What’s good for GM …
The race for the GOP presidential nomination is turning out to be more closely contested than many had foreseen. That makes Michigan’s Feb. 28 primary an important way station.
Michigan is Mitt Romney’s home state. His father was a popular two-term governor there in the 1960s.
Yet Michigan is far from a gimme for Mitt in 2012, where polls currently show him trailing Rick Santorum. Why? Because the Obama administration’s bailout of GM and Chrysler was popular in Michigan, and Mr. Romney opposed that bailout as an overreach of federal authority.
Mr. Romney is right — and he deserves considerable credit for sticking by his guns on this issue.
In a Tuesday op-ed in the Detroit News, Mr. Romney described Steven Rattner, who headed the government’s auto task force, as a “politically connected and ethically challenged Obama-campaign contributor” whose role in managing the bailout was part of “crony capitalism on a grand scale.” Furthermore, Chrysler’s secured creditors got “short shrift” when, under Obama’s plan, the United Auto Workers’ trust fund received a 55 percent stake in the Michigan-based company, Mr. Romney writes.
Fans of the administration’s actions chortle that events have proved them right — Chrysler and GM survived.
Yet that erects a false dichotomy, implying that had the administration not stepped in to prevent the automakers from going through bankruptcies, tumbleweeds would now blow through the parking lots of abandoned Michigan auto plants. In fact, someone was going to end up operating those plants, regardless. The real risk in traditional bankruptcies for Chrysler and GM was that they might have shed their burdensome union contracts. In fact, the unions are the real constituents Mr. Obama stepped in to protect.
And has the scheme really been such a success? Chrysler is now majority-owned by Italy’s Fiat, which didn’t have to put up a single euro to benefit from that massive giveaway. And Shikha Dalmia, a senior analyst at the Reason Foundation, warned in a column for thedaily.com last week that, all in all, taxpayers are still facing $20 billion to $30 billion in losses. In addition, she notes. “The GM bailout has distorted the playing field so badly that its competitors are demanding their own handouts to even things out.”
The Obama administration is learning that a massive intervention into a major sector of the economy can bring a brief time of apparent triumph, after which they find themselves stuck in a morass, as all the negative repercussions that free-market advocates such as Mr. Romney warned them about begin to raise their heads.