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Congressman Darrell Issa on the car bailouts, California politics, and the impending radio performance tax he needs to rethink

Tuesday, March 31, 2009
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HH: I begin, though, with an old friend, Congressman Darrell Issa, who is from Southern California. He is a force in the House of Representatives, he’s also deeply connected with the GM-Chrysler bailout efforts, and the efforts to make them restructure. He’s a successful businessman and a longtime friend of the program. Darrell Issa, welcome back to the Hugh Hewitt Show, great to have you on.

DI: Well, thanks for having me back, Hugh. And we certainly are enjoying the Chinese curse that we’re living in interesting times, aren’t we?

HH: Oh, my goodness, way too interesting. I want to start with a little politics in California, though. You’ve endorsed Meg Whitman. Give us a little sense of why you’ve done that out here.

DI: Well, like you, to me it’s a matter of can we move the state forward. We’ve been sliding backwards for a number of years, and I’ve become convinced that we need somebody who may or may not have star power, but certainly understands the business world. And as somebody who left the business world to come to politics, I appreciate the experience Meg had, has and had, that I think she’s going to understand that we cannot continue to spend our way the way we have in California with a cycle of spending and tax increases.

HH: You’ve run statewide before, and a lot of people hope you’ll run statewide again. You know how difficult it is. Do you think Ms. Whitman has the political ability to put together a majority in California in 2010?

DI: Well, I’ve been impressed with how fast she is going from being a business leader to being a political person. She’s got some tough questions to answer, and so far, I’ve been very impressed at the way she answers them. You know, some people enter politics and they say well you know, why did you do this or that, and then they sort of freeze like a deer in the headlights. She seems to be able to answer these questions, and answer them in a way that has earned my support, Mitt Romney’s support, and growing support around the state.

HH: All right, now Darrell Issa, before we get to GM, and that’s what I want to spend the most time on, I also want to ask you about what I call the radio tax. It’s a performance tax. A lot of singers and record companies, most of them foreign owned, want to impose a tax on every time you play a radio song. I know that you’re in conversations about this. I hate it, because it’s going to ruin a lot of radio stations, put a lot of people out of work, and reliance is built up in our industry around ways of operating over sixty years. Is your mind settled on this? Or are you still open to being talked into doing the right thing, which is opposing the radio tax?

DI: Well, I certainly believe that the status quo can’t last forever. We can’t have internet and satellite people who play music paying a tax, if we want to use your word, and have terrestrial radio not. There needs to be some sort of a common denominator. I’m certainly persuaded by the broadcast industry when they say that there is a promotion value. And since they’re banned from collecting for that promotion, there has to be some sort of an offset consideration. The bill right now doesn’t necessarily do that the way it needs to, and I’m hoping we can work with the broadcasters to come up with something that makes it both affordable and fair to all parties.

HH: Have you done any analysis yet on the number of…actually, it’ll collapse most of music radio, Congressman. I’m just absolutely convinced about this. Talk radio might actually prosper, because we don’t have to use music in my business. But the radio industry as a whole will, I think, collapse. People will lose all the stations that they listen to out of, what do they call it, the foolish consistency of a tax performance. When…are there going to be hearing on this, because I think the public will weigh in decidedly against a radio tax. I just hope it gets a chance to be aired out.

DI: Well Hugh, I believe there will be hearings, and no one is predicting that this is going to move in this Congress. What I would say is that as many of your listeners don’t know, that the people who write music get paid every time it’s played while the people who sing it don’t. There’s been a suggestion over the years that perhaps that fee, which is now only paid to the writers and not to the guitarists, the producers, the actual singers, or in the case of a symphony, all the violinists, that maybe that should be split. I don’t have a dog in the fight of the exact outcome. What I do see is that even among your stations, they certainly would say well, they’re paying to half of the folks. It’s not a question of can they afford to keep paying to the people they’re paying. They’re making the claim that they can’t pay more. And that may be true, and that may be what…

HH: You’re breaking up there, Congressman.

DI: We can pay, but we’re going to have to split it. I’m open to all these discussions, and look forward to working with the broadcasters on it.

HH: Great, now let’s get to GM. I see today that you endorsed President Obama’s refusal to take the deal put forward by the car companies. But I want to start with what Larry Kudlow calls a truly breathtaking departure, which is the demand by President Obama that GM fire a CEO. This is a little chilling. Actually, it’s a lot chilling to me, Darrell Issa. What do you think about that?

