US Auto Bailout: Mitt Romney (and the Rest of the GOP): Let Detroit Go Bankrupt!

Nowhere are Mitt Romney or any of the other Republican candidates further for reality than in their opposition to the 2008/9 bailout of the US Auto Industry. I worked in that industry for 32 years (and yes had a stake in the bail out too) and what has happened has been a major success story. But if you are ideologically blinkered, if you don’t understand economics 101, have learned nothing from the Great Depression of the 1930s, if you are in denial about the nature of the 2008 financial crisis, and think free markets work just fine, then you are in a delusional universe, and I would not vote for you under any circumstances. And of course, Rick Santorum, Ron Paul and Newt Gingrich, to be fair to Mitt Romney, are no less delusional:

The New York Times Editorial today, says it well:

A Million Jobs

The American economy was terrifyingly close to the brink in 2008 and 2009, and the impending collapse of General Motors and Chrysler threatened to be the final push. When the companies begged the federal government to save them from financial catastrophe, President George W. Bush and later President Obama ignored strong Republican objections, saving a signature American industry and the whole country from an even deeper crash.

Four years later, there are 1.45 million people who are working as a direct result of the $80 billion bailout, according to the nonpartisan Center for Automotive Research, both at the carmakers and associated businesses downstream in the economy. Michigan’s unemployment level is at its lowest level in three years. G.M. is again the world’s biggest automaker, and both companies are reporting substantial profits.

And yet Mitt Romney, along with the other Republican presidential candidates, has spent the days before the Michigan primary denouncing the bailout that has rescued his native state. Mr. Romney has been especially vociferous in his insistence that he would have allowed the carmakers to go bankrupt, and said he believes they could somehow have clawed their way back to profitability without a dollar of federal assistance.

“The president tells us that without his intervention things in Detroit would be worse,” he wrote recently in The Detroit News. “I believe that without his intervention things there would be better.”

This critique is detached from reality. Steven Rattner, who was Mr. Obama’s lead auto adviser, wrote in The Times on Friday that not a single dollar of private capital could be found to prop up the companies, despite desperate efforts, and he challenged Mr. Romney to name one investor who might differ. The Detroit News, which otherwiseenthusiastically endorsed Mr. Romney in the primary, said he was dead wrong about the bailout. Only the government was in a position to save the auto industry from “the darkest hour of its history,” the newspaper’s editorial board wrote.

Mr. Romney slid into this quicksand in 2008 with an Op-Ed essay in The Times arguing against government help for Detroit. It included the memorable prediction that if the bailout were granted, “you can kiss the American automotive industry goodbye.” Having been criticized for his inconsistency on so many other issues, he apparently feels he cannot back away from this one — no matter that his argument has proved so wrong.

These days he has added a new trope: union-bashing. He is now calling the bailout “crony capitalism” because it was designed to save union jobs. He charges that Mr. Obama used the Treasury to help his political allies. “While a lot of workers and investors got the short end of the stick, Obama’s union allies — and his major campaign contributors — reaped reward upon reward, all on the taxpayer’s dime,” he wrote earlier this month.

High labor costs were undeniably part of Detroit’s problems. But his claim that the government did not do nearly enough to drive those costs down in the bailout is just flat-out wrong. Labor made substantial concessions.

After earlier agreeing to let newly hired workers make half the wage of current employees, unions consented in the bailout deal to give up cost-of-living increases, dental coverage, and some vacation benefits and work rules. Unions also took the gamble of accepting a company stock fund to pay for their health benefits, instead of cash.

Mr. Romney is oblivious to those givebacks, expressing anger that a health care fund for nearly half a million United Automobile Workers retirees (“union-boss controlled”) got a higher priority in the bailout than lenders to Chrysler.

In a speech on Friday, he continued to insist that the U.A.W. and federal fuel-economy standards were somehow imperiling the future of the industry, even though neither seems to have halted the carmakers’ current success.

Neither Mr. Romney nor any of the Republican candidates are able to admit that sometimes only the government can rescue a major sector of the economy. Any autoworker, however, can explain it to them.

The deluded candidates: the Four Republican Horsemen of the Apocalypse: Fundy, Sleazy, Shallow and Nutty

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About creativeconflictwisdom

I spent 32 years in a Fortune Five company working on conflict: organizational, labor relations and senior management. I have consulted in a dozen different business sectors and the US Military. I work with a local environmental non profit. I have written a book on the neuroscience of conflict, and its implications for conflict handling called Creative Conflict Wisdom (forthcoming).
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