A COMEBACK STORY AMERICANS (EVEN THE GOP) SHOULD LOVE…. The U.S. Chamber of Commerce gets a lot of things wrong, for a lot of wrong reasons. But of particular interest today was Steven Pearlstein’s sweeping rejection of Chamber politics, most notably, how wrong it and its president, Tom Donahue, were about President Obama’s rescue of the U.S. auto industry.
Perhaps none was more controversial than the decision to rescue Chrysler and General Motors, using $86 billion in taxpayer funds and an expedited bankruptcy process that wiped out shareholders, brought in new executives and directors, forced creditors to take a financial haircut, closed dealerships and factories and imposed painful cuts in wages and benefits on unionized workers. It was an extraordinary and heavy-handed government intervention into the market economy that left the Treasury owning a majority of both companies. As one participant recalls, public opinion was divided among those who believed that the companies should have been allowed to die, those who believed they would never survive bankruptcy and those who believed the government would inevitably screw things up. Among the most vocal skeptics: the Chamber’s Donohue.
A year later, the auto bailout is an unqualified success. The government used its leverage to force the companies to make the painful changes they should have made years before, and then backed off and let the companies run themselves without any noticeable interference.
The results, which President Obama will tout on a visit to Michigan on Friday: For the first time since 2004, GM and Chrysler, along with Ford, all reported operating profits in their U.S. businesses last quarter. The domestic auto industry added 55,000 jobs last year, ending a decade-long string of declines. Auto sector exports are up 57 percent so far this year and, thanks largely to new government regulations, the industry is moving quickly to introduce more fuel-efficient vehicles. Most surprising of all, GM and Chrysler have already repaid more than $8 billion in government loans, while GM is preparing for an initial stock offering later this year that would allow the government to recoup most, if not all, of its investment.
There was a time, not long ago, when real business leaders encouraged these kind of public-private partnerships.
It’s worth noting that the administration’s auto industry bailout not only worked, it exceeded expectations. Just as importantly, it fit comfortably into an existing model — every time the federal government bails out key national industries, the results are encouraging.
A year ago, the Monthly‘s Phillip Longman argued that “any honest reading of history suggests that the federal government has quite an impressive record of rescuing institutions considered too big to fail.” Quite right. When the government bailed out Lockheed in 1971, the company thrived and taxpayers profited. The government bailed out Chrysler in 1980, and saw similar results. The government bailed out the railroad industry, and saw it flourish.
In each case, the government spent lots of taxpayer money, used bureaucrats to engineer the revival of an industry, recouped the money, and produced a success story. Conservatives howled in every instance, but as is usually the case, their complaints and dire predictions were wrong.
After Obama intervened to rescue auto manufacturers a year ago, the right insisted it was an example of his purported desire to be a communist dictator. A year later, his efforts look pretty smart, and his detractors’ apoplexy looks pretty foolish.
For that matter, the conservative theme of the year is that government spending is the single most odious phenomenon in the known universe. And yet, it was government spending that prevented a depression, and it was government spending that rescued the American auto industry.
Maybe the right can pick something else to complain about? This talking point isn’t working out well for them.
When the president takes a victory lap (so to speak) at a GM plant this morning, it will be well deserved. We can all be very thankful Obama didn’t listen to conservatives, that there wasn’t a conservative in the Oval Office, and that this industry was spared a looming catastrophe.