Once, We Would Have Called It a Scandal

Commentary by Newt Gingrich

There was a time when we would have called it a scandal. In 1921, oil tycoon Harry Sinclair gave several prize head of cattle and around $269,000 to President Harding's Secretary of the Interior, Albert Fall. In return, Sinclair got the exclusive rights to drill in an oil field in Wyoming. Sinclair's no-bid contract became the Teapot Dome scandal, the most notorious example of political corruption in America prior to Watergate.

Between 2000 and 2008, the United Auto Workers (UAW) union gave $23,675,562 to the Democratic Party and its candidates. In 2008 alone, the UAW gave $4,161,567 to the Democratic Party, including Barack Obama.In return, the UAW received 55 percent of Chrysler and 17.5 percent of GM, plus billions of dollars. But nobody's calling this a scandal.

2000-2008 - The UAW gave: $23.7 million to Democrats. $193,540 to RepublicansIn the 2008 presidential election, President Obama was by far the biggest recipient of UAW contributions, raking in $27,340 compared to the $10,600 given to Hillary Clinton, the No. 2 recipient of UAW money.

And so it was no surprise to the cynical Washington political class when the payback began with the Chrysler bankruptcy. In a rigged proceeding in which the federal government disregarded bankruptcy law in favor of the political outcome it desired, the Chrysler bankruptcy laid the predicate for the much larger General Motors bankruptcy to come. Against law and precedent, the unions were moved to the front of the line when it came to who would benefit from the bankruptcy.

The Obama Treasury Department strong-armed Chrysler's creditors into a deal in which the UAW was given 55 percent ownership of the company while Chrysler's secured creditors - investors who would have received priority in a non-political bankruptcy proceeding - were left with just 29 cents on the dollar. But the Chrysler bankruptcy was just a prelude to the Obama-Administration-brokered General Motors bankruptcy deal announced last week.

The GM deal is yet another example of rank, taxpayer-financed political favoritism. Once again, the big losers are GM's bondholders, who include substitute teachers in Florida and retired tool and dye supervisors in Michigan. They hold $27 billion in GM debt but are receiving a 10 percent stake in the new company. In contrast, the UAW, which is owed about $20 billion from GM, is walking away with 17.5 percent of the company and a cool $9 billion in cash. According to one analysis, while the bondholders will be lucky if they recover 15 cents on the dollar, the UAW can expect to recover up to 60 to 70 cents on the dollar - four to five times what the bondholders will receive. As Barron's Magazine wrote, "Never has an American union done so well at the expense of shareholders and creditors". "

At a Time When Some American Workers are Facing Stiff Pay Cuts, UAW Workers Gave Up Their Customary Paid Holiday on Easter Monday." Of course, the Obama Administration has assured us that the United Auto Workers has made "substantial concessions" as part of the bankruptcies that have literally saved the union from extinction. But as no less than the Washington Post put it, the "union concessions were 'painful' only by the peculiar standards of Big Three labor relations: At a time when some American workers are facing stiff pay cuts, UAW workers gave up their customary paid holiday on Easter Monday and their right to overtime pay after less than 40 hours per week. They still get health benefits that are far better than those received by many American families upon whose tax money GM jobs now depend." Union members also preserved their right to have six unexcused absences from work before they can even be considered to be fired.

It is a sign of the degree to which raw politics has dominated its handling of Chrysler and General Motors that the Obama Administration has a 31-year-old who has not yet graduated from law school determining the fate of two multi-billion dollar companies.For their political support of the Democratic Party, the auto unions have been rewarded, not just with ownership stakes in two giant companies, but with ongoing protection and subsidization by the U.S. taxpayers.

The President has said repeatedly that he wants to get out of the auto business as soon as possible. But does anyone seriously believe that he would accept an arrangement in which GM becomes profitable at the expense of the union and its gold-plated benefits? Having spent $50 billion to "save" GM and the UAW, does anyone really believe that the Obama Administration will now allow economics and not politics to dictate its future decisions?

In the GM and Chrysler bankruptcies, the Obama Administration has trampled on the rule of law. It is using the taxpayers' money to pay back a political group for its political contributions. There was a time when we would have called that a scandal.