Grasping Reality on TypePad, by Brad DeLong

Jonathan Chait Cohn:

Mitt Romney Needs To Get His Facts Straight About The Auto Bailout: Romney’s Latest Attempt to Spin the GM BailoutMitt Romney is talking about the auto industry rescue again. But his latest argument is even more convoluted, and misleading, than his previous ones…. Romney has criticized the Obama Administration for rescuing the industry in early 2009, but the industry is clearly on the rebound – making profits, selling cars, and hiring back workers. So doesn’t Obama deserve credit for that? No way, says Romney. As he sees it, Chrysler and GM are succeeding because they did what Romney had advised all along: They went through structured bankruptcies, shedding unsustainable contracts and assets. But like all companies attempting to reorganize through bankruptcy, Chrysler and GM needed loans in order to keep their operations going. Romney says he would have told the companies to get money from the private sector. Obama allowed the companies to get financing directly from the government, which meant that  “The U.S. Department of Treasury – American taxpayers – was asked to become a majority stockholder of GM.”

Romney is correct: The U.S. did become GM's majority stockholder. And there was a very good reason for that, as many of us have noted before.

In late 2008 and early 2009, when Chrysler and GM ran out of money, private financing was not available. Remember, this was not long after Lehman had collapsed and the entire financial industry was on the brink of collapse…. That would have meant liquidation and mass layoffs. Chrysler and GM would be gone…. Every company connected to the domestic auto industry would have suffered, which is why Ford, although healthy enough to survive without federal assistance in 2009, supported the Obama rescue…. The new twist is his portrayal of the rescue as a form of “crony capitalism.”…

While a lot of workers and investors got the short end of the stick, Obama’s union allies – and his major campaign contributors – reaped reward upon reward, all on the taxpayer’s dime.

That’s a pretty skewed version of the truth. As Kristin Dziczek of the Center for Automotive Research reminds me, the unions had by 2009 already made major concessions in order to help the companies restructure: Among other things, they agreed to a two-tier pay scale, changes to retiree health benefits, and changing work rules that had protected union jobs. Those changes helped the automakers reduce their hourly labor costs by nearly a third. Then, during the bankruptcy, the unions agreed to further concessions…. [T]raditional Chrysler and GM hourly employees have seen no annual raises since 2003 and will see no raises until at least 2015…. The concessions on retiree health benefits concession were particularly significant….

You can argue that the concessions were necessary, given what the competition was paying their workers. You can argue that the union should have structured the concessions differently. But to call the rescue a “sweetheart deal” or example of “crony capitalism” is way off the mark….

Prioritizing workers over investors may seem strange to the co-founder of Bain Capital. That doesn’t mean it’s wrong.

Marcy Wheeler:

Mitt Advocates Taking Healthcare from Retirees to Give Money to Bailed Out Banks: There’s a lot that is fact-impaired in this op-ed doubling down on the “let GM go bankrupt” (starting with the lack of funding for a bankruptcy, meaning a managed bankruptcy was impossible)…. [Mitt] is complaining, of course, that VEBA (the trust fund run by professionals that allowed the auto companies to spin off contractual obligations–retiree healthcare–to the unions) got a stake in Chrysler while Chrysler’s secured creditors took a haircut. So, in part, he’s basically complaining that the bailout preserved the healthcare a bunch of 55+ year old blue collar workers were promised….He’s also complaining that… a bunch of banks that themselves had been bailed out had to take a haircut. He’s complaining, for example, that JP Morgan Chase, Chrysler’s largest creditor at the time and the recipient, itself, of $68.6B in bailout loans, had to take a haircut on $2B in loans to Chrysler….

[T]he UAW retirees who still have healthcare today instead of Jamie Dimon having another yacht probably don’t feel the same way as Mitt does.

David Dayen:

Romney’s Auto Rescue Double-Down: Mitt Romney, struggling to regain the lead from Rick Santorum in national polls and facing a serious deficit in the key primary state of Michigan, has doubled down on his position against the auto industry rescue…. Basically, Mitt is mad that the unions stayed in place after the auto rescue, and that they got, through their health care management trust fund VEBA, a stake in Chrysler…. Mitt would rather that the stake in the auto companies went to bailed-out banks instead of the union health care fund.

This isn’t quite as suicidal as it looks. Romney needs to win Michigan, and Michigan Republicans actually don’t support the auto rescue, in true what’s-the-matter-with-Kansas fashion…. [It's] pandering… playing to the conservative lizard brain conception of greedy unions.

For the state as a whole, however, it’s a really dumb double-down… Romney favoring banks over people’s health care….

UPDATE: A commenter at Brad DeLong’s place adds:

As I am sure you all remember, going into bankruptcy with no source of continued funding would mean liquidation for the auto makers and everyone understood that at the time including Keith Hennessy in public.

Saying he was for managed bankruptcy without a funding source was like saying he was for medical treatment but at the time refused to pay for the medicine or that he was for having a kid finish their degree only he refused to pay the tuition.