Why Free-Marketers Oppose US Auto Bailout

I've been following the story about the auto industry's request for a $25 billion loan package with great interest. While I'm concerned about the potential consequences of their bankruptcies, it's hard for me to feel sorry for American car companies, especially when the CEOs of General Motors, Chrysler and Ford show up to Congressional hearings in their private jets.

Here in San Francisco, some of my liberal friends oppose the bailout because they (rightly) blame American automakers for continuing to build gas-guzzling, greenhouse gas-spewing SUVs, and using their leverage with BushCo to make sure that: 1) higher fuel economy standards would not apply to SUVs, minivans and trucks or negligibly so, 2) higher emission and mileage standards in blue states would be struck down as illegal, and 3) their customers would be able to deduct from their taxes up to $75,000 for buying said gas guzzlers.

It's not like no one saw this crisis coming. Back in March 2006, Roland Hwang of the Natural Resources Defense Council (NRDC) warned:
"The Big Three automakers are in trouble today precisely because management bet the farm on gas guzzlers. When oil prices soared, the bottom fell out of their market and sent thousands of workers out the factory gates. Those prices aren't coming down soon. In fact most experts say that they will go higher.

"The administration is calling for baby steps at a time when the country needs bold action. By setting the bar low once again, the administration is setting the industry up for a continuing disaster. Engineering better fuel economy performance is the key to survival in today's intensely competitive auto market.

"Simply by raising the fuel economy standard for SUVs and other light trucks by just one mile per gallon per year over the next five years -- to 27.2 mpg by model year 2012 -- we could save one million barrels of oil per day by 2020. That's twice as much oil as we buy from Iraq, and three-quarters of our daily imports from Saudi Arabia."
It's interesting that support and opposition for the auto bailout has played out mostly along partisan lines. Most Democrats support a loan package, if only grudgingly, while most Republicans oppose the bailout.

Paul Krugman makes the case for Democrats:
We are in the middle of a very - you know, the economy is in a nose dive. And this is something that will greatly accelerate the nose dive.

If GM goes under, which looks like a real possibility, then that's a huge blow to huge anti-stimulus program at exactly the wrong moment. If this was 1999 and we had four percent unemployment and the credit markets were working, I would say, let it fail. Let bankruptcy do its work. But this is not a good time to be having a really major industry just turn belly-up.

These [Big Three CEOs] are not good guys. And they took corporate jets to plead for money in Washington, right? They are idiots. This is the theatrics. It was really stupid, right?

But nonetheless, that's not the point. The point is that there are - you know, estimates run from one million to three million jobs lost if GM goes under. And so there's probably 12 guys out of those one million to three million people who are really bad guys and fly corporate jets and really don't deserve any bailout.

But the other 999,000 - I can't do the subtraction right here - all those other people are, you know, people making a living, people who will lose their jobs, and lose their health insurance. That's where you should be putting the priority.
So why would Republicans oppose helping people keep their jobs and their health insurance? I think I know why: it's all about the unions.
Some conservatives suggest the best course would be to allow General Motors and other automakers to head into bankruptcy, which would void their union contracts and allow them to slash the size of their operations and cut costs. A bailout "would hinder the long-overdue restructuring" of the industry, said Dan Mitchell, an economist at the libertarian Cato Institute.
Steven Jonas presents two more reasons why Republicans oppose the bailout ("Why the Republicans Want to Kill GM"):
Two are ideological and one is political... bankruptcy would permit the companies to break their union contracts, both for current employees and for their "legacy" beneficiaries who depend on the U.S. automakers for their pensions and health care coverage.

Modern Republicans, having had their hands on the many or all of major levers of governmental power since the election of Reagan, are closely associated with finance capitalism, much less with industrial capitalism. Thus their strong interest in helping out the former while being perfectly willing to let the latter die on the vine, especially if that death can bring down one of the few remaining major unions.

The Republicans in their gut realize that if Obama even half-succeeds in bringing the country through the recession/Depression, especially if it is identified in peoples' minds as Limbaugh would everso falsely have it be, as the "Obama Recession," they will be in the political wilderness for a long time.