My Foreign Investor, Right Or Wrong
by dday
As Digby noted yesterday, the auto industry recovery package looked to be on life support. Looks like Mitch McConnell pulled the plug:
The Kentucky Republican, with a large auto presence in his state, had been seen as a potential ally for the industry, and he provided crucial support for the Treasury Department’s financial markets rescue fund this fall. But he has since endured a punishing reelection fight. And faced with strong resistance in his caucus, he said that the bill “isn’t nearly tough enough” and that he could not ask taxpayers to “subsidize failure.” […]
While not entirely surprising, the Republican opposition stands in contrast to what have been significant concessions by Democrats to try to move the bill forward.
“Much of this bill is dictated by the president. It is a stunning vote of no confidence,” [Rep. Barney Frank (D-Mass.)] said of the Republican opposition.
I think the first mistake was making a “deal” with the loathed President Bush and expecting that to hold.
But let’s be clear what’s going on here. A bunch of Southern-state Republicans (including, amazingly, Diaper Dandy David Vitter), from right-to-work states, want to push GM and Chrysler into bankruptcy to bolster the foreign auto presence in their home states. Kentucky has a Ford factory but they also have a Toyota plant in Georgetown, so McConnell’s on board.
Last week, Jane Hamsher explained the conflict of interest for Bob Corker in Tennessee:
He hasn’t mentioned the subsidies his own state of Tennessee has given to foreign automakers, making it harder for the Big 2 1/2 to compete:
Tennessee offered its richest incentive package — and perhaps the most government assistance and tax breaks ever for an American automobile plant — to lure Volkswagen to Chattanooga.
But the state’s chief business recruiter said Wednesday that the benefits from VW’s $1 billion assembly plant far will exceed what could top $500 million in government assistance and tax breaks for the project.
“The Volkswagen investment in this community is going to have a tremendous economic gain for the entire region,” said Matt Kisber, Tennessee’s commissioner for economic and community development. “I’m confident we’re going to have a very reasonable incentive package when you look at the initial costs of what is being offered compared with a much bigger long-term return.”
Yes, that’s the logic — these incentives will bring more money to the region than they cost. But it doesn’t always work out that way. As David Cay Johnston noted in Free Lunch, these kinds of subsidies frequently wind up costing communities much more than they ever make back:
Johnson writes: “The tribute Cabela’s demanded from Hamburg [Pennsylvania] amounted to roughly $8,000 for each man, woman, and child in town.” Johnson points out that between 2004 and 2006, Cabela’s earned $223.4 million. During those years, it collected at least $293.7 million in subsidies, more than its reported profits. Meanwhile a family business selling fishing and hunting gear was driven out of business in Hamburg.
Funny nobody is mentioning this.
The GOP does a lot of chest-thumping about “Country First” and patriotism. It’s fun to watch them destroy American manufacturing so they can keep Japanese and German corporate executives happy. OK, maybe not so fun.
…stop me if you’re surprised by this:
A $14 billion auto industry bailout bill stalled in the Senate on Thursday, and Republicans demanded upfront concessions from the United Auto Workers as the price for support needed for passage.
UAW officials were in talks with key Republicans and Democrats at the Capitol, although it wasn’t clear what, if any, givebacks the union was willing to discuss.
If the unions would only play ball by disbanding, we could have the auto industry in the same top shape as non-union entities like the financial industry in no time!
.