DI: Well Hugh, didn’t President Obama look a lot like Lee Iacocca telling you that he backed his cars unconditionally with the full faith of the American government?

HH: No, he didn’t look like Lee Iacocca to me, because he’s being paid with a green check. I am very concerned about statism here, and the idea that the government’s getting its hands into everything.

DI: Hugh, you’re absolutely right. The idea that a plan put forward by General Motors wasn’t good enough to get more bailout money was the prerogative of the President and the administration.

HH: Yup.

DI: The idea that they should tell the board that they have to resign and their CEO has to resign was overreaching. And in my statement, I was very narrow in support of General Motors has to do whatever it needs to do to be viable going forward, or taxpayers should have nothing more to do with it. That part I agree with the President on. Of course I disagree with the idea that we’ve nationalized so many industries, and now we’re going to begin saying how much they can make, and of course who to hire and fire. And you may have seen that the White House, these bank presidents, they realize now that if you don’t do what Obama wants the way he wants, including his social programs, you’re probably going to get fired by the President.

HH: And that is to me a Rubicon has been passed that we’ve got to get back on the other side of in a hurry, and I hope that the moderate Democrats, and you’ve got good relations with them, Darrell Issa. Are they waking up to the fact that sort of state-managed capitalism isn’t capitalism at all?

DI: There are probably seven to eleven, depending upon which vote you look at, that we think we have, but that’s not enough to defeat the Pelosi agenda or the President’s. It’s going to take a few CEOs and business leaders weighing in with their moderate Democrats to get that number up to 15 or 20 so that we can have a workable balance to the President’s socialized agenda.

HH: Let’s talk about GM. I just came back from my hometown. You’re from Cleveland, I’m from Warren, I was in Northeastern Ohio over the weekend. And of course, Lordstown matters a lot as do a number of GM facilities in Ohio. Even though you represent Southern California now, I know you know your Cleveland stuff. What would you have to see in a plan put forward by GM, maybe Chrysler, but mostly GM, to support additional federal support for them?

DI: Well, I think the number one plan is that they normalize all their costs, top to bottom. That includes their top management, which also costs more than their Japanese transplants. They normalize that so that it’s at least on a cost basis, they can compete. The next problem, of course, is they need to innovate new cars that are designed to by competitive. I happen to think they can do that if the government doesn’t mandate that they be somehow greener than the American public wants them to be. If Obama tells the car companies to be politically correct, that’s fine, except maybe the American people will still buy Toyotas, because they prefer them.

HH: And do you actually see GM being able to come up with that plan? Or is this pretty much a prelude to the announcement of bankruptcy?

DI: I’ve been fairly pessimistic that without the real fear of bankruptcy, you’re not going to get people to negotiate in good faith the way you need to. When last week, they retroactively tried to take back the AIG bonuses, I said well, you know, if AIG had gone through bankruptcy to begin with, these things would have been on the table. And the same’s true. General Motors’ plan to reorganize and survive would have been better the first time had they been forced to look at bankruptcy the way the President now has announced suddenly it’s back on the table.

HH: Darrell Issa, what about the argument from GM and Chrysler that a Chapter 11 filing will make it impossible to sell cars if people will not buy cars from a bankrupt business?

DI: Well then what I’d say is if that’s true, then it’s game over, because the President has already said bankruptcy is on the table as of today. The President has already backed these car companies at least from this day forward, that the government’s going to be responsible for their warranties. So I think that that argument now is in the rear view mirror.

HH: And so how long do you think until we see a final decision on this, Congressman Issa? We’ve got about a minute left. When do you expect we’ll see end game on GM, Chrysler and the government?

DI: I think it’s going to be within the next 30 days, I really believe. Unless they’re out selling a viable turnaround strategy in 30 days, it’s over. Now in the case of Chrysler, I’ll tell you, I’ve looked at Fiat for a lot of years. I’m not impressed. The President said that they make these technologically advanced cars. Mostly, they make very small cars that don’t sell in America. So I’m concerned that Chrysler’s going down a road that even if they make the sale, it’s still a terminal event.

HH: Congressman Darrell Issa, I look forward to many more conversations about the car business, about the radio business, and about California politics in which I hope someone persuades you to take a long, hard look at a statewide race.

End of interview.

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