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Amend Or Kill The Car Bill

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The car czar billthat passed the House has nothing in it for conservatives, so the Senate GOP should demand major amendments which, if they aren’t forthcoming, should end the effort for this year.

If a big compromise is in order to try and save Detroit, that compromise should have something for everyone. Democrats and the Bush Administration say the bill is a compromise because it includes a powerful car czar flotaitng on a sea of money, but conservatives think that is nonsense, and the Administration won’t even name the car czar which is a pretty good signal that conservatives won’t be cheering when the name is unveiled.

So the proponents of the bill ought to be thinking: How can we make this appeal to conservatives? Answer: Include some tax relief as a demo project. It doesn’t have to be a sweeping end-run like extension of the Bush tax cuts until 2011, though such a move would be a huge tonic for the economy and thus Detroit.

It can be modest and focused on the states in which the car business is most obviously anchored, like MI and OH. If the bill included a cut in the corporate rate in those two states for ten years, conservatives would be cheering it on as a chance to demonstrate once and for all what low taxes mean for economic growth.

But the complete failure of imagination within the Administration and on the Hill froze the discussion early into the size of the bailout and details on the role of the so-called “car czar.”. Well, unfreeze it. I debated the bailout with White Deputy Chief of Staff Joel Kaplan on yesterday’s show. The transcript is here, but the key exchange is this:

HH: But Joel Kaplan, why not get us something like tax reform in Michigan and Ohio? Why not get us something…you’ve got leverage. The Democrats want this, the UAW’s demanding it, the cars…want it. All you guys have to do is ask for something that makes sense to conservatives.

JK: Yeah, you know, to be perfectly honest with you, Hugh, I don’t think that’s feasible or doable in the Congressional climate that we’ve got here. We’d love to see a lower corporate tax rate. We’ve got…these firms are going to go bankrupt in a couple of weeks, potentially, based on their testimony last week and what the analysts say. We’d love to get that. I’m just being honest with you and your listeners, I don’t think that’s doable. We think we’ve got a deal that is doable…

HH: But I don’t think you guys tried…

JK: …and that will get a good result for the firms and for the economy.

HH: But I don’t think you tried to get anything. I honestly don’t. I think you guys went there and accept their assumptions that this is the parameters in which we’re going to negotiate, and you’re passing by an opportunity to use leverage which is huge.

JK: Well, this may be one where we’re going to have to agree to disagree. We think we’ve got the right outcome that strikes a balance of avoiding very significant economic harm to our economy at a time when we’re going to have pretty tough unemployment numbers for the next few months here, and very tough GDP. We think if we can, like I said before, you can avoid that outcome for a couple of months, and try to get a deal that will be the right outcome for the industry, the right outcome for the economy and the country, and we think we’ve got the responsibility to try that.

HH: But what did you ask for that you didn’t get, Joel Kaplan?

JK: You know, I’m not really going to get into the nuts and bolts of the negotiations. What we wanted to get, we got, and that was an ability to use money that’s already been appropriated for these auto companies, that was appropriated last fall for advanced technology. We said you’ve already put that money out there, Congress, why don’t you use it for the purpose of actually bridging these guys to a real competitive viable structure. We won on that.

HH: Joel Kaplan, but you…

JK: We said you’ve got to have, we’ve got to have this czar have teeth so that bankruptcy is the stick on the back end of this negotiation. We got that. So we negotiated hard…

HH: But we don’t know who the czar is.

JK: What’s that?

HH: We don’t know who the czar is, and it comes down to this. Why should we trust you again, meaning the administration, when Hank Paulson promised us TARP, and it didn’t turn out to be what he promised, he didn’t spend the $700 billion dollars, he didn’t appoint anyone that we knew, and it didn’t work out. Why should we trust that the car czar will be other than another grey suit from Wall Street that no one will care about, and we’ll get stuck holding this bag, Joel Kaplan?

JK: Well, I don’t think that’s what you’d get, Hugh, and respectfully, I also don’t accept your premise. What Secretary Paulson and Chairman Bernanke said was we were on the abyss of a financial collapse, the likes of which we hadn’t seen before. And the injection of capital into our financial system has so far averted that collapse. Although we’re in some really tough times, it could be a heck of a lot worse.

HH: Well, it could, but they said they were going to buy distressed assets and they haven’t, and they didn’t do mortgage relief which they promised they would do. The FDIC plan has not been put forward. And so the credibility gap is not between intentions. Everybody likes the President and the administration. You’ve got leverage. But we’re just going to get stuck holding the bag again, saying yeah, go ahead, pass it through. And this time, to me, it’s just gosh, fool me once, bad on you, fool me twice, bad on me.

JK: Well, you know, Hugh, like I said, it sounds like I’m not convincing you….

Joel Kaplan is a very smart guy who has worked long in the service of the Adminstration and he and the Adminstration is generally conservative, but I also think they have lost site of the need to fight for conservative principles even as they address the current economic crisis, including its Detroit component. There is still time to do both, and I hope Mitch McConnell and Jon Kyl and the rest of the Senate GOP says “Look, we can work with you, but here’s what conservatives insist be a part of this package.”

Comments? Send long ones to Tweet short ones at with the hash tag #hhrs.


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