Frank on Auto Bailouts and Income Inequality

As congressional lawmakers debate whether America’s automakers deserve an emergency cash infusion, a central point of contention has been the relationship between the powerful autoworkers union and Detroit’s failed business model. In a sentence: Many Republicans argue that the platinum pension and health-care benefits enjoyed by workers have made the Big Three unable to compete with foreign companies, who aren’t burdened with the same expenses.

The thinking is that if the union isn’t willing to cede some of these benefits as part of a larger bailout strategy, then Republicans will be unlikely to support it.

But Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, voiced concerns yesterday about a plan that would cut workers’ incomes.

“The union to its credit did just renegotiate the contract and new workers are going to take less,” Frank told CNN. “But frankly, I think there’s already been too much income inequality in this country to give them a tool to start undercutting what people already have.”

United Auto Workers President Ron Gettelfinger has wondered why critics of a Detroit bailout didn’t ask similar concessions from workers of bailed-out Wall Street firms, according to reports.

“Let’s go to AIG, Bear Stearns, active and retired workers: Did anybody go in and ask them to give back wages and benefit levels?” Gettelfinger said on WDIV-TV in Detroit. “What about the bond traders? Did anybody ask them? What about the cleaners in the building? Why would the UAW be any different?”

Democrats hope to take up legislation next month to help Detroit survive the downturn. If one side doesn’t give on the workers’ pay issue, however, it won’t likely move very far.