A Short History of Mitt Romney's Views on the Detroit Bailout
Over the weekend, top Romney adviser Eric Fehrnstrom made an audacious claim:
"[Romney's] position on the bailout was exactly what President Obama followed. I know it infuriates them to hear that.... The only economic success that President Obama has had is because he followed Mitt Romney's advice."
As Fehrnstrom predicted, liberals are reacting with irritation and incredulity. They point out -- not for the first time -- that Romney published a New York Times op-ed in November 2008, even before Obama had taken office, headlined, "Let Detroit Go Bankrupt."
The case is actually a little more complex than that, although Fehrnstrom's claim is still hard to take seriously. To understand how we got here, here's a brief history of Romney's statements on the car industry.
During the 2008 primary campaign, Romney won Michigan, a victory that was in part attributed to his promises to save the Motor City's main industry. "If I am president, I will not rest until Michigan is back," he said. "Michigan can once again lead the world's automotive industry." His campaign contrasted that with John McCain, who said, "I've gotta look you in the eye and tell you that some of those jobs aren't coming back." Romney's main policy prescription was a series of federal expenditures for retraining and green tech, to be doled out in $20 billion chunks over five years. The McCain campaign derided this as a "$100 billion bailout of the auto industry."
By November 2008, shortly after Obama's election, the economy was in free-fall. Here's an excerpt from Romney's now-infamous column:
If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed. Without that bailout, Detroit will need to drastically restructure itself .... Detroit needs a turnaround, not a check.
Romney called for a "managed bankruptcy," in which company's executives would be replaced and union contracts would be renegotiated with more favorable terms. Reversing his position from the Republican primary, he said shedding excess workers was now essential. He wanted the government to oversee the bankruptcy, but it be paid for with private-sector funding. But as former Obama administration "car czar" Steven Rattner and others have pointed out, there did not appear to be any private money on the sidelines. Markets were in disarray and credit was drying up fast -- and so, they argue, the federal government's coffers were the only thing standing between GM and the company's total demise.
In May 2009, Romney appeared on Fox News Sunday with Chris Wallace, who pressed him on the issue:
WALLACE: Wouldn't that, at a time when we were in the depths of the recession, when we were really right in the midst of what looked like a financial crisis -- wouldn't that have been disastrous for the economy?
ROMNEY: It'd have been precisely the right thing to do for the economy. To help General Motors at that point, before it had received tens of billions of dollars from the government, go through a structured process either in court or out of court to rid itself of its excessive union contract obligations, would have been the right course, and at that point the government could have helped with warranty guarantees and so forth, with debtor possession financing .... We wouldn't have closed the business down or liquidated it; we instead would have helped it restructure. It was the right course to take, it's being taken now, too late unfortunately, and as a result the government ends up with more than 70 percent of GM.
Already, we can see Romney struggling with the issue. But the gist of his main answer is already in place: The government funding was wrong, but the restructuring was right.
In June 2011, he reprised this point on the CBS Early Show: "When I wrote that the auto industry was asking for a bailout, we are unwise to send billions of dollars [to companies], instead -- finally -- the president recognized I was right, and finally took the company, in the case at General Motors, the company finally went through bankruptcy and went through a managed bankruptcy, came out of bankruptcy and is now recovering."
With the Michigan primary looming in late February 2012, and his numbers sagging as Rick Santorum surged, Romney was again on the defensive. On February 14, he wrote an op-ed in the Detroit News (now paywalled online), writing, "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." He appeared with Wallace a few days later, and the host again pressed him. Romney once again insisted that GM could have gone through a managed bankruptcy without federal bailout funds.
That brings us to the present day, and Fehrnstrom's comments. There have been two important shifts in Romney's position. The first is from pre-recession, 2008 campaign Romney, who supported a $100 billion government investment in maintaining Detroit jobs, to recession-era Romney, who adopted the idea that the automakers needed pain -- including potentially significant job loss -- to survive. The major questions here are (1) whether it was feasible for the companies to find private financing to restructure and (2) whether the associated job loss and economic ripple effects would have been acceptable. While Romney is correct that the restructuring was what he suggested, his idea at the time was hardly unique; there was a consensus that the companies needed to be significantly reshaped. The question was how to do it, and he said the answer was without federal funds.
The second shift is from the stance Romney has taken since his op-ed to Fehrnstrom's comments on Sunday. Fehrnstrom is overreaching in claiming that Obama adopted "exactly" what Romney recommended, given his longstanding opposition to the bailouts. It's understandable that Romney would want to align himself with the successful rescue of the auto industry: While the bailouts are still unpopular with Americans overall, a plurality agree that they helped the economy. Moreover, the move is comparatively popular in Rust Belt states and among working-class white voters with whom Obama is otherwise weak.
Romney's position on how to handle the carmakers may not have been realistic, but it was far less cartoonish than his liberal critics have suggested. Trying to rewrite history, however, won't answer their attack.
