Conservatives Wrong on Auto Bailout?
Steve Benen argues that the bailout of the American automobile industry has produced excellent results, proving that conservatives who railed against the measure were wrong.
He cites Steven Rattner‘s WaPo op-ed, which notes that GM and Chrysler are both reporting modest profits, are selling cars for higher prices, and are running more efficient operations. Indeed, it’s even conceivable that we’ll not only see all the money that the Obama administration put into the companies paid back but realize a small profit.
Benen also cites a year-old Washington Monthly piece by Phillip Longman showing that government bailouts quite frequently achieve the desired result of saving major companies on the brink of bankrupcy.
So, what does this mean for conservative critics? Well, for those arguing that government couldn’t successfully revive the companies — at least in the short term — it means they were wrong. But that’s not what most of us were arguing.
Indeed, in a December 2008 post titled “Public Opposes Auto Bailout,” I frankly admitted that we were making this up as we went along and that none of us had a clue what the specific effects of any of the policy options on the table would be.
(And note that most of the OTB gang was in opposition to the bailouts in the fall of 2008 when President Bush was trying to get them through Congress and then did so via an end-around when Congress refused to pass it. So, our objection is ideological, not partisan or political.)
In my November 2008 post “Why Not Bail Out GM?” I argued that GM didn’t deserve to survive after decades of bad decisions. And I argued, rather obliquely perhaps, that using taxpayer money to reward GM’s bad behavior would come at the direct expense of those making cars in America the right way.
In December, Steve Verdon followed up with “Why the Bailouts are a Bad Idea.” It’s rather technical (he’s an economist by training) but the bottom line argument is one of moral hazard. That is, bailouts beget more bailouts and, more importantly, encourage foolish risk-taking.
None of those arguments have been disproved by the unfolding of facts.
And none of us were in favor of doing nothing, strictly speaking. That is, the expectation was that the natural course of events would have been for GM and Chrysler to go into bankruptcy — which would have shed that bad debt that Rattner cites as crucial to the success of the government plan — and have the best parts sold to the highest bidder. Whether that would have been “better” from the standpoint of the profit and loss sheets is unknowable.
It’s worth noting, too, that Rattner’s test of the success of the plan is an odd one. While it’s great that GM is making a “profit,” I’m not sure why we should care. The reason we wanted to save GM was to save the associated jobs. But a huge number of those — at the production facilities, dealerships, and associated industries — have been lost forever in the restructuring.