GOP divided on backing auto aid

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By Donald Lambro

Conservative activists befuddled by the mounting bailouts doubt that Capitol Hill Republicans, still smarting from electoral defeats, can muster the courage to turn back the Big Three.

But many think it's time to take a stand and put the brakes on saving endangered companies by taking unprecedented federal control and stock ownership.

"The vote will be divided, but this is a time for Republicans to show clarity in their message. They've been running around saying 'we learned our lesson about spending too much.' And now is the time to put George Bush's presidency behind them and say no to that kind of spending," said tax cut crusader Grover Norquist, president of Americans for Tax Reform.

"In 1993 the Democrats had a tax increase bill and Republicans refused to give it a single vote and they came back and won the House and Senate in 1994. We need a united Republican party that says, 'hell, no,' " he said

Free market groups are urging Republican lawmakers to oppose forcefully the effort to prop up the Big Three automobile makers with a $15 billion loan.

"The moment you extend large taxpayer subsidies to an industry or a company, you develop a fiduciary obligation to the taxpayers because their money is at risk. That leads to a slippery slope that is very disturbing to us," said Michael Franc, a vice president and public policy analyst at the conservative Heritage Foundation.

"The slippery slope is that once you become a part owner and develop an equity stake in the company, then it becomes logical to want to run the company on a day-to-day basis and that's the worst possible outcome," Mr. Franc said.

Not only does the bailout for Detroit's automakers establish a federal overseer, or "car czar," with broad managerial powers to govern their corporate decision-making and restructuring, it gives the government an equity stake in the companies and prohibits them from challenging state environmental laws in courts.

"I understand that the companies will be constrained in the deal to function in the public policy arena against policies they do not agree with. That's a huge First Amendment price to pay," said a top trade association executive who spoke on the condition of anonymity.

But conservatives and their allies in the business community, many of whom backed the $350 billion bailout of the cash-strapped banking sector, remain divided, and some doubt Republican lawmakers can withstand local lobbying pressure from unions and automotive suppliers despite majority opposition by voters.

"That would require some discipline on message and I don't know if the Republicans in Congress are over their election shell shock to deliver a cohesive and compelling message," said Bill Wilson, president of Americans for Limited Government, which opposes the bailouts.

"If all they can muster at this point is to aggressively stand up and say no, that in itself will be a great step," he said.

The U.S. Chamber of Commerce, the big business lobby that sides with conservatives on tax cuts and other business issues, is not only for the automakers' bailout, it supports President-elect Barack Obama's massive economic stimulus plan to rebuild and repair the nation's infrastucture.

"It's clear the president-elect understands that investing immediately in shovel-ready projects -- whether roads or rails, broadband, energy or water -- will create jobs and strengthen America's competitiveness," chamber president Thomas J. Donohue said Tuesday.

House and Senate Democratic leaders have been aggressively promoting the plan, arguing that their failure would have a huge impact on the economy because it would threaten hundreds of thousands of automotive suppliers and numerous banks who hold their corporate bonds.

"Recent research by a prominent financial firm concludes that the auto sector represents one of the largest sectors in leverage finance for banks because of their large number of high-yield bonds they have issued and that the companies' failures would result in 'credit crisis part II,' " the leaders said in letter to Mr. Bush last week.

An estimate by the Center for Automotive Research, which is partially funded by the auto companies, said the jobs of 239,000 autoworkers and 795,000 suppliers were at stake.

But a Heritage Foundation study says that if the car companies were go into bankruptcy, they would emerge leaner and stronger as a result of downsizing, while other manufacturers here like Toyota and Honda would see their sales rise and expand their work force and supplier contracts - easing the impact on the economy.

Heritage's Mr. Franc says the bailout would not only set a dangerous precedent, but put in charge people who know little if anything about running corporations.

"The same kind of people who run the Department of Motor Vehicles or the Post Office are now going to be in charge of running the automotive industry. Not the most reassuring image for most Americans," he said.