Half-truths are a staple of all political campaigns, but Republican presidential hopeful Mitt Romney is wrecking his viability as a candidate by making statements that are 100% untrue just to discredit the success of the government rescue ofand .
This may work playing to the base in Republican primaries, but it will ruin him in the national election against Barack Obama if he makes it that far.
Romney argued against a government bailout in a famous 2008 editorial in the New York Times, saying it would be good for the auto industry if Detroit auto makers were denied government assistance and allowed to go bankrupt.
Now confronted with a resurgent GM and, Romney has invented a pipedream that allows him to deny both the Obama and Bush Administrations credit for the auto makers’ recovery while avoiding accusations he did not care about the consequences of a vast auto industry meltdown.
It’s a cynical ploy to dupe voters into believing Detroit could have done just as well going through a privately funded managed bankruptcy rather than an $82 billion government-orchestrated rescue. It also is an insult to Michigan voters who know better.
To those of us who closely follow the auto industry, the bailouts are a spectacular success. GM and Chrysler now are back in the black, adding thousands of new jobs and pushing Michigan’s unemployment rate from 14.1% in 2009 to 9.3% today.
More importantly, preventing the auto maker shutdowns in 2009 averted an economic catastrophe that would have devastated the entire North American auto industry and cost more than 1 million jobs, according to the Center for Automotive Research.
Government coffers received $28.6 billion in higher personal income taxes, Social Security receipts and other benefits in 2009-2010 simply because GM and Chrysler did not go belly up, CAR says. And they paid back their outstanding loans in 2011.
In late 2008, then-President George Bush was keenly aware the failure of GM and Chrysler could push the U.S. economy into a full-blown depression, so he stepped in and signed off on $17.4 billion in loans, requiring GM and Chrysler to develop restructuring plans under President Obama's watch.
During a recent speech, Bush said he had no regrets about the auto bailout and would do it again “Because I didn’t want there to be 21% unemployment.”
But as candidate Romney knows all too well a stunningly high number of Michiganders still think the government rescue was a bad idea.
An NBC/Marist poll recently found that only 42% of Michigan Republicans who were likely to vote supported the government’s actions, while 50% were opposed and apparently willfully ignorant enough to swallow the whopper he has concocted.
At the heart of Romney’s big fat lie is the idea that GM and Chrysler could have obtained private financing for managed bankruptcies, an idea that economists and auto industry insiders alike label “delusional.”
“That sounds like a wonderfully sensible approach – except that it’s utter fantasy,” Steven Rattner, the former leader of the Obama Administration’s auto task force writes recently in the New York Times.
“In late 2008 and early 2009, when GM and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines. If Mr. Romney disagrees, he should come forward with specific names of willing investors in place of empty rhetoric. I predict that he won’t be able to, because there aren’t any,” Rattner writes.
Not only was there no private capital available to provide debtor-in-possession financing for a managed bankruptcy, (the money required to keep a company running while it is being restructured), there was no access to capital for other auto companies interested in buying up valuable pieces of each auto maker, such as Jeep, during a liquidation fire sale.
Without government aid, there would have been no managed bankruptcy. GM and Chrysler would have closed their doors, laid off their workers and the North American auto supplier base would have fallen like dominoes, plunging the U.S. into a 1930s-style depression.
Fearing their own economic meltdowns during the same time, the governments of most other major industrialized nations from China to Europe also provided bailouts of some kind to their auto industries.
And thanks to U.S. government help, GM posted a record $7.6 billion profit for 2011 and took back the title of world’s largest auto maker from. Chrysler showed a $2 billion full-year operating profit in 2011 and sales were up 37.4% for the year, according to WardsAuto data, allowing it to pass in U.S. deliveries.
Meanwhile, Mitt Romney’s fate as Republican front-runner grows more tenuous by the day. If he loses the Republican nomination or the national election to Obama, GM and Chrysler will prove success indeed is the best revenge.