And the Senate Republicans have killed the automaker bailout. John Judis offers tour-de-force criticism here. The next step likely involves the Bush administration, which supported the final bill, using TARP funding to provide bridge loans to some of the automakers until the Obama administration can inherit the problem in January. Get ready for some, er, volatility on the financial market as well, as least if Majority Leader Harry Reid is to be believed: “It’s over with. I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.” No doubt.
In particular, this is bad news for the UAW, because the GOP seems intent on pinning the problem on their refusal to accept immediate pay cuts (they offered to take a phased-in cut over two years). Of course, as David Leonhardt points out, that would only change the price of a car by $800, which is not a make-or-break discount for someone looking to buy a car. The problem still resides in the type of cars that the company makes. Labor has made several compromises with the automakers in recent years, most notably a 2007 agreement where they took responsibility for their own pension fund in order to allow GM to get ... more outside funding. The union shouldn't be held accountable for the mistakes of management.
While the current president has to find some way to hold the companies over until the next administration, the president-elect is the player who really takes one in the teeth. It's just one more expensive problem that has been pushed into his bailiwick.
--Tim Fernholz
