Saturday, December 13, 2008


Republicans as Grinches

We are having a budget crisis in California. Because of the 2/3 vote requirement for passing a budget and for increasing taxes, the Republicans are able to prevent any increase in taxes to provide more revenue to close the budget gap. They insist that the entire gap must be made by reducing the spending on State programs. These are programs that build highways, provide money for hospitals, provide money for schools and universities, provide money to help local governments provide police and fire protection, etc. Some of these programs, like Medi-Cal, provide health care for low-income residents.

As usual in American politics, each political party tries to put the blame for a bad situation on the other party. Republicans hold fast to their "no tax increase" pledge, but do not propose any schedule of program reductions to close the gap between revenue and expenses. Their position is that these cuts shall be made by Democrats, so that the Democratic Party will be blamed for short-changing education, health care for the poor, and other programs that are popular with the public.

One Republican legislator commented that he wasn't going to approve any tax increase that would benefit people who don't pay any taxes - i.e., the poor. The remark made news on an inside page of the Los Angeles Times for one day. Since then no one, no Democrat, has commented on it. In the battle of assigning blame it seems to me that the Democrats have lost a chance to make a point.

If the crisis in California isn't enough, consider the crisis in the domestic automobile industry. In the US Senate Republicans have killed the bill that would have provided a fourteen billion dollar loan to the firms to keep them going until March. I should say, Southern Republicans. Their motive is to punish the auto workers union, UAW. These gentlemen would agree to the loan only if the union would give up all advantages regarding salary, health insurance, and pensions that they have over the non-union workers in the auto plants in the South that are operated by foreign owners and without unions, such as Daimler-Benz, BMW, Toyota, and Honda. In other words, the price of the bail-out was that the UAW would simply cut its own throat. The alternative the Southerners offer is Chapter 11 Bankruptcy.

Bankruptcy of one of the big three auto companies would be different from bankruptcy of, for example, United Air Lines. United continued to fly while undergoing the restructuring of bankruptcy. Americans are willing to fly on bankrupt airlines. I doubt that Americans would continue to buy cars from an bankrupt auto company. An airline trip is a one-time event. A car purchase involves certain guarantees regarding defects in the car, contracts for service for a number of years, and the like. If the company is bankrupt, it can not offer such guarantees and service contracts. A bankrupt General Motors would be shut down and the various properties sold to satisfy the claims of the creditors. The workers would be laid off. The federal government would have to pick up the retirement pensions. Bankruptcy now, during a credit crisis, would undoubtedly lead to another Great Depression. This is what the Southern Senators are willing to risk in slapping down the hated auto workers' union.

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