Congressional Motors

Back in April, even as the federal government was bailing out General Motors and Chrysler to the tune of tens of billions of dollars, Obama flatly stated, "I don't want to run auto companies…." In June, the president reiterated his stance when he declared, "What I have no interest in doing is running GM…." Well, the president may have no interest in running car companies, but Congress certainly does. 

One of the chief cost cutting measures adopted by the flailing automakers was to get rid of hundreds of marginal dealerships. Not so fast, say congresspeople who are dependent on campaign contributions from such dealers. As the Washington Post reports today: 

Now that the Obama administration has spent billions of dollars on the bailouts of General Motors and Chrysler, Congress is considering making its first major management decision at the automakers.

Under legislation that has rapidly gained support, GM and Chrysler would have to reinstate more than 2,000 dealerships that the companies had slated for closure…

Since federal money has been used to sustain the automakers, they say Congress has an obligation to intervene. 

Congressional justification for subsidizing the dealerships? Jobs. Supposedly a 170,000 of them. But is that really the case? The Post goes on to report that the dealers may be open to a compromise:

…the bill may simply be a way of extracting concessions -- possibly money -- from the auto manufacturers for the dealers. 

Paying off the dealers will not save many jobs, but it may help Congresspeople garner future campaign contributions. 

See Reason's August/September cover article "Illegal. Illiberal. Ill-Fated" on why Washington should not run Detroit here. 

Comments

[Xeones]

Goddammit, government, Atlas Shrugged was not an instruction manual.

[Spartacus]

Baseball, hot dogs, apple pie, and Congress...

[Pro Libertate]

See? See why government running things is bad? The first consideration and the last consideration is always political. Not what's good for the country, not what's good for the economy, not what's good for most individuals. Just what's good for the next election cycle.

This is precisely why the government should have no role in running industries or "managing" the economy. How many times do we need to learn this lesson?

[KingShamus]

"Congressional justification for subsidizing the dealerships? Jobs. Supposedly 170,000 of them."

So tens of billions of federal dollars were used to create or save 170,000 jobs.

If only there were some private-sector mechanism or...market, if you will...that could employ people in a more cost-efficient, less taxpayer-based way.

[J sub D]

Wait till the inevitable plant closings. It'll be a howl.

[John-David]

I hate to say it, but this makes a better case for campaign finance reform than any story I've seen in a while.

[Seward]

Car dealers in many ways are a more powerful lobby than the auto makers are; particularly at the state level.

[Johnny Longtorso (aka jsh)]

I can't decide which is more fitting, the "Too Big To Fail" or the "Government Motors" tshirt.....

http://despair.com/toobigtofail.html

http://despair.com/gomo.html

[Tulpa]

Newsflash: We already have CFR and this still happens.

Money will stop interfering with government precisely when government stops interfering with money.

[Peter]

I hate to say it, but this makes a better case for campaign finance reform than any story I've seen in a while.

I don't think new regulation would fix this, they would find a way around it like they always do, if they would even honestly try to regulate themselves.

We need a president who won't stand for earmarks and all of this pandering to lobbyists. If only someone would campaign on this issue, because we know presidents always hold to the words they used to get the votes in the first place.

[Mike in PA]

Please let this echo chamber of bad policy come back to us soon! It usually takes too long for the ones to initiate these things to have to suffer the consequences... It seems, though, that the consequences may be coming faster and faster.

Goddammit, government, Atlas Shrugged was not an instruction manual.

It sure looks like they believe it is. And they're counting on no strikers.

[John-David]

Tulpa, Peter,

I didn't say it made me want more or better CFR, just that it makes a persuasive case for it.

[Flex Nasty B.I.G.]

Please let this echo chamber of bad policy come back to us soon! It usually takes too long for the ones to initiate these things to have to suffer the consequences... It seems, though, that the consequences may be coming faster and faster.

Brilliant observation. The Internet is accelerating everything, however Congressional terms are the same length they have been for 200-and-some years. That's gotta be good for us.

[Episiarch]

We're becoming a third world country politics-wise with a superpower military and a tanking economy. What could go wrong?

[Johnny Longtorso (aka jsh)]

We're becoming a third world country politics-wise with a superpower military and a tanking economy. What could go wrong?

In other words, Russia, right down to the Czars.

[Pro Libertate]

So, where's the American Rubicon? Because I plan to set up cameras and microphones there so I can catch the guy who, realizing that our system now permits anything, mutters Alea iacta est. I'd like some advance warning, see.

[Johnny Longtorso (aka jsh)]

So, where's the American Rubicon?

About 100 miles behind where we are now.

[Malto Dextrin]

This is all so much better than having the economy run by selfish, greedy businessmen.

[P Brooks]

Corporations are evil. Politicians are noble.

Jeepers, how many times do you guys have to be told?

[Lost_In_Translation]

Yay, not only do I bailout GM, I get to bail out the dealers too.

The beatings will continue until morale improves.

[brotherben]

Dang! I am so proud of Malto Dextrin and P Brooks for finally starting to see reality as it is in my world. ???

[Hazel Meade]

Good news. This will further ram home the point that state ownership of anything is a guarenteed disaster. GM is going to end up back in bankruptcy even sooner.

[Mike Laursen]

EconTalk had an interesting podcast about how the dealership franchising system works. Most states have laws that forbid the auto manufacturer from unilaterally ending the franchise; one of the reasons GM kept selling its more obscure, money-losing brands. Bankruptcy was GM's big hope for getting out of a bunch of those franchise deals.

[CatoTheElder]

The only cost-cutting measure taken by GM and its new owners was to stiff its creditors.

When he was in Ghana, Obama seemed to understand how investors respond to governments skimming 20% off the top of investment returns. How is that he does not understand how investors respond to a government-mandated 90% forfeiture of the investment itself.

If Obama keeps this up, the US will have a political risk rating similar to Nigeria and Pakistan.

(I hope I haven't offended any Nigerians or Pakistanis.)