Mitt Romney, Strapped to a Car Roof

02/15/2012 12:43 pm EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

The former presidential frontrunner is on the defensive in his native state as a result of a policy stance that simply can’t be defended, writes senior editor Igor Greenwald.

Mormons don’t believe in fate, rejecting the notion as a copout from the ethic of personal accountability.

But believe in it or not, fate has a wicked sense of humor. Because as fate would have it, the most famous Mormon in America is about to be held accountable for his secular articles of faith.

Former Republican presidential front-runner Mitt Romney is suddenly up against it in the race for the nomination, losing ground to Rick Santorum in national polls after getting convincingly thumped by the same in Minnesota, Missouri, and Colorado. He desperately needs a win in Michigan on February 28 to prove his appeal beyond Florida and New England.

This should be a layup. Romney is the son of a revered Michigan governor, George Romney. He was born and grew up in the state. Romney won Michigan’s Republican primary by nine percentage points over John McCain four years ago, in large part by repeatedly pounding McCain for his true statement that the jobs lost in the state, many of them automotive, “are not coming back.”

That race took place in a different America, one in which Michigan’s 7.4% unemployment rate stood as the highest in the nation. Now, the recently improved national average is down all the way to 8.3%, and Michigan’s 9.3% is universally acknowledged as a great improvement on the recessionary 14.1% peak.

Which is, ironically, Mitt Romney’s biggest problem. Because after selling Michigan an optimistic message of industrial renewal four years ago, Romney showed his true stripes when the chips were down just nine months later, by opposing the government bailout of the Michigan-based automakers in a notorious op-ed in The New York Times.

“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 began. Everything that followed amounted to a footnote.

Well, here we are three years and four months later, and General Motors (GM) is widely expected to post a 2011 profit of $8 billion tomorrow, the biggest in its 103-year history. This despite domestic auto sales more than a quarter below the 2007 level.

Sure, the government still hasn’t recouped the nominal cost of the auto bailout, but that’s only if you don’t count all the unemployment compensation not paid to the millions of workers who got to keep their jobs as a direct consequence of the bailout, as well as all the taxes paid by those workers and tens of thousands of new hires GM, Ford (F), and Chrysler have added of late.

In the grander scheme of things, the auto bailout has proven to be a tremendous pragmatic success. So Romney must now justify his opposition to the injection of government cash in 2008 in order to keep alive his quest for the White House.

Hence his valentine to Michigan—and the auto industry in particular—in yesterday’s Detroit News, in which Romney introduces himself as “a son of Detroit.” (Mitt’s family moved to the ultra-wealthy suburb of Bloomfield Hills when he was 5.)

Eventually, Romney gets around to acknowledging the Times piece…regrettable privately perhaps, but one that can’t be disowned without further stigmatizing the candidate as a craven flip-flopper. Hence the improbable claim that while the auto industry is doing pretty well, without Obama’s intervention it would be doing even better.

Why? Romney doesn’t really explain, especially since he notes that “the [managed bankruptcy] course I recommended was later followed.” He doesn’t argue that the restructuring that followed was somehow mismanaged, or would have gone better without the backstop of government aid.

Instead, his argument boils down to the accusation that Obama “rewarded” the “union bosses” who backed him politically. And that the president preserved the pension and medical benefits of workers and retirees at GM spinoff Delphi (DLPH) at the expense of salaried executives who “lost their life and health insurance.”

And in conclusion, “The dream of the Motor City is…one of ideas, innovation, enterprise, and opportunity,” as exemplified by automotive pioneers “who never envisioned a role for government in their business.”

What we have here is willful obfuscation of the facts and an equally willful politics of division, that in the face of evident recovery asserts that said recovery’s fruits have been distributed unfairly. Yes, those union bosses and the hundreds of thousands of workers they represent—including new hires paid $15 an hour—are really lording it over GM’s former creditors, among them numerous hedge funds.

The fact is that in late 2008, the auto industry was on the brink of collapse not because it had failed to restructure, as Romney and many others claimed at the time, but because those restructuring efforts had been overtaken by mass layoffs, record-high gas prices, and the general unavailability of corporate or consumer credit.

I happened to buy a (gently used) car in October 2008, on a Sunday, at a big dealership located on a major four-lane highway in a prosperous Boston suburb. It was the only sale made there that day. The place looked eerily abandoned except for one other customer who couldn’t get credit. I kept wondering when the zombies would show.

When auto executives pleaded with Washington for a tiny fraction of the cash that had already been set aside for the financial industry that caused the crash, they were worried they were going to run out of cash by year’s end. It was that prospect that ultimately convinced the Bush administration to offer some money after all, punting the ball just far enough that the whole industry wouldn’t collapse on its watch, just before Obama’s inauguration.

So when Romney opposed government loans to Detroit, he was really advocating mass layoffs and plant closings in advance of any “managed bankruptcy.” Or else he should explain how these would have been avoided, at a time when the entire financial system was coming apart and consumer spending had plummeted.

The auto companies are doing well now, in part because of the painful restructuring demanded by the Obama administration in exchange for the government aid, with the full cooperation of those “union bosses” Romney likes to rail against. But none of this would have happened had GM gone belly up in January 2009, and it’s not clear that Mitt Romney thought at the time that government should do anything to prevent that.

As for those visionary Detroit pioneers dedicated to the notion of private enterprise, Henry Ford offered his workers more than double the going wage to assemble the Model T. When Mitt Romney’s America next produces someone willing to do that, government will gladly let them do their thing.

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