Progress Illinois

What does Rep. Mark Kirk have against the American worker? Back in June, the North Shore Republican initially voted down a federal extension of unemployment benefits, claiming that people who had worked as briefly as two weeks could game the system and collect 52 weeks of unemployment checks -- which we debunked. Now, five months later, he’s blaming the members of the United Auto Workers for destroying the American auto industry. From his appearance on WLS’ Don Wade & Roma Morning Show on Tuesday:

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KIRK: Under Chapter 11, you have a number of ways to restructure a company, because just giving a big bailout doesn’t handle a structural problem. When you have an hourly labor cost of $78 per hour at GM, where as Toyota has $35 …

ROMA: Yeah, that’s insane.

KIRK: It doesn’t matter how much taxpayer money you throw at the problem -- you’re still going to go under. When some employees have a right to 120 days of vacation time … I worry that unless properly structured, this is a bailout of the United Auto Workers, not General Motors.

Numerous conservatives have latched on to this highly misleading argument in recent days. First, let’s take Kirk’s assertion that the hourly labor costs at GM are dragging the company into the gutter.

Portfolio’s Felix Salmon (via Chris Hayes) took aim at this myth on his blog a couple days ago. According to Salmon, the average GM assembly-line worker makes about $28 per hour in wages with additional resources devoted to health insurance and pension plan contributions. But to assume that GM is shelling out $50 per hour in individual pension obligations is ludicrous. (The International Motor Vehicle Program puts the figure at around $10 per hour, as Jonathan Cohn points out.) Salmon explains:

[T]he $70 per hour figure (or $73 an hour, or whatever) is a ridiculous number obtained by adding up GM’s total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers. [...]

As of 2007, the UAW represented 180,681 members at Chrysler, Ford and General Motors; it also represented 419,621 retired members and 120,723 surviving spouses. If you take the costs associated with 721,025 individuals and then divide those costs by the hours worked by 180,681 individuals, you’re going to end up with a very large hourly rate. But it won’t mean anything, unless you’re trying to be deceptive.

Second, there’s a very good chance that without some Congressional assistance, the auto companies will be forced into Chapter 7, not Chapter 11 bankruptcy. Cohn explained why last Friday:

In order to seek so-called Chapter 11 status, a distressed company must find some way to operate while the bankruptcy court keeps creditors at bay. But GM can’t build cars without parts, and it can’t get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. But the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

That’s why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation. The company would close its doors, immediately throwing more than 100,000 people out of work.

As Paul Krugman writes, this scenario would affect far more than just those 100,000 workers: “[A] default by GM would probably mean loss of ability to pay suppliers, which would mean liquidation and that, in turn, would mean wiping out probably well over a million jobs at the worst possible moment.”

Of course, there are legitimate reasons to oppose a Detroit bailout. Providing a life preserver to companies that for years refused to build fuel-efficient cars, even though the public demanded them, is a major one. But considering that “saving jobs and strengthening the economy for working Americans” was Kirk’s rationale for supporting the Wall Street bailout in October, it only seems natural to support a plan to protect an industry far more important to the economy than the financial services. Unless, of course, he has something against these particular “working Americans.”