Saturday, November 10, 2012

Democratic National Convention Airbrushes Auto Bailout

Granholm Speech At Democratic National Convention Airbrushes Auto Bailout
(Huffington Post, 6 September 2012)

Michigan Gov. Jennifer Granholm delivered a rousing defense of the auto industry bailout Thursday night, totaling up the number of well-paying jobs that were saved by the controversial decision. President Barack Obama, in the spring of 2009, approved an $85 billion package that is widely credited with bringing about a subsequent turnaround.  Obama has been hammered for the decision, so he deserves credit for it now that it's gone well.  But Granholm left out a significant element of the story. During the time between Obama's election and inauguration, he worked closely with President George W. Bush to save the industry.

In 2008, Bush announced $17.4 billion in loans to the automakers. Had he not done so, it's unlikely the industry would have made it to Jan. 20th.  "There's too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies," Bush said at the time, justifying the bailout.  Giving Bush credit wouldn't have taken away from Obama's accomplishment, and even makes Romney's rejection of the intervention look that much more out of step. But that's not the story Granholm told.  "The entire auto industry, and the lives of over one million hard-working Americans, teetered on the edge of collapse; and with it, the whole manufacturing sector," Granholm said. "We looked everywhere for help. Almost nobody had the guts to help us -– not the banks, not the private investors and not Bain capital. Then, in 2009, the cavalry arrived: our new president, Barack Obama."

Romney's own stance on the bailout will likely hurt him in Midwestern states. Suggesting the troubled automakers go into bankruptcy without government intervention, Romney wrote an op-ed for The New York Times under the headline "Let Detroit Go Bankrupt."  Democrats have assailed Romney for that position throughout the convention, with speakers like United Auto Workers President Bob King, AFL-CIO President Richard Trumka and Granholm herself reminding viewers that Romney opposed the bailout. Like Granholm, King also made a point of reciting the "Let Detroit Go Bankrupt" line.

None of those Democratic speakers, however, mentioned that the auto rescue in fact began under Bush.

Obama's DNC Speech Exaggerates Auto Bailout Benefits

(By Nate C. Hindman, The Huffington Post, 10 September 2012)

In his formal acceptance of the Democratic presidential nomination last night, President Barack Obama celebrated his administration’s efforts to get the U.S. auto industry “back on top of the world," echoing remarks he made in a campaign stop earlier this month.  “The American auto industry has come roaring back,” Obama said then, nearly five years after the onset of an economic downturn that threatened to sink the nation’s largest carmakers.  But there’s one small problem with those assertions. The federal government's $80 billion bailout of General Motors and Chrysler, started under President George W. Bush and continued under Obama, hasn’t returned the sector to the top of the world. And that supposed roaring has fallen on deaf ears among taxpayers who are still owed billions by the car companies and autoworkers who are still out of a job.

GM, the country's largest carmaker and the recipient of $50 billion in government funds, has slipped to No. 2 and is headed for third place in global sales this year, behind Toyota and Volkswagen. And despite last year being the most profitable year in GM’s 103-year history, the automaker still owes taxpayers a whopping $25 billion. Chrysler, for its part, has repaid most of its federal loans.  Employment in the auto industry remains 12 percent below what it was before the recession started in December 2007, the Washington Post recently noted. In contrast, overall private employment is only four percent below what it was before the recession began.

To be sure, U.S. auto jobs and sales have seen a resurgence, and economists agree that a bailout was vital to keep the industry afloat. “Without financial help from the federal government, all three vehicle producers and many of their suppliers might have had to liquidate many operations, with devastating effects on the broader economy,” economists Mark Zandi, of Moody’s Analytics, and Alan Blinder, of Princeton University, wrote in a report cited by Bloomberg.  A majority of Americans also view the federal bailout of the auto industry as helpful to the U.S. economy, according to polls by the Pew Research Center and Quinnipiac University.  But to tout the auto industry’s comeback alongside less controversial accomplishments, like the killing of Osama Bin Laden -- as Obama’s campaign has done with its “Bin Laden is dead and GM is alive” slogan -- may be a stretch.

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