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General Motors

As with so many Romney-related flaps, the one surrounding his observation that he could take credit for President Obama’s restructuring of General Motors and Chrysler has been confused and out of focus. Well, maybe not out of focus, but focused narrowly – and with all the superficiality that can be mustered in 24 short hours – on Romney’s unconscionable triumphalism at Obama’s expense.

The temptation is strong to just let this one go. But it’s actually a perfect example of where Romney is, um, challenged, and why my enthusiasm for him remains tepid. The short version of my point is that the president has no business restructuring auto companies and trying to guide them through “recovery.” He is not empowered by any part of the US Constitution to do this, and it’s a terrible, horrible, no-good, very bad idea in any case.

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If I want the services of someone who’s good at reorganizing auto companies, I’ll invest money in a private business. That’s not what we elect a president for. The president of the United States, our highest elected public official, needs to keep his paws off the management of private companies. When he doesn’t, the window is flung open to cronyism, graft, bad business decisions, and distorted, uneconomic incentives.

The US auto industry keeps snuffling up to the public trough – has been doing so for 30 years now – because it is required by the government to operate under unprofitable conditions. It is tended by the federal government as an interest of politically connected constituencies. It has been artificially constrained and incentivized for so many years now that to say it has “recovered” is a wholly political statement, bearing no useful relation to the Big Three’s actual profit-loss or earnings picture, stock price, or any other measure of business health.

In fact, Chrysler’s much-touted “payback” of its taxpayer bailout turned out to involve a shell game in which the US Department of Energy is lending Fiat $3.5 billion so that Fiat can pay off its US Treasury loan and pump Chrysler with cash by exercising an option to buy Chrysler stock. The Washington Times describes the transaction as follows:

So, to recap, the Obama Energy Department is loaning a foreign car company $3.5 billion so that it can pay the Treasury Department $7.6 billion even though American taxpayers spent $13 billion to save an American car company that is currently only worth $5 billion.

That’s government management in a nutshell. Romney can’t manage the auto industry better – not from the Oval Office. No one can. If he wants to run auto companies, he needs to see if Ford, GM, or Chrysler is hiring. If he wants to guide them through bankruptcy, he can become a federal regulator or get himself appointed as a bankruptcy judge – and in either case, follow the law on the matter as written by Congress, rather than getting creative and exercising powers the Constitution doesn’t give him.

When Romney speaks of the US auto industry recovering, he is speaking in the language of big, dirigiste government, accepting at face value the short-term effect of a bailout process that has served mainly to perpetuate unprofitable but politically entrenched conditions. It guarantees that more subsidies will be needed down the road. The taxpayer had to be billed for getting the Chevy Volt built and maintaining the political sway of the UAW, because those are special-interest mandates that no one would pay for voluntarily. The bailout under Obama has simply been a pretext for expanding the unprofitable conditions that make the US auto industry unable to truly “recover,” in the sense of not continuing to need bailouts.

A president who doesn’t see this is hard to get excited about. There is no point in claiming that Romney does see it, when he never speaks as if he does. About the auto industry bailout, what he ought to say is that it was improperly handled by Obama through executive actions that must not serve as precedents; that it hasn’t turned out to be a good deal for the taxpayer; and that due-process bankruptcy without presidential intervention would have been the right way to proceed and should have been defaulted too.

Romney’s utterances on this topic indicate that he is a big-government politician.  Not only is he not offended by the bailout, he’s not offended by the Obama administration’s dirigiste approach to restructuring GM and Chrysler.  He’s taking credit for it.

In the sense that he would not engage in Chicago-style cronyism, I think Romney would be better than Obama.  (There are a number of other ways in which Romney comes out on the long end of the personal- and professional-integrity comparison.)  But in terms of improper autonomy in the executive, and structural opportunities for cronyism, he would probably either set or confirm some very undesirable precedents while in office.  He needs an active, curmudgeonly Congress to thwart him, early and often.

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