Uncle Sam the Car Repair Man

The United States may have taken a major step toward corporatism today–an economic philosophy more reminiscent of Italy in the 1930s than of American free enterprise (although, to be fair, there were significant corporatist elements in Roosevelt’s New Deal, too). I’m not sure whether Barack Obama ever ran a lemonade stand as a child, but if he did, it would be his most salient business experience. Nevertheless, in his apparently boundless self-confidence, Obama evidently thinks that he knows better how to run an automobile manufacturing company than the management of GM or Chrysler. I found this passage from his speech today striking:

In this context, my administration will offer General Motors adequate working capital over the next 60 days. And during this time, my team will be working closely with GM to produce a better business plan. They must ask themselves have they consolidated enough to profitable brands. Have they cleaned up their balance sheets, or are this still saddling with so much debt that they can’t make future investments?

Above all, have they created a credible model for how, not only to survive, but to succeed in this competitive global market?

I’m not sure who is on Obama’s “team,” or why they are better qualified than GM management to figure out how to “succeed in this competitive global market.” Obama’s arrogance is best explained, one suspects, by an a priori conviction that government always knows best.

This was, perhaps, Obama’s most remarkable announcement:

If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired just like always. Your warranty will be safe. In fact, it will be safer than it’s ever been because, starting today, the United States government will stand behind your warranty.

I wasted a couple of hours today looking for the Automobile Repair Clause in the Constitution, but I couldn’t find it. Again, this intermingling of the state with private (or formerly private) enterprise is a sad echo of intellectual currents that swept through Europe in the 1930s. Resurrecting this sort of state “capitalism” can hardly be considered progress.

Much has been made of Obama’s firing of the Chairman of General Motors, Rick Wagoner. My guess, for what it’s worth, is that this was mostly misdirection. Months ago, we and many others wrote that what General Motors needs is bankruptcy. Its legacy obligations, especially to retired UAW members, are simply unsustainable. Until those contracts are broken, bailing out GM was pouring money down the drain. It was not so much bailing out GM as it was bailing out the United Auto Workers. Obama more or less admitted as much today:

Now, while Chrysler and GM are very different companies with very different paths forward, both need a fresh start to implement the restructuring plan they developed. That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger.

Translation: I’ve wasted billions in taxpayer dollars. We now see that those who argued that the only path forward lies in bankruptcy were right. To distract attention from that fact, I’ll fire Rick Wagoner.

It remains to be seen how significant today’s actions will be in the long run. If GM goes into bankruptcy and sheds its legacy obligations and Chrysler is acquired by Fiat, and the Obama administration more or less gets out of the way, the long-term ramifications could be relatively slight. Unfortunately, however, today’s power grab is only one of several fronts on which President Obama appears determined to extend the long arm of government into American business, and American life generally. How far he will succeed in doing so, and at what point the American people will rebel, are shaping up as the key questions to be answered over the coming months and years.


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