Let’s start with George W. Bush in April 2006 explaining his decision to keep Donald Rumsfeld as his secretary of defense. “I am the decider,” he declared, “and I decide what is best.”
Bush invited no small amount of ridicule for his words, and yet he conveyed a core truth. The toughest decisions ascend to the Oval Office, where the president is the ultimate decision-maker, the last word, the one who carries the burden.
For Bush, such a choice arrived on his desk late in his presidency: What to do about the reeling auto industry, General Motors and Chrysler, in particular, years of mismanagement compounded by the financial collapse and a deep recession? Rescue the companies from the abyss, as the country showed bailout fatigue, hundreds of billions already poured into banks and others?
The answer was yes, Bush persuaded that otherwise the industry would suffer a brutal blow, leading to liquidation, massive job losses and failing businesses. He pumped $13 billion into the two automakers. He called for them to craft a credible restructuring plan by March 2009.
Put another way, Bush bought crucial time. Even more difficult decisions would fall to his successor, Barack Obama, starting with an evaluation of the restructuring blueprints and ending with whether to inject tens of billions more into General Motors and Chrysler.
Recall the political landscape, polls showing a large majority of Americans opposed to expanding the rescue. Many Republicans sounded more aggressively their opposition.
Becoming plain, too, was the greater severity of the recession, 2.3 million jobs lost in the first three months of the new year. A study by the Center for Automotive Research calculated that “should one or more of the Detroit Three fail in 2009, initially all U.S. automotive operations would be affected, including international producers and suppliers.” It cited a first year loss of nearly 2.5 million jobs in the American economy, plus a loss of $125 billion in personal income.
No wonder Ford, Honda and others supported the rescue of competitors. The president formed a task force to oversee the remaking of General Motors and Chrysler. The rescue, $80 billion in all (with a likely net cost of $25 billion), would be financed by the federal government. The task force quickly discovered that private financing wasn’t available for the managed bankruptcy it would launch, credit markets in retreat, frozen in many places.
A key measure was whether GM and Chrysler would make the hard, painful choices they had avoided for years. They have, in many ways, closing plants, reducing dealerships, all stakeholders, including the United Auto Workers, taking steep losses in one form or another.
Today, the retooled GM and Chrysler are back in the game, the latter part of Fiat. The industry as a whole has added more than 230,000 direct auto manufacturing jobs, or a 14 percent increase since its low point in the middle of 2009.
What would Mitt Romney have done? In the presidential debate last week, he argued that “under no circumstances would I do anything other than to help this industry get on its feet.” He reminded, and correctly so, that he called for a managed bankruptcy as George W. Bush weighed that first rescue package.
In his now famous column in the New York Times, Romney advocated many of the conditions the Obama task force would achieve, cutting excess costs, changing management, investing in the future, “a turnaround, not a check.” More, he hinted vaguely at a government role, providing “guarantees for post-bankruptcy financing” and protecting warranties.
Then, as the race for the Republican presidential nomination gained pace, Romney placed his emphasis elsewhere. As Jonathan Cohn of The New Republic recently noted, Romney shared at a Republican debate a year ago that the rescue was “the wrong way to go. … My plan, we would have had a private sector bailout with the private sector restructuring and bankruptcy with the private sector guiding the direction as opposed to what we had with government playing its heavy hand.”
In February, Romney concluded in a column for the Detroit News that “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.” Josh Mandel made this hollow pitch in his Thursday debate with Sherrod Brown.
Romney appeared eager to report Friday that Jeep was headed to China. Actually, it is investing $500 million and adding 1,100 jobs in Toledo.
What Romney and Mandel have failed to confront squarely is that absence of a private pathway, or another means of intervention. How easy to spin convenient alternatives, or appear soothing, as Romney tried in the final debate. They didn’t have to make the actual call, amid the warnings, the competing interests, the pluses and minuses, the likely disappointment and dissatisfaction.
This was a presidential decision: Put up the public money (while attaching strings) or let things crash where they may. Barack Obama chose. He gets credit for the result.
Douglas is the Beacon Journal editorial page editor. He can be reached at 330-996-3514, or emailed at email@example.com.