U.S. Rep. Jerry Moran had hoped that he would see specific plans for solutions when Congress voted last week on a rescue plan for the auto industry. Those plans failed to materialize.
In part because of that lack of detail, Moran voted against lending $15 billion to the Big 3 domestic automakers — just as he voted against the $700 billion his colleagues approved to give to the financial sector in October.
At the crux of both decisions were his beliefs that 1. government should not become involved to that extent in business or in industry and 2. the lack of specific plans to correct the situation.
“I don’t like the idea that I, as a Congressman, am making the decisions about which businesses succeed and which businesses fail,” Moran said.
A business with more political clout, he said, might get more favorable treatment from government, under those circumstances.
“Government’s role in the economy needs to be as limited as possible because these decisions need to be made by the market, not by politicians,” he said.
And, he said, the billions given to the financial industry — with no real plans in place, no transparency on money spent and no understanding of how the funds would be administered — only reinforces that opinion.
“I think that the fact that Congress approved a $700 billion bail-out — and that is on top of AIG, Fannie Mae and Freddie Mac — that the American people … became very skeptical about one more quote ‘bail-out,’” he said. “Particularly in light of the fact that the administration handled the bailout so poorly. … This is taxpayer dollars. It ought to be something that makes a difference. I want some level of assurance that the company has a plan, and (will) return to the taxpayers their money.”
Moran is worried, however, about the national and local ramifications if the domestic auto industry fails.
“While my hope would be that government wouldn’t get involved in making decisions about an industry’s success or failure, this is so serious and the consequences so significant, this may be something I set aside,” Moran said of his stance on government involvement.
Before the votes by the House and by the Senate, he had looked for “some level of assurance that this was not just a Band-Aid, not just a patch” for the auto manufacturers’ financial crisis.
He wanted evidence that all involved, from management to labor, had a “real plan” to return the industry to viability instead of throwing good money after bad, he said.
“I actually hoped that when the Senate took this issue up that the proposal that Sen. (Bob) Corker was pursuing would be taken seriously by the Senate,” Moran said.
Corker had wanted to know what concessions would be made by management, bondholders and labor.
“And all we got from labor was a promise that they would negotiate down the road,” Moran said.
The bill that resulted was flawed in other ways, he said.
“I was also troubled by the so-called ‘car czar’ … the idea that some federal bureaucrat could better run the car companies” than the companies’ management.
Moran described several aspects of the auto industry that put the domestic manufacturers at a disadvantage compared to foreign manufacturers, including those with plants in the United States.
The majority, if not all, of the foreign “transplants” are staffed with non-union labor, which receives lower wages and fewer benefits than union workers at domestic plants.
Wages and benefits had been among the nebulous concessions that labor would negotiate later. Among the proposals discussed but not solidified was hiring new workers at a much lower rate to reduce costs for manufacturers.
“My guess is, they’re not hiring anybody. So if you simply limited it to making changes in new hires, you probably would not get much effect on the bottom line,” Moran said. “My impression is that General Motors, just like other businesses, has to get concessions from their employees, including their current employees, not just new-hires.”
Moran mentioned health care as another example of disparity that gives foreign manufacturers a financial advantage.
“One of those is health care costs that a Japanese company doesn’t have to take into account, but an American car company does,” he said.
Domestic manufacturers may have to seek a Kansas-type solution to lowering health-care costs.
Here, where workers often are not unionized, management might have to increase employees’ co-payments on health insurance to reduce expenses, he said. For a sector employing hundreds of thousands of workers, the savings could be substantial.
“I think that reality check, as painful as it can be, it’s more important to keep that job,” he said.
Moran questioned rhetorically why a company such as General Motors, with its high level of vehicle sales reported in news media as being statistically successful in vehicle sales, would be experiencing a financial crisis.
“In the year 2006, General Motors sold as many cars as Toyota did. Toyota made money. General Motors lost money,” Moran said. “That is a telling story to me. Both through mismanagement, cost of production, and government policy, those things have combined to create an industry that is selling as many cars as another manufacturer but still is not making money.”
Government could help correct that, by taking another look at the ways Congress and the federal government have increased the costs of producing an automobile in the United States.
He said Congress could amend tax codes to benefit the manufacturing sector, as well as ensure that it has better ability to compete with manufacturers from abroad.
The cost of meeting rules and regulations, coupled with the expenditures for health care, in addition to inequitable trade restrictions and energy-efficiency requirements, all have contributed to the current crisis.
“I think Japan goes out of their way, like many countries do, to keep our automobiles out of their markets,” he said. “And that, in my opinion, is some of the failings of our trade agreements that allow that to happen.”
Moran said he did not know how the trade negotiators justified the inequities; perhaps they believed it was not important.
“It is that important, and it is certainly that important today,” Moran said. “The Department of Commerce, the Department of State and our trade representative … ought to be to work every day to level the playing field of our manufacturers competing with foreign manufacturers.”
Those actions, however, will not help with the current crisis, and the trickle-down effect on local governments could create its own crises.
Auto dealerships, he said, are important components of the economies of communities across Kansas.
“They need a healthy automobile industry to be able to sell cars,” he said.
Taxes generated by vehicle sales are a large component of the cities’ tax bases.
“They’re awfully important in paying for local government,” Moran said.
Concern about the economy, both statewide and nationally, is a topic that Moran hears often on his town-hall meetings tours.
And, while the auto rescue plan has been passed to President Bush to resolve, Moran said he was surprised that Congress had allowed that to happen.
“I actually believe that Congress should be in session on this, and other economic issues,” he said. “The House and Senate have weighed in with the White House and the administration. The plan is that the Bush administration is going to do something that may be beneficial … short-term, until Congress gets back.
“My guess is, when Congress reconvenes on Jan. 6, we’re back at this.”
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