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Thursday, December 11, 2008
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Paul Ryan Harms His Own Constituents With the Bailout

Last night, the House voted to pass the bailout bill of the Big 2.5.  Essentially what it does is to provide for "bridge loans" to be made available from funds already made available for other purposes.  Some of the money will be coming from the $700 billion bailout (which is not being used to buy illiquid assets any more) and some of the money is coming from a bill having to do with alternative energy.  It also creates a "car czar" which will supervise the disbursement of the loans, and also make sure that the car companies are restructuring properly.  The bill also requires that the "car czar" is to receive warrants to receive nonvoting or preferred stock in any car company which accepts funds.  In other words, more partial nationalization.  Some would argue that it's not true nationalization because it's non-voting stock... but let's be honest here.  Even without the warrants, the "car czar" is going to wield enormous influence over these companies in exchange for the money they will receive.  We're nationalizing.

The full text of the bill is here, and the roll call for the vote is here.  As you can see Jim Sensenbrenner did not vote, and Paul Ryan voted for the bill.  The question is, why would a "principled Republican" like Paul Ryan do such a thing?  There is a lot of debate among Conservative bloggers about Ryan's vote.  Owen at Boots and Sabers is saying Ryan disgraced himself, while Michelle Malkin includes him in a list of "anti-free market Republicans".  But then, others are coming to his defense, like Josh Schroeder.  As my regular readers know, I've been really tough on Paul Ryan for his votes as of late, and this will be a continuation on that theme.

From reading Ryan's defenders, there is generally one theme that seems to be strongest.  He's from Janesville, and his district has a large base of UAW folks.  He's between a rock and a hard place, and so he has to vote for this because of them.  The story continues that although he has to vote for the auto bailout, we need him in Congress because he'll fight for Republican principles in other areas.  First of all, we already know that's not true.  He voted for the $700 billion bailout of the financial industry... a bailout that is not being used for any of the purposes it was originally tasked for in the bill, and that is being given out with hardly any oversight.

But let's look at exactly what Paul Ryan himself says.  In an opinion piece in the Journal Times a few weeks ago, he talked about what Republicans needed to do in this economy.  He never once mentioned bailing out anyone and in fact talked about the dangers of government bailouts.  Just last week, while the auto-bailout was being debated, Paul Ryan added a second part to that opinion piece where he went further:

We must recognize that real, sustained growth comes from the work, savings, and investment of American families and businesses – not from the Federal Government. We can, and should, take immediate action to address a weak economy with initiatives that produce lasting economic gains. There are legitimate steps Congress can take to help the American economy in both the near and long term. These include the following:

- Provide Help to Those Who Need It. With the economy still shedding jobs, it makes sense to extend unemployment benefits, as we have already done.

- Stop Overselling What Congress Can Do. Congress must stop pitching the false notion that we can simply spend (then tax and borrow) our way to prosperity. Last year, Washington increased Federal spending by 8.3% – more than twice the growth of our economy or Americans' wages; this included 11,000 pork-barrel earmarks at a cost to taxpayers of $17 billion. If – as Washington likes to suggest – higher government spending leads to stronger economic growth, our economy today would be the strongest in our nation's history.

In the entire op-ed, there is not a single mention of bailing out the auto industry, nor the $700 billion dollar bailout he fought for.  Instead, he talked about other measures which did not appear in a bill which has come close to passing, like cutting specific taxes and other good ideas.  This is an article that appeared in a major newspaper in his district.  This is what his constituents saw.  Last night, after voting for the auto-bailout, the only mention of it is a small quote which is hidden on his Congressional webpage:

It is clear that the mounting hardships throughout Southern Wisconsin have been downright gut-wrenching. In addition to the imminent closure of the GM plant in my hometown of Janesville and mass layoffs elsewhere, hard-working Wisconsinites are finding it increasingly difficult during this recession to cope with strained credit markets, rising health care costs, and making their monthly mortgage payments.

The American automotive industry is under considerable distress, and various proposals have been put forth to provide aid to those in need. I’ve maintained that any assistance to the domestic auto industry should be drawn from previously approved funds from a U.S. Department of Energy loan package, rather than divert resources from the financial rescue package or rely on additional taxpayer dollars. H.R. 7321 cuts through the bureaucratic red tape and expedites these previously appropriated funds. Because no additional taxpayer dollars were appropriated, I was able to support this legislation.

At the forefront of my mind are jobs in Southern Wisconsin and the retiree commitments to workers that could be placed in jeopardy under certain bankruptcy scenarios. To be clear, this bill is not intended to save the American auto industry and makes no guarantees that layoffs in this industry will end. Congress must stop overselling what it can do. At the very least, I am hopeful that by extending these loans to the American auto manufacturers, bankruptcy will be avoided in the near term and protections for retirees will remain intact.

