McConnell puts Bush in a tight spot

Senate Majority Leader Mitch McConnell’s (Ky.) opposition to a bailout of U.S. automakers has put pressure on President Bush to corral Senate Republicans at a time when his influence has reached its lowest point.

Several Senate Republicans said McConnell’s opposition to the $14 billion House-passed auto bill hurt its chances of passage tremendously. They said that while Bush is due to move back to Texas in just over a month, McConnell is poised to become his party’s top leader.

{mosads} Sen. Carl Levin, the Democrat from Michigan who is deeply involved in negotiations on the automakers’ bailout, said that McConnell’s statement of opposition was a painful blow and that now it’s up to Bush to save the legislation.

“It hurts but it doesn’t mean it’s necessarily the end,” said Levin. “The president will have to weigh in personally with Republicans this afternoon.”

Levin said that Bush would have to call up wavering GOP senators individually to save the bill. 

White House spokeswoman Dana Perino declined to tell reporters which senators Bush is targeting, but said he is making the case that legislation to be taken up in the Senate “is the most effective and reasonable approach” to helping the ailing domestic auto industry.

Perino said there “is a chance” the measure will pass.

The stalemate poses an interesting test of Bush’s and McConnell’s respective clout in the party. While Bush remains the GOP’s titular leader, many lawmakers see the mantle of power switching to McConnell, who as Senate GOP leader will head the last line of defense against next year’s Democratic agenda.

“This White House is moving on and a lot of Republican senators are thinking beyond January,” said Sen. John Thune (R-S.D.).

“Certainly, Sen. McConnell and the Senate is going to be the last line of defense for a lot of the stuff Democrats want to do.”

Senators spent much of Thursday afternoon negotiating an alternative version of the bailout that could muster enough Republican support. Several GOP senators said the House version would not pass the chamber.

Alaska Sen. Lisa Murkowski (R) said McConnell’s opposition made it very difficult to pass a bill that had little Republican support even before McConnell made his position public during a Thursday morning floor statement.

Sen. Chuck Grassley (Iowa), the senior Republican on the powerful Senate Finance Committee, called McConnell’s action “pretty important.”

“He’s going to be a leading spokesman of the new direction of the party,” said Grassley of McConnell’s role within the GOP once Bush leaves office.

The Republican leader’s opposition to a bill crafted by Democrats and White House officials underscores the rift that has opened up between Senate Republicans and the Bush administration over how to shore up the faltering economy.      

Republicans’ confidence in White House officials was shaken when Treasury Secretary Henry Paulson acknowledged that he would use the authority of the $700 billion Wall Street bailout in a substantially different way than he first proposed to Congress.

Congress gave Paulson $700 billion in rescue authority in October after he told lawmakers the bulk of the funds would be used to buy toxic assets. But shortly afterward, Paulson changed course and announced the government would focus instead on making direct injections of capital to banks because the asset-purchase program proved to be overly complex.  

“There’s already been a lot of conflict between the White House and Senate Republicans on this,” said Thune in reference to the bailout strategy the administration has adopted for the nation’s three biggest automakers. “There’s not much appetite for Senate Republicans to go down that path right now given what everyone thinks is a weak proposal that is light on reform and heavy on taxpayer exposure.”

McConnell’s stance has dismayed lobbyists for U.S. automakers who had hoped the support of Bush and GOP leaders would sway wavering Republican senators to support the bailout. They had their eye on Republican lawmakers such as Sens. Orrin Hatch and Bob Bennett of Utah, who tend to support their leaders.

Hatch, however, told The Hill shortly after McConnell’s statement that he was not satisfied with the House-passed bill and was working on alternative legislation.

Many Senate Republicans would like to see strict requirements imposed on the automakers that they think would enhance the long-term economic viability of the beleaguered industry. They fret that even if Congress approves billions in aid this month, automakers will return in another few months to ask for more.

McConnell summarized his colleagues’ view on the Senate floor.

“Its greatest single flaw is that it promises taxpayer money today for reforms that may or may not come tomorrow,” McConnell said.

“We would not be serving the American taxpayer well if we spent their hard-earned money without knowing with certainty their investment would result in stronger, leaner automobile companies that would not need additional taxpayer help just a few months or weeks down the road.”

McConnell said the legislation would be significantly improved if it were amended to impose mandatory requirements on automakers.

McConnell and other Republicans support a proposal offered by Sen. Bob Corker (R-Tenn.) that would require automakers who accepted federal aid to reduce two-thirds of their outstanding debt through an equity swap with bondholders.

Corker’s amendment would also require that U.S. automakers reduce their labor costs to match foreign competitors.

If Detroit’s Big Three failed to meet these conditions by a certain date, they would be forced to file for Chapter 11 bankruptcy protection.

Levin said that Democrats would review the language of Corker’s proposal but he added that mandating an equity swap by law to reduce debt was too intrusive.

One important question is how the nine retiring GOP senators will vote on the bailout.

Sen. Pete Domenici, the outgoing Republican senator from New Mexico, said he would vote for “something.” He predicted that Senate negotiators would craft alternative legislation that would attract broad support.