Mitt Romney is again slamming the White House for its handling of the auto bailout, calling it “crony capitalism on a grand scale” in an op-ed in The Detroit News. And once again, Democrats are responding that if Romney had been in charge, the auto industry would be dead and millions of jobs with it. Lost in all the infighting is this: Romney’s proposal, in some of the particulars, was not so different from what wound up happening.
If you’re confused, you should be.
As is often the case, Romney is in the tough position of trying to sell the same position to two very different audiences, the Republican base and the general electorate, which means his answers can be pretty confusing in order to satisfy both. And because Democrats are trying as hard as possible to contrast President Obama’s now successful plan with Romney’s, their own messaging deliberately downplays any similarities.
Back in late 2008, when Romney was still considered a surefire bet to run for president again, conservatives were whipped into a frenzy over the Bush administration’s efforts to use TARP money to keep the auto industry afloat, which they saw as a socialist takeover. Playing to this base, Romney wrote an op-ed for the New York Times instead calling for bankruptcy.
“If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye,” he wrote. And so it continued, for ten paragraphs, demanding that the companies be forced to go through bankruptcy and emerge only after extracting major concessions from all stakeholders and producing a plan to return to profitability with lower overhead.
But here’s the thing: there was no way the auto companies could get the necessary loans to keep them afloat during bankruptcy from the private sector. That’s because the financial industry was barely hanging on to life itself. So Romney recommended at the very bottom that the federal government step in with the money, offering “guarantees for post-bankruptcy financing and [assuring] car buyers that their warranties are not at risk.”
While being deliberately vague about what kind of help the government would need to give, he did suggest in further interviews that the real issue was that the car companies and their workers needed to accept tough terms and go through bankruptcy in order to receive government help.
“You’re going to have to stand up to the UAW and to management and say, these are the changes that have to happen, and if you do these things, we’ll give you the financial relief you need, and if you dont, were not going to help you at all,” he told CNN in January 2009.
Then a funny thing happened. The new Obama administration came in and, rather than continuing to write a “bailout check,” did just what Romney had recommended. GM and Chrysler were forced to go through a managed bankruptcy in which the government provided the loans and guarantees needed to keep them afloat. In exchange, workers and bondholders had to make concessions.
So what did Romney make of it? Well he was kind of all over the map. When news broke the Obama administration would demand tough action in exchange for further funding, Romney actually praised the president’s “backbone” at a Republican fundraiser in April 2009 and said his party shouldn’t hesitate to credit him when he’s right (it was a weird time for Republicans). And when the actual announcement of GM’s bankruptcy came, he said in a speech that it was the “a course I recommended a number of months ago” adding that, while he agreed with the particulars, his chief objection was that it wasn’t undertaken sooner.
“At that point, the government could have helped with warranty guarantees and so forth, with debtor-in-possession financing, to get the company back on its feet,” he told FOX News. “We wouldn’t have closed the business down or liquidated.”
In interviews, he said that more of the concessions should have come from the unions (who actually accepted a number of wage and benefit cuts in the deal) and less from bondholders. But he again insisted that he wouldn’t have let the companies collapse, while dancing around the issue of how directly the federal government should have supported them.
But the Tea Party saw little distinction between financing a bankruptcy proceeding with taxpayer dollars, as both Romney and Obama advocated, and a socialist corruption of private industry. Newt Gingrich, for example wrote it was a “government takeover” backed by the “secular-socialist machine.” This meme became a key part of the anti-Obama right.
So Romney’s now in a tough spot. On the one hand, Obama pretty much followed the basics of his own 2008 proposal. On the other hand, the Tea Party doesn’t think this route was an alternative to bailouts, but was instead the ultimate bailout. So his new tack — in addition to insisting everyone should have taken his advice sooner — is to accuse Obama of “crony capitalism” by letting the terms of the restructuring result in the auto workers’ union (UAW) controlling a minority share of the companies.
“Instead of doing the right thing and standing up to union bosses, Obama rewarded them,” he writes in his latest op-ed. “A labor union that had contributed millions to Democrats and his election campaign was granted an ownership share of Chrysler and a major stake in GM, two flagships of the industry.”
This plays to the “socialist takeover” crowd without actually endorsing their original position of just letting the free market take care of the whole thing and wreck the industry in the process. But it’s also a rewrite of history. Romney’s op-ed suggests Obama took over the auto companies in order to hand them to his union buddies. In fact, the UAW’s stake in the companies was a concession. GM and Chrysler owed huge amounts of cash to the auto-worker’s health care retirement fund at the time, which was an independent entity run created to help save the companies the costs. As a concession, the UAW agreed to instead allow the industry to pay into the fund with equity — a risky move given their tenuous financial position.
“Romney makes it seem like the unions were just given this stake in the company,” labor historian Nelson N. Lichtenstein and author of a book on former UAW head Walter Reuther, told TPM. “But the reason it was there was in order to offload health care costs with company stock.”
In the heat of a campaign, however, what comes out is a mess. And Democrats are all too happy to make hay of Romney’s ambiguous position by insisting he would have destroyed the entire industry if he had his way.
“He opposed the rescue package for the automakers,” former Gov. Jennifer Granholm (D) told reporters on Tuesday. “He opposed it with no regard for the families who were going to go bankrupt as a result, for the 1.4 million jobs they would lose, for the homes they would lose, for the communities that would be devastated if we abandoned the American auto industry.”
It’s the curious case of a complicated mess which it currently suits no one clear up.
“What Obama did is what Romney said would be a good idea,” Edward Altman, a professor of finance at NYU-Stern who testified before Congress during the auto crisis, told TPM.
Note: This story has been updated.
