debt by two-thirds by next March. As of this writing, the details of the plan are being negotiated, and so we don’t know what will finally emerge or when a vote would occur.
For now, the requested UAW concessions aren’t bad: Wages, benefits, and work rules would be made competitive; in other words, they would match those that apply to U.S.-based employees of foreign auto companies, and the “job bank”, under which laid-off employees continue to be paid, would be eliminated. The union would have to accept significant equity, instead of cash, to help offset future retiree health-care payments. At least, these conditions would reduce some of the damage that the UAW’s ridiculous demands cause.
The bankruptcy provision is more problematic. Practically speaking, this provision most likely prevents creditors from recouping money that is owed them: They accept equity in lieu of cash or renegotiate debt down, or the companies declare bankruptcy (which, by the way, is a bail-out and a moral outrage).
But even more seriously, the Corker plan is still a bail-out; it still puts taxpayers on the hook for $14-Billion, to ill-managed companies.
It is a very good thing that taxpayer outrage has made the auto bail-out so much tougher to pass than the bank bail-out. It is also a good thing that that outrage is making real UAW concessions viable.
But a bail-out is a bail-out is a bail-out: a Constitutional outrage and a moral hazard.