How Romney Got the Bailout Wrong
In an interview in Ohio on Monday, Mitt Romney said he would “take a lot of credit” for the fact that the U.S. auto industry has rebounded. That’s a remarkable statement.
In fact, it’s an outrageous statement. When the auto manufacturers were bailed out in late 2008, Mitt Romney was out of government completely, giving speeches and raising money for his current presidential run. Romney’s only real role was to write an editorial in the New York Times titled “Let Detroit Go Bankrupt”, saying that if GM, Ford, and Chrysler were bailed out, “you can kiss the American automotive industry goodbye.”
That was obviously wrong. In the interview on Monday, Romney explained that he called for the auto manufacturers to go through a managed bankruptcy, which both Chrysler and GM eventually did in 2009. In The Detroit News earlier this year, Romney wrote that the actual bailout—agreed to by President Bush, but largely administered by Obama—was ”crony capitalism on a grand scale.” In other words, Romney argues that the auto manufacturers rebounded in spite of the bailout, only after President Obama followed his very general advice.
In fact, of course, Obama’s handling of the crisis worked out better than just about anyone expected. GM, Ford, and Chrysler are not only still around, but have once again become a bright spot for American manufacturing. The three companies have all returned to profitability, taking in $3.2 billion in the first quarter of this year, largely on the sales of the fuel-efficient light vehicles the Obama administration encouraged them to make. The Center for Automotive Research estimates that the federal government's action saved 1.4 million American jobs in 2009 and 2010.
In an editorial in February, The Detroit News—which otherwise endorsed Romney—wrote that while he was right to criticize certain parts of the way the bankruptcy was handled, GM and Chrysler couldn’t have raised enough cash to survive bankruptcy in 2008. With the credit markets crashing, there were simply no private investors willing to finance the auto industry. “On the key question of whether automakers could have managed themselves through a traditional bankruptcy without assistance from the government,” the Detroit News wrote, “Romney is wrong. The loans provided by Bush and then by Obama allowed the domestic auto industry to survive the darkest hour of its history, and return to thriving operations today."
Mitt Romney image from Gage Skidmore