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President Obama’s claim that some wanted to let the auto industry die

at 06:02 AM ET, 02/03/2012


(SAUL LOEB/AFP/GETTY IMAGES)

“It’s good to remember that the fact that there were some folks who were willing to let this industry die. Because of folks coming together, we are now back in a place where we can compete with any car company in the world.”

--President Obama, at the Washington Auto Show, Jan. 31, 2012

“On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen.”

--Obama, in the State of the Union address, Jan. 24, 2011

The apparently successful rescue of the auto industry is obviously going to play a central part in President Obama’s reelection narrative. Vice President Biden put it this week: “Osama bin Laden is dead and General Motors is alive.”

As our colleague Charles Lane pointed out recently, this effort has sometimes included what he called “an unfortunate, and remarkably ungracious, tendency to distort the record” of George W. Bush on the auto industry rescue. After all, Bush loaned billions of dollars to GM and Chrysler (with strings attached), in opposition to much of his party, so Obama was not confronted with an auto-industry collapse in his first days in office.

The president has also demonstrated a fondness for using rhetorical straw men in his speeches. So we wondered: Did anyone really say the auto industry should simply die?

The Facts

Many reporters have assumed that the president’s words were aimed at his likely GOP rival, former Massachusetts governor Mitt Romney, who famously (or infamously) penned an opinion article that was titled: “Let Detroit Go Bankrupt.” The basic thrust of the article was that the companies should go through a managed bankruptcy, mainly to shed labor costs, rather than just get a “bailout check.”

We gave Two Pinocchios to Romney for how, in retrospect, he has characterized his stance. But he certainly did not say that the industry should die. And, in the end, the Obama administration arranged for both GM and Chrysler to go through the bankruptcy process.

Interestingly, the White House did not provide any quotes from Romney when we asked for backup for the president’s claim. Apparently, reporters’ speculation about Obama’s intended target is wrong.

Instead, an administration official provided a seven-page document that highlighted 30 statements by Republican lawmakers criticizing both the Bush and Obama efforts to stabilize the auto industry. But virtually all of these comments were questions of tactics, such as complaints by Republicans that not enough pressure had been put on auto industry unions.

In fact, it is clear that many of the Republicans were pressing for an immediate auto industry bankruptcy in order to break the United Auto Workers. As we have mentioned, a credible case can be made that an auto industry bankruptcy likely would not have been possible in November or December of 2008 (when Romney and other Republicans pushed for it) because there was no bank financing available. In other words, a plain-vanilla bankruptcy proceeding may not have been a viable option.

But is this the same as saying that “we should let it die?”

One of the quotes supplied by the administration official was made by Sen. Bob Corker (R-Tenn.), who was central to crafting the conditions for the Bush loan. Corker said on March 31, 2009, that “Chrysler was toast.” But, according to the fascinating book by auto czar Steven Rattner, top administration officials had split 4-4 on whether it made sense to keep supporting Chrysler.

In fact, only days before Crocker made his statement, one of Obama’s top economic aides, Austan Goolsbee, made a direct appeal to Obama to let Chrysler die, on the grounds that the demise of Chrysler would enhance GM’s chances of survival. But Obama rejected his advice. (See pages 118-132 of Rattner’s book.)

Obama may have made the right call, but is it fair to criticize Republicans for echoing sentiments expressed within the administration? Rattner, in fact, credits the Bush administration for laying the groundwork for Obama’s intervention.

The closest thing we could find to a “let it die” comment was from Sen. Richard Shelby (R-Ala.), who on March 8, 2009, said: “You’ve got to say no sometimes. And if a company has a failed corporate model, they will continue to fail.” But he said this in the context of arguing that the Obama model gave too much power to the unions, which is clearly a philosophical objection.

The administration official also noted that a survey of economists by the Wall Street Journal at the time found that 16 percent said the government should “do nothing.” The headline on the article was: “Most Economists Say Detroit Can’t Be Allowed to Fail.” We were also directed to a Gallup Poll from the end of 2008 (when Obama was not yet president) showing that if people were told that the auto companies were certain to fail without government assistance, 42 percent of those surveyed still opposed intervention.

The Pinocchio Test

Okay, out of 300 million Americans, maybe there were “some folks” who felt the auto industry should die. But Obama appeared to be suggesting that GOP lawmakers were willing to let the auto industry collapse. On that basis, the evidence is not very strong. The quotes we received — and others we researched — were mostly questions of tactics.

As the administration’s internal debate suggests, the answers were not clear. Certainly, some top administration officials thought at least one car company should die.

Obama deserves credit for making some tough calls on the auto industry, building on difficult decisions by George W. Bush and his team. A good chunk of the billions of dollars in taxpayer funds may never be recovered but both GM and Chrysler are still in business, selling cars. The dire predictions of opponents have turned out to be incorrect.

But there is no need for such rhetorical overreach.

Two Pinocchios




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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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