So he publicly and loudly proclaims that we need to not oversell what Congress can do, but he very quietly allows Congress to oversell itself.  If he is so concerned about making sure his constituents know he voted for the bailout, then why isn't it appearing in any of the op-eds that he writes for the newspapers in his district?  I also have my doubts that many UAW faithful would vote for Ryan, even if he votes for a bailout.  Of course, he has even called out other Republicans for not taking a stand, and even saying that doing so will be politically popular!

Our party has become too fearful of our own ideas. Since 1997, congressional Republicans began a steady retreat from principled leadership to political expediency. A party built on spending discipline and government reform succumbed to the siren songs of government expansion and earmarked giveaways. Republicans squandered the opportunity to limit and reshape the relationship between the federal government and the individual.

I ran on these bold ideas and innovative solutions in a congressional district carried by Barack Obama -- yet I received 64% of the vote. I challenge my colleagues to rethink political risk taking. Taking on our most serious fiscal challenges will restore relevancy to the Republican Party and will keep alive America's commitment to freedom and prosperity.

So he wants all other Republicans to stand up for what's right, even if they think against their own self interest, but he is too cowardly to do so himself!  But let's look at whether this bailout will actually address the concerns that Ryan mentions in his statement from last night.  First, there is the closure of Janesville GM plant.  This closure was announced months ago, before any of this crisis even came to a head.  In fact, Janesville will close even with the bailout.  Nobody has ever suggested that bailing out GM will keep that plant open.  So suggesting that this bailout will immediately help his voters in that city is just plain false.

Secondly, he is concerned for retirees.  Believe me when I say that I am also.  In fact, I have a more personal interest in retiree pensions than Paul Ryan does.  My mother derives half of her income from GM pension obligations.  If anything drastic happens to that fund, it would hurt her immensely.

So will the bailout help retirees?  No.  In fact, it will do the opposite!  Bankruptcy is actually the best thing that could happen to retirees.  The New York Times had an excellent article detailing the current state of the GM pension fund and what would happen to it with, and without bankruptcy.  I strongly suggest you read it.  What the article details is how well GM actually managed that fund, and because of the conservative nature of it, how it has actually fared well even in the current crisis.  In bankruptcy, what will happen is the fund will immediately be turned over to a government insurance program to be overseen.  All current pension obligations will continue to be paid out of that fund, and because of the bankruptcy, no new obligations will be taken on.

That is the key component.  GM has said that because of their current financial problems, they will not pay anything into the fund for the next several years.  However, if GM continues on its current course thanks to a bailout, during those years its not paying anything new into the fund, it will still take on new obligations for current employees and new employees because of union contracts.  It will over burden the fund at the expense of all current pension holders.  In other words, GM can currently keep its promises to retirees, but what Paul Ryan is asking is them to do is to make new promises to people that GM knows it can't keep, at the expense of those who it already made promises to.  This bailout will actually do great long term harm to his own constituents!

GM needs to restructure.  That is exactly what Chapter 11 bankruptcy law was designed to do.  It is a system that we created that allows the people who have the most at stake in a company, it's debtors, to take over control in the theory that they will get more money if the company stays afloat with renegotiated obligations, than if its liquidated under Chapter 7 laws.  This reorganization is handled by the debtors, under the supervision of a bankruptcy judge, and is generally a very good system.

What this bailout proposes is to replace that system with one in which the Executive branch, through a "car czar", and also through various financial carrots and sticks, take control of that reorganization.  The danger in doing so is that not only will the bailout money be wasted, but now politics will enter into how the reorganization takes place.  If you thought the current system of ear marks, and special favors in bills was bad, just wait and see what little favors GM, Ford and Chrysler are forced to do... whether it will actually help make a successful company again or not.  This is once again an unprecedented growth in executive power, which makes our President even more like a King that before.

I've been concentrating on GM in this post, but if you want some information on why Chrysler wants in on the deal, read this from Forbes.  The private investment firm that owns Chrysler could actually back the company out of its own coffers fairly easily... but would rather not... especially if it can get gullible House Republicans to do it for them.  Thankfully, Senate Republicans may actually have more back bone.

Paul Ryan should be ashamed of himself.

# Posted at 8:52 AM by Nick  |  Comment Feed Link 3 Comments  |  No Trackbacks

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Thursday, December 11, 2008 1:33:39 PM (Central Standard Time, UTC-06:00)
I agree completely with the above.
Thursday, December 11, 2008 3:04:02 PM (Central Standard Time, UTC-06:00)
I have been a big Ryan supporter in the past, but with his votes on the 1st bailout and now this I am done with him. His votes are a disgrace. He has lost all credibility with me. He is not a fiscal conservative. I am truly disappointed. I thought he would be part of the new republican leadership. There is so much not to like about this bailout loan I do not even know where to start, and a so called fiscal conservative voted for it.
John Pierquet
Saturday, December 13, 2008 10:39:45 AM (Central Standard Time, UTC-06:00)
Isn't the phrase "prinicipled republican" an oxymoron?
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