NCPA - National Center for Policy Analysis


May 11, 2007

At a campaign event in Detroit this week, senator and Democratic presidential hopeful Barack Obama described the bill he recently introduced in Congress to bail out Detroit's struggling automakers and save the planet at the same time.  In rolling out his "health care for hybrids plan," the senator has managed to combine two bad ideas into a proposal for one big government program, says Nicole Gelinas, the Searle Freedom Trust Fellow at the Manhattan Institute.

The legislation calls for a deal between Detroit and the federal government:

  • The feds would pay up to 10 percent of the cost of domestic automakers' annual health-care benefits for retirees.
  • In return, the companies would invest 50 percent of the savings in developing and commercializing cars and trucks that use technologies, including hybrid designs, that get better mileage per gallon and thus save energy.

Neither component of Obama's plan is a good idea by itself; taken together, they're even worse.

  • Shaving 10 percent off Detroit's retiree health care costs won't help the automakers return to profitability.
  • In fact, it likely will discourage the automakers and union workers from making the necessary painful choices to get those costs under control.


  • The plan specifies that any participating auto company would have to certify that it provides "full health-care coverage to all of its employees."
  • This provision might please the unions, but it would drive up future costs for the automakers by keeping them from pushing workers to shoulder at least part of the health-care burden.

Obama's proposal is creative, certainly, but only in that it combines two of the federal government's perennial bad solutions to domestic policy questions: a taxpayer bailout of an old industry and a taxpayer subsidy of a new one, says Gelinas.

Source: Nicole Gelinas, "Obama's 'Health Care for Hybrids,' ", May 10, 2007.

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