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Right Turn
Posted at 11:36 AM ET, 02/14/2012

Romney takes on Big Labor and crony capitalism

Mitt Romney appears to be zeroing in on a thus far underplayed aspect of his agenda: In tax and economic policy he favors free market solutions, and he’s been a persistent critic of Big Labor. In an op-ed for the Detroit News today he writes:

Three years ago, in the midst of an economic crisis, a newly elected President Barack Obama stepped in with a bailout for the auto industry. The indisputable good news is that Chrysler and General Motors are still in business. The equally indisputable bad news is that all the defects in President Obama’s management of the American economy are evident in what he did.
Instead of doing the right thing and standing up to union bosses,Obama rewarded them.
A labor union that had contributed millions to Democrats and his election campaign was granted an ownership share of Chrysler and a major stake in GM, two flagships of the industry.The U.S. Department of Treasury — American taxpayers — was asked to become a majority stockholder of GM. And a politically connected and ethically challenged Obama-campaign contributor, the financier Steven Rattner, was asked to preside over all this as auto czar.
This was crony capitalism on a grand scale. The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.
My view at the time — and I set it out plainly in an op-ed in the New York Times — was that “the American auto industry is vital to our national interest as an employer and as a hub for manufacturing.” Instead of a bailout, I favored “managed bankruptcy” as the way forward.

On the merits, conservatives will certainly agree. A “managed bankruptcy” would have allowed the car companies to dump their onerous labor contracts, restructure and emerge better able to stand on their own. Moreover, it would have respected the rule of law and given greater protection to bond holders, as they had every right to expect under law. He is correct when he tags this as crony capitalism:

The pensions of union workers and retirees at Delphi, GM’s parts supplier, were left untouched, while some 21,000 non-union salaried employees saw their pensions slashed and lost their life and health insurance. And so on and so forth across the industry.
While a lot of workers and investors got the short end of the stick, Obama’s union allies — and his major campaign contributors — reaped reward upon reward, all on the taxpayer’s dime.

Romney then argues that “shares need to be sold in a responsible fashion and the proceeds turned over to the nation’s taxpayers.”

It’s an important argument to be made both on the merits and for the general election. But it also hints at a liability for Rick Santorum, whose support for Big Labor and a special tax rate for manufacturing (which would be the most unionized portion of the economy aside from government) are a thorn in the side of fiscal conservatives. Romney is essentially making an argument for the most level playing field possible and rejection of the practice of picking winners and losers. As the primary race unfolds, we’ll see how the argument with Santorum, who has very different economic approach, unfolds. Santorum’s view may be politically smart — sway Rust Belt states — and sync up with his social views — support families, rebuild Rust Belt cities — but Romney’s view — ironically for the candidate painted as less conservative — is in fact closer to the view of fiscal conservatives. It’s an important debate that deserves more attention.

By  |  11:36 AM ET, 02/14/2012

Categories:  Economy

 
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