Answering the Auto Executives' Pleas

By Eugene Robinson
Friday, November 21, 2008

The truth is that the chief executives of the Big Three automakers could have hitchhiked to Washington to beg for alms and they still would have been raked over the coals. But the fact that they came in their corporate jets was a bit much.

What, they couldn't have piled into a tricked-out Malibu and taken turns at the wheel?

Richard Wagoner of General Motors, Robert Nardelli of Chrysler and Alan Mulally of Ford should begin the inevitable cost-cutting by firing their public relations consultants. They left Capitol Hill empty-handed, but they're bound to get some kind of federal help, however grudging. In the end, I don't think either George W. Bush or Barack Obama wants to be remembered as the president who lost the auto industry. Strings will be attached, solemn promises extracted, oaths signed in blood. At some point -- I'm an eternal optimist -- the wizards of Detroit might even come up with a car or two that Americans want to buy.

If not, well, the Big Three execs can always come back to town -- by more modest means of transportation, one hopes.

If there's anything beneficial in this predictable melodrama, it's that contemplating a taxpayer-funded rescue of the auto industry might make Americans realize the extent to which their government already puts its big, fat thumb on the scales of free enterprise. The idea that the U.S. economy is based on unfettered free markets is, and has long been, a cruel joke.

It's more of a joke now, arguably, than at any time since the Great Depression. Our government has already pledged well over $700 billion -- it may go over $1 trillion -- to save the financial industry from its own greed-fueled excesses. That, in the end, is why the automakers have to be given some kind of multibillion-dollar handout. Yes, it's galling to reward industry management that has such a track record of failure -- and that inspired so little confidence while testifying before Congress. But politically it's just not tenable to bail out a bunch of Porsche-driving investment bankers and then slam the door on legions of lunch-bucket-toting workers.

Even before the current crisis, however, the U.S. government had an industrial policy. We just couldn't be honest and call it what it really is -- which meant that we couldn't be serious about its design and implementation.

Instead of openly "picking winners and losers," which is anathema to pure-of-heart free-marketeers, we hide our industrial policy in the tax code. One example was unearthed this month by The Post. The Bush administration changed the way it interprets a provision of the tax code known as Section 382 -- it has to do with corporate mergers, tax shelters and the way losses suffered by an acquired company can be used to offset profits made by the acquirer. The details are less important than the bottom line: Because of the change in interpretation, banks will get a windfall of as much as $140 billion.

The tax code is littered with that kind of targeted largess. This is a big part of what lobbyists do -- get tax breaks for their clients.

In agriculture, we just write checks. Ethanol subsidies were an issue in the presidential campaign -- Obama supported them, John McCain wanted to kill them. The truth is that it's a lot easier and more efficient to make ethanol out of sugar cane than out of corn, but they grow sugar cane in Brazil and corn in Iowa, and citizens of Brazil don't get to vote in U.S. elections. We'd be less energy-dependent on the Middle East if we just imported a lot of cheap ethanol from Brazil -- but there would be a lot of angry farmers in the Midwest, and the regional economy would suffer. The law about all politics being local has not been repealed.

Detroit blames its situation on the financial and economic crisis. It's true that demand for cars has fallen off a cliff, largely because many would-be buyers are unable to get financing. It's true that the auto industry claims to have seen the light about making energy-efficient cars. But it's also true that these newly enlightened executives spent years defending their industry's obsession with SUVs -- and pooh-poohing the idea that times, and tastes, would ever change.

They should be given the money -- and then be shown the door to make way for management that can see past the hood.

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