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Bankruptcy Before Bailouts
Sen. Jim DeMint shares his thoughts on the auto bailout.


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The House passed a $14-billion, stopgap bailout of the automotive industry on Wednesday night. But in the Senate, Republicans have the votes to prevent it. And despite urging from the exiting Bush administration, they appear poised to do so.

This is big. Normally, lame-duck congresses concern themselves with far less consequential matters. The addition of seven or eight more Democrats in the next Congress may come weeks too late to prevent the bankruptcy (or, in the worst case, failure) of General Motors.

In the hours leading up to the critical votes, NRO spoke with Sen. Jim DeMint (R., S.C.), a staunch opponent of the bailout.

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NRO:
 First we heard that we needed to bail out the banks, and then we were told we needed to bail out the auto industry. What is the case against this?

SEN. JIM DEMINT:  We don’t want any of these auto companies to fail. And they won’t fail unless they completely ignore their responsibilities and wait for the government to bail them out instead of doing what they need to do — what they should have done a while back. GM had its best sales year ever in 2007. It sold over 9 million cars around the world — the same number as Toyota. But Toyota made $20 billion, and GM lost $40 billion. Their viability is not going to change if the cost structure is such that they cannot succeed. Until they restructure, we’d just be throwing good money after bad to prop them up for a few months.

Government should not be in the auto industry. We’ve set up laws to deal with companies that are financially strapped, and we’ve got bankruptcy protection under Chapter 11, which would allow them to restructure their debt and their union contracts under the authority of a bankruptcy judge, who could help them make the hard decisions that would create a sustainable business.

We’ve got those laws in place. For us to come in arbitrarily and make up new laws based on one situation sets a precedent for us to do it in other places. I lived in the South and saw the textile industry, which was our major industry, destroyed without any government help. And there are people all over the country right now losing their jobs and their health insurance as the economy falls. The federal government can’t save everyone.

Because the auto industry is so big, they’re saying we have to change our laws and do something special. But the government shouldn’t do it. And the fact is, they can’t do it. We can’t even run what we have to do now; the idea that we’re going to have a “car czar” who is going to help run the auto industry is so ridiculous that it’s hard to believe people are taking it seriously. We need to let the market work through it, let our laws work, and if the companies that own Chrysler and others won’t invest in them, the American taxpayer shouldn’t, either.

NRO:  Can the Big Three survive if Senate Republicans stop this now, as it appears you will?

DEMINT:  We’ve been told that GM cannot make it until Christmas. I hope they’ve been doing their homework and they’ve made preparations for Chapter 11 bankruptcy. If they haven’t, it’s going to go right up to the wall and there’s going to be a disruption. There should not be a disruption in production if there’s any kind of management ability there now.

Americans have come to know that airlines — and a lot of other companies — have gone through the bankruptcy process and come out the other side. I think frankly they’d have more confidence buying a General Motors product if they knew they were going through a bankruptcy process than if they’re being propped up by the federal government. . . . These companies are businesses. They are not government agencies.



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