Probably the most devastating critique you’ll read of Mitt Romney’s claim that “the course I recommended was eventually followed” on the GM/Chrysler bailout is this from the Economist because they agreed with him at the time:
As with much of Mr Romney’s excessive rhetoric, there is some truth to this statement. Following the bail-outs, the president eventually forced Chrysler and GM into bankruptcy, a step Mr Romney thought should occur naturally. And the government oversaw painful restructurings at both companies, which were largely in line with Mr Romney’s broad suggestions. But the course Mr Romney recommended in 2008 began with the government stepping back, and it is unlikely things would’ve turned out so well had this happened.
Free-marketeers that we are, The Economist agreed with Mr Romney at the time. But we later apologised for that position. “Had the government not stepped in, GM might have restructured under normal bankruptcy procedures, without putting public money at risk”, we said. But “given the panic that gripped private purse-strings…it is more likely that GM would have been liquidated, sending a cascade of destruction through the supply chain on which its rivals, too, depended.” Even Ford, which avoided bankruptcy, feared the industry would collapse if GM went down. At the time that seemed like a real possibility. The credit markets were bone-dry, making the privately financed bankruptcy that Mr Romney favoured improbable. He conveniently ignores this bit of history in claiming to have been right all along.
Opposition to the bailout was driven, in part, by the recognition that nationalization of an industrial enterprise is an open invitation to mismanagement and bad public policy. You could easily imagine a scenario in which the Obama administration made its partisan political objectives a key management priority at Government Motors. Alternatively, you could easily imagine a scenario in which Obama administration trade policy became dominated by the narrow interests of Government Motors rather than the broad interests of the American public. There’s a good reason why sensible people don’t normally recommend that the government own manufacturing companies. But these bad things didn’t happen, and given the total lack of private financing for anything at the time the alternative was liquidation rather than reorganization. I think it’s very understandable that Obama’s political foes were not prepared at the time to simply assume that the administration was handle a post-nationalization auto industry in a responsible way. But the fact of the matter is that they did handle it in a responsible way and the skeptics were largely mistaken. If you want to argue that as a point of principle liquidation is still the better alternative, then have at it. But Romney’s not owning up to the real implications of his views.
