Monday, October 29, 2012

What a lot of people are still getting wrong about the Romney “let Detroit go bankrupt” story

(And why it's worse than most people think. Updated at the bottom of the post.)

Mitt doesn't say he was “wrong on Detroit,” because he doesn't think he was. And the folks on my Facebook and Twitter feeds have been have a whooping old time with that.

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Letting Detroit go bankrupt! Detroit! The erstwhile symbol of American economic leadership (”What's good for GM is good for the world.”). Ground Zero of an American middle class that was once the envy of the world. The city where, in Mitt's childhood, his father was a merchant-prince.

And although that clip only catches a moment of it, he's been saying all along why he thought it was a good idea to let GM and Chrysler tank. In fact, in that clip, he said it twice. He's been as clear as a buttonhook in the well water about it for four years. It's one of his rare instances of non-self contradiction. But almost no one's really listening all the way through, because “Look! He wanted to let Detroit go bankrupt!” is the easier way to score points.

It's not that Romney's delusional (at least not any more so than usual). Or dishonest (at least not any more so than usual). It's just that no one's asked him precisely the right question in exactly the right way. And no one listens very closely to his answer. And most of the Democrats howling with glee about his bankruptcy “gaffe” don't appreciate how dangerous that oversight is.

Because what Romney wanted -- what he would have brought about had he been in the driver's seat -- was even worse. He wanted to see the auto companies go through bankruptcy and the resulting reorganization “to shed costs.” What “costs” are those?

Labor costs. Union contracts. Worker health care. Pensions. Step One of the Romney plan was to use bankruptcy to bust the unions connected with the automotive industry and break the fundamental promise embodied in their pension plans. And yes, as the governor took care to point out in the third presidential debate, some companies -- like Macy's and 7-Eleven -- do come through bankruptcy and survive. Others aren't so fortunate, though, especially if they have the bad luck to fall into the hands of chop shops like Bain Capital LLC. Romney's upset because, following the bankruptcy move, the Obama administration stepped in with bailout money which allowed the unions to keep a toe-hold in Detroit.

But, delightful as union-busting would no doubt to seem to the governor simply on its own merits, that's just Step One. Remember that part of the Obama administration's rationale for the bailout was that, even if the auto companies had gone through bankruptcy, no banks were then willing or able to step up with the money to help them rebuild. So even with court-enforced restructuring (and “shedding of costs”), where would the money come from?

I'm glad you asked. That's Step Two of the Romney plan. If the banks can't help and the federal government is prevented from helping, that just leaves the paper-manipulators (like Romney's own Bain Capital) to buy GM and Chrysler for pennies on the dollar, then strip 'em and flip em. In the third presidential debate, Romney denied his intention was to enable his vulture-capitalist cronies to gut GM and Chrysler, pay themselves off, and sell off the remaining assets. You've seen the short half-life of his stand on any issue. Do you believe him this time?

Laura Clawson at DailyKos Labor writes:
Romney may not have understood himself to be arguing for liquidation back in 2008. But it would have been the effect if his advice had carried the day. And to this day, regardless of how often and by whom the situation is explained to him, he cannot accept that he was wrong. His certainty that Mitt Romney, Businessman, is always right is too strong to allow for that possibility. And admitting he was wrong would drive home that if he had been president, the American auto industry would have gone under. Michigan and Ohio's economies would have been destroyed. A million jobs would have gone up in flames.
Yes, but that's a feature, not a bug. It's not that Romney wanted to save Detroit, but mistakenly advocated a plan that would inevitably have failed, and is now too vain to admit it. Romney never really wanted to save Detroit.* Which is why he sees no point in backing down or changing his story.  The mistake is to think he's kidding.

*(Update:) At least no more than he would presumably be interested in saving the East Coast this afternoon. As everyone is being reminded, and appropriately so, Romney's on record as saying that it would be "immoral" for the government to be involved in disaster relief, that this is more appropriately a state-level (or, ideally, a private-enterprise) function. Ironically, it's one of the rare moments in his political life where he's told the straight truth from the start and stuck to it without variation -- and no one seems to believe him.

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