Saving Detroit

Prez is making the victory rounds in the rust belt over the auto bailout, shoring up union support and cramming his finger in the eyes of the faith-less GOP:

Even more than he did during a swing through Michigan last week, he suggested that his adversaries were virtually un-American in standing against his policies.

But the heartland is an appropriate place to make more strawman arguments. Not everyone on the right was against an auto bailout--some believed the industry was so interrelated that "saving it" was required--the ultimate too big to fail. The question was how to save it.

Back in the late 70s president Carter bailed out Chrysler. Lee Iaccoca took the conditional loan:

Congress passed the bill 21 December 1979, but with strings attached. Congress required Chrysler to obtain private financing for $1.5 billion -- the government was co-signing the note, not printing the money -- and to obtain another $2 billion in "commitments or concessions [that] can be arranged by Chrysler for the financing of its operations." One of those options, of course, was reduce employees wages; in prior discussions, the union had failed to budge, but the contingent guarantee moved the union.

Bolded to indicate concessions were a crucial part in getting the bailout and turning the company around (it paid off the note in 1983). The entire thing was much more hands-off.

Several years prior the government had bailed out six eastern railroads, forming a quasi-government corporation called "Conrail". By the early to mid 80s the line was turning a profit and in 1987 the government sold its shares, getting back about 1.9 billion. Again, that profitability was brought on in large part by paring down unneeded routes and trimming excess personnel, wages and restrictions.

Overall, the entire rail industry was saved by Carter's de-regulation (Staggers Act) in 1980, which forced railroads to aggressively compete for business while allowing them to remove the obstacles to financial success. Removing featherbedding, in other words. Several didn't make it, like Rock Island lines and Milwaukee Road. Many miles of track were abandoned. The world didn't stop.

Meanwhile, the current administration is making a big to-do out of this factoid:

Ford, Chrysler and G.M. are all now profitable again, the first time in six years that all three big American automakers have been in the black at the same time. The auto industry added 55,000 jobs over the last year, the first net gain in a decade, and its exports were up 57 percent in the first four months of the year.

But why couldn't they make a profit in 2006 and 2007, both better economic years than this one? How much can be attributed to bankruptcy proceedings allowing (or forcing) concessions, lowering wages and overhead? Obama is touting the federal freebees; conservatives should be applauding the success and pointing to the greater efficiencies that made it possible and how the debacle could have been avoided. After all, not every major industry has required a bailout through this great Bush depression.