Politics, Economics and Automobiles

mitt

Let Detroit Go Bankrupt

That was the headline of Mitt Romney’s 2008 New York Times article describing his views on the then-troubled American auto industry. “If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye.”

Romney spoke of an industry that has rebounded as of late thanks to that 2009 government bailout. A bailout that allowed General Motors this week to post record profits, pay large bonuses to its factory workers and edge out Toyota to regain the title of the world’s biggest auto maker.

With Michigan’s presidential primary fast approaching on Feb. 28, Romney chose to double down on his stance that the bailout was bad for Detroit. This despite the fact in 2008, Mitt Romney (forever the flip-flopper) campaigned for president in Michigan decrying Washington’s disregard for lost auto industry jobs.

The bailout, as expensive as it was at the time ($81 Billion), helped to save over one million middle class jobs at a time when the economy was tanking hard. It also reorganized and spared at least two (possibly three) huge corporations from bankruptcy, the same companies who have repaid most of what they received and are now posting profits again. Let’s also not forget the people of those million plus jobs continue to pay taxes instead of receiving unemployment or welfare.

Romney (along with Santorum and most of the right wing) has said that GM and Chrysler should have gone through a “traditional” Chapter 11 bankruptcy. Economists at the time, however, explained that frozen credit markets thanks to the financial crisis made private financing for a traditional bankruptcy impossible. Chapter 11 would have rapidly turned into chapter 7, resulting in a mass liquidation of the auto industries’ assets and permanent shutdown.

The government-led reorganization of GM and Chrysler LLC led to a government stake in GM that now stands at a 26.5 percent share. Romney this past week called on the government to sell its remaining shares saying “the shares need to be sold in a responsible fashion and the proceeds turned over to the nation’s taxpayers.” What Romney neglected to tell people was that if the shares were to be sold tomorrow, it would result in a $14 billion shortfall to the taxpayer. The value of GM stock has only begun to rise again.

Mitt Romney’s critical stance on the automotive bailout will not be reflected in the Michigan Primary results, not much anyway. Romney, Santorum, Gingrich and especially Ron Paul believe in laissez-faire capitalism and would all have been happy to sit back and watch the auto industry collapse. Therefore it is obvious that the primary will not be decided on this issue.

Conversely, we have the General Election in November. Conservatives look at Obama’s bailout as pandering to his union base (the UAW actually gave up thousands of jobs and billions in benefits) while Democrats and economists have called it simple common sense or at least a necessary evil.

Whether Romney becomes the nominee or it goes to one of his party rivals, Republicans are shooting themselves in the foot with their ideology of anti-government involvement in a swing state that has clearly benefited from the now-successful government bailouts. Unless Barack Obama commits some kind of political suicide, I believe Michigan will be painted blue come November.

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