President Obama said that “[i]f we had taken your advice, Governor Romney, about our auto industry, we’d be buying our cars from China instead of selling cars to China.” In other words, if GM and Chrysler were allowed to go through orderly bankruptcy instead of getting a government bailout, President Obama claims they would have shuttered their doors. The president (a teacher of mine at the University of Chicago Law School) surely knows better. His claims are the height of audacity in an attempt to defend a failed policy that gave staggering handouts to major political contributors.
Chapter 11 bankruptcy is not the end of companies; it is an opportunity for a fresh start. Just ask Macy’s, 7-Eleven, and just about every major American airline in the country, all of which have gone through bankruptcy not to close their doors, but to come out more competitive.
As Andrew Grossman argues, what the Obama administration engaged in was failed economics — redistributing over $25 billion in assets to the UAW (which, coincidentally, I’m sure, gave 99 percent of its PAC funds to Democrats in 2008), while avoiding the kind of reforms that will make the automakers viable in the long term. The administration’s plan locked in unviable and uncompetitive wage and pension structures and the continuation of status quo mismanagement, all but guaranteeing that the companies will be facing similar economic dilemmas in the future, as their balance sheets demand reckoning yet again. Reinforming uncompetitive policies is not good for the American auto industry or American workers, even if such action may satisfy the short-term interests of campaign-contribution cronies. But the suggestion that refusing to bail out the auto industry (or, more accurately, the UAW) would have resulted in the death of GM and Chrysler, or the loss of more than a million jobs, or Americans buying cars from China rather than exporting cars to China, is simply false.
— Robert Alt is a contributor to National Review Online, and is the President of The Buckeye Institute for Public Policy Solutions.