Granholm Administration on Automaker Bailout: Throw Taxpayers Under the Government Pensioners’ Bus

Gov. Jennifer Granholm has been a high-profile proponent of using billions of U.S. taxpayer dollars to bail out the domestic automakers. However, the Granholm administration is more cautious when it comes to risking the pensions of Michigan government workers in this cause.

Specifically, the Dec. 11 MIRS Capitol Capsule reports that Michigan Treasurer Robert Kleine opposes investing state pension money in domestic automaker stock because he "is interested in making investments that make sense and not foolishly spreading around retirement dollars," as correspondent Tim Skubick put it in the Lansing political newsletter.

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The article refers to the Treasurer's fiduciary responsibility to invest pension dollars wisely. It quotes Kleine saying, "We owe our obligation to the retirees," and characterizing the automaker stock as "uncertain."

The apparent message from the Granholm administration is that it's OK to put taxpayer dollars at risk, but government employees are a special class that must be protected.

That's good for the government class, but bad for the people: Many believe the bailout will just postpone an eventual bankruptcy of one or more of the Detroit Three, or a nationalization of the firms, either of which would wipe out any remaining shareholder equity — and also whatever taxpayer wealth will have been transferred to richly compensated United Auto Worker union members along the way.

This is all consistent with the priorities demonstrated by the governor over the past several years, which might be described as "Leave no government worker behind." For example, to avoid the need to privatize services and adopt genuine government and school employee pension and health coverage reforms, last year Gov. Granholm and the Legislature imposed $1.4 billion in tax hikes — including a $600 million business tax surcharge — on a state that's been losing jobs most of the decade.

Given that context, it's also not surprising that the governor was highly critical of a version of the automaker bailout that would have required UAW members at the Detroit Three to accept reasonable pay rates comparable to those at thriving non-union "trans-plant" car factories in other states. While government workers (including school employees) and their unions are perhaps the core group in Gov. Granholm's political base, industrial unions (including the UAW) are a close second or third (vying with "just say 'no' to growth" environmentalists).

Incidentally, the new Michigan Business Tax promoted by the governor and adopted in 2007 essentially exempted Detroit Three operations in the Great Lakes State from all business and personal property tax liabilities. The tax burden was shifted to job providers in other sectors; many medium sized firms in the growing service industry report seeing their annual tax payments double, triple or even quadruple. Call it another example of the political class protecting their base at the expense of the rest of the economy and population.


Jack McHugh is senior legislative analyst at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.

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