Auto bailouts: Sometimes, government is the solution

Let’s hear it for “Big Government,” said E.J. Dionne in The Washington Post. That may be heresy in an age in which the Right attacks everything the government does as “socialism,” but here are the facts: The federal bailout of General Motors and Chrysler has proved to be an incredible success. Just two years ago, the U.S. auto industry was losing billions every quarter and on the verge of collapse; more than a million jobs were about to go down the drain. George Bush stepped in with a $25 billion infusion, and Barack Obama followed with an additional $60 billion attached to a tough bankruptcy restructuring plan. Last week, Obama went to Detroit to call attention to the fact that the automakers have begun to pay back their loans, have added 55,000 jobs since June 2009, and have returned to profitability. Even in a bad economy, buyers are returning to GM and Chrysler dealerships (and to Ford’s, too), and American cars are winning new critical acclaim for quality, dependability, and style. “These are stunning results,” said Tom Walsh in the Detroit Free Press, “and Obama is right to celebrate them.” Obama’s auto task force has “totally reshaped a bloated and dysfunctional industry into something that now looks sensible and sustainable.”

True enough, but at what cost? said Daniel Howes in The Detroit News. In seizing control of a major American industry, the government picked winners and losers, forcing secured bondholders to take a beating. White-collar retirees also had their benefits cut. That’s a dangerous precedent to anyone who believes in free enterprise. Besides, Obama deserves no real credit for Detroit’s recovery, said Steve Forbes in Politico.com. The industry turned itself around by embracing “conservative, free-market management principles.” GM completely restructured its labor agreement, winning a “no strike” provision and “far more flexibility to hire temporary workers.” Meanwhile, a top-to-bottom emphasis on quality goosed sales for once-fading models like the Chevrolet Camaro. This is a victory not for “government meddling” but for Detroit’s “new work ethic.”

Unfortunately, GM is making at least one car bearing Obama’s fingerprints, said Charles Lane in Slate.com. It’s the Chevrolet Volt. The Volt is the new plug-in electric car that GM’s government-installed management last week announced would sell for a whopping $41,000. (And that’s after GM received lavish taxpayer subsidies to produce the unappealing, impractical, four-seat hatchback.) It would take more than a decade of driving this electric vehicle to produce enough fuel savings to justify the high purchase price. In other words, taxpayers have heavily subsidized a “green” status symbol for rich people.

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Let’s look at the big picture, said Steven Pearlstein in The Washington Post. When Obama ordered the takeover of the auto industry last year, public opinion was essentially divided into two camps: “Those who believed the companies should be allowed to die, and those who believed the government would inevitably screw things up.” Yet taxpayers are getting repaid, and a major industry—as well as the broader economy—has been saved by aggressive government intervention. This time, Big Government may in fact have been the solution, said Paul Ingrassia in The Wall Street Journal. But the danger now is that the turnaround of GM and Chrysler will tempt this White House to cast aside the free market whenever it wants to impose its will. “Arrogance and hubris were what brought Detroit to disaster. The Obama administration shouldn’t fall into the same trap.”