13 April 2012

The Bankruptcy of OIP Derangement Syndrome

In mid-November 2008, Mitt Romney, already angling to become this year’s Republican presidential nominee, published an essay in the New York Times that got the headline “Let Detroit Go Bankrupt.” It concluded:
The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.
Disregarding Romney’s advice, the Bush-Cheney administration worked out an arrangement the next month for General Motors and Chrysler to receive $17.4 billion in early 2009. This was on top of a $25 billion loan earlier that fall. President George W. Bush stated that “allowing the U.S. auto industry to collapse is not a responsible course of action.” According to Romney’s essay, those actions meant “you can kiss the American automotive industry goodbye.”

Choosing not to give up so easily, in February 2009 President Barack Obama’s administration formed the Presidential Task Force on the Auto Industry to manage the ongoing crisis in the industry (which also affected other countries). Eventually combined US and Canadian government loans to General Motors and Chrysler totaled $85 billion as the government steered them into Chapter 11 bankruptcy by June.

As Romney acknowledged when he revisited the subject of his editorial last month (using some of the same anecdotes and language), that was the “managed bankruptcy” he asked for. He had written that “new labor agreements” must reduce payroll costs and retiree benefits. There were indeed new contracts with big layoffs, lower pay, and reduced benefits. Romney had said that the management of the companies be replaced. The US government actually forced out the head of GM.

By the time this presidential campaign began, Chrysler had repaid all its loans and GM was once again the biggest car company in the world. Economists agreed that the US government’s actions had preserved thousands of jobs in the automotive industry, not just those companies.

But that left Romney in a quandary. One of the dictates of OIP Derangement Syndrome is that nothing President Obama supports can be good, so to please his party’s base Romney had to find reasons to complain.

He began by ignoring the actions of the Bush-Cheney administration—the actual steps he had opposed back in November 2008. Then he and his staff came up with the argument that the Obama administration had put too much taxpayer money at risk—even though the loans it extended have all been paid back with interest, making them a successful investment.

Back in 2008, Romney wrote, “The new management must work with labor leaders to see that the enmity between labor and management comes to an end.” But in 2012 he complained bitterly that unions now held a big stake in the reorganized companies. As phrases like “the UAWs' union-boss-controlled trust fund” make clear, Romney promoted more enmity between labor and management.

In short, the only major thing consistent about Romney’s two essays on the auto industry, three years apart, was that he was still born in Detroit.

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