Bailout politics

by The City Wire staff ([email protected]) 86 views 

All things considered, Republican presidential frontrunner and former Massachusetts Gov. Mitt Romney will likely win the Feb. 28 Michigan primary, thereby creating a sizeable gulf between himself and his competitors. He claims Michigan as his home state, has much support there, and is certainly the best financed conservative contender remaining.

But should Romney lose to former Pennsylvania Sen. Rick Santorum, thus catapulting the GOP nominating process into minor chaos, there are those who will blame his ongoing disapproval of the federal government’s rescue of that state’s auto industry.

The subject of bailouts is a touchy one in these deficit-sensitive times. For some, Uncle Sam’s decision to salvage Detroit was an enormous waste of taxpayer dollars, fraudulent, and maybe even socialist in nature. And yet odds are that most factory employees, like so many communities that indirectly benefited from the federal bailout program, strongly disagree with those sentiments.

Like anything, it depends who you ask.

A Gallup poll conducted Feb. 20-21 reports that a bare majority of Americans, 51%, still disapprove of the very public salvation — endorsed by Presidents George W. Bush and Barack Obama, to the tune of approximately $80 billion — of General Motors and Chrysler. Meanwhile, a recent NBC News/Marist poll suggests that Michigan voters believe the auto bailout was a good idea, and prefer President Barack Obama to his four Republican challengers.

It’s tough to argue the auto bailout isn’t working. GM recently pointed to a record profit in 2011, and has announced that 47,500 union workers will receive $7,000 profit-sharing checks. The Detroit News reports that Chrysler and Fiat have repaid all but $1.3 billion of Chrysler’s $12.5 billion bailout. Meanwhile, taxpayers have made back $22 billion of the almost $50 billion lent to GM, with billions still to come via shares of company stock still owned by Washington.

The best part might be the thousands of jobs saved as a result of public intervention, certainly a big plus in the midst of a debilitating recession.

Romney’s stiff opposition is curious – given that he is a Michigan native, and since his father, a former Michigan governor, was himself an auto executive – but not difficult to understand. During the fall of 2008 citizens everywhere were left shaking their heads as the federal government budgeted $700 billion on a historic Wall Street bailout. Spending still more cash on what some saw as a moribund auto industry led to disappointment (if not outrage) across the nation – and you can bet Romney was thinking with the 2012 campaign already in mind when he started knocking it in a New York Times opinion piece.

In November 2008 he wrote: “If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye.” He also referred to its demise under those circumstances as being “virtually guaranteed.”

Romney continued: “Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course – the suicidal course of declining market share, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.”

In retrospect, Romney, his advisors, and most observers, could not have anticipated the auto industry rebounding quite so quickly. With the big three in improving shape, crippling union headaches in the past, smart designs selling well, and practical corporate management having replaced the stagnant thinking that drug those proud companies down, Detroit is on the mend.

Romney is thinking well beyond Michigan’s borders each time he pans the auto bailouts. He is well aware that millions of conservative voters across the country are by no means fans of any bailouts (corporate welfare, some call it) for any reason. In some ways, he is betting his entire campaign on this premise, since a Santorum victory in Michigan can only further confuse matters.

Still, Romney deserves points for not backing down. In an opinion piece published this month in the Detroit News, the former Massachusetts governor was at it again, complaining that the bailout was “crony capitalism, Obama-style.”

In theory, Romney could be quite right. In the alternate history currently unfolding in some parallel universe, a “managed bankruptcy” of GM and Chrysler could be winning benefits and side benefits that none of us could have imagined. No doubt solid thinking supports what Romney is saying.

In reality, though, Presidents Bush and Obama did not have time to test out various ideas when the nation’s auto industry struck its proverbial iceberg in the night. It was in desperate shape, and required almost immediate assistance. For better or worse, Uncle Sam wrote a couple hefty checks.

Was Detroit’s bailout a perfect solution? Not in the least, if only because taxpayers are highly unlikely to get every dime back. Still, this effort appears to be working – which must leave Michigan voters wondering why Romney backed the bank bailout (the Troubled Asset Relief Program, better known as TARP) but not the U.S. auto industry during its own moment of crisis.

Whether he squeaks by on primary night or finishes a close second to Santorum, it’s probably a question Romney hasn’t begun to answer for the last time.