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Obama - What, Me Meddle

The article argues the following: 1) While Obama said the government would take a hands-off approach to industries, he made exceptions by forcing auto companies to adopt stricter fuel standards and scuttling GM's plan to move headquarters. 2) These exceptions contradicted Obama's claims and fueled Tea Party concerns about government overreach, as the interventions weren't publicly acknowledged. 3) To reduce suspicion, Obama should have explained any exceptions to his hands-off rule and been more transparent about the government's influence as majority owner of GM.

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64 views3 pages

Obama - What, Me Meddle

The article argues the following: 1) While Obama said the government would take a hands-off approach to industries, he made exceptions by forcing auto companies to adopt stricter fuel standards and scuttling GM's plan to move headquarters. 2) These exceptions contradicted Obama's claims and fueled Tea Party concerns about government overreach, as the interventions weren't publicly acknowledged. 3) To reduce suspicion, Obama should have explained any exceptions to his hands-off rule and been more transparent about the government's influence as majority owner of GM.

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rteeha
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© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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http://www.newsweek.com/blogs/kausfiles/2010/11/23/obama-what...

Obama: What, Me Meddle?


The case for Tea Party paranoia.

by Mickey Kaus (/authors/mickey-kaus.html) November 23, 2010

On page 188 of Jon Alter's mostly laudatory Obama instant history


(http://books.simonandschuster.com/Promise/Jonathan-Alter/9781439101193) --which, oddly, has
become more useful now that everyone's searching for clues to Obama's decline--you hit
this passage:

But whatever happened to the American auto companies, the United States would
have a new approach to troubled industries--a moderate, commonsense view, not the
hands-off philosophy of conservatives or the heavily planned industrial policy of the
left. Obama envisioned no fundamental shift in the role of government in business,
and he believed that those who accused him of a power grab either weren't listening
to him or were intent on distorting his views.

Alter doesn't challenge Obama's belief. But six pages earlier, he presents powerful
evidence that more or less proves Obama wrong. On page 182, Alter has just finished
defending the decision to use a prepackaged bankruptcy as the means to rescue Chrysler
and GM. Then comes this:

While he had his foot on their necks, Obama moved aggressively in late spring to
force the auto companies to adopt fuel economy standards (35.5 miles per gallon by
2016, up from 27.5) that they had loudly resisted for decades. Because he considered
reducing dependence on foreign oil to be a national security issue, Obama made an
exception to his promise not to use his leverage to tell Detroit how to build cars.

An exception. Well, all right then! Did Obama tell us he was making this exception at the
time? I don't remember it (which is why Politico had to resort to quoting anonymous
lobbyists (http://www.politico.com/news/stories/1110/44639_Page2.html) suggesting that GM
succumbed to environmentalist pressure from its new majority shareholder). Has Obama
acknowledged that continuing government ownership of a third of GM will give him leverage
in future auto debates--which, at least if they affect energy use, will also be "national
security" issues?

We also know (from Reuters (http://www.reuters.com/article/idUSTRE69U0X820101031) ) that


GM's then-CEO Fritz Henderson's

plan to move GM headquarters from the Renaissance Center to nearby Warren, MI,

1 of 3 11/28/2010 12:26 AM
http://www.newsweek.com/blogs/kausfiles/2010/11/23/obama-what...

was scuttled by the White House auto task force.

Another exception! National security seemingly wasn't involved this time, and (according to
Alter) Obama himself had pledged that this was a matter for GM, not the government, to
decide. But Michigan's congressional delegation objected to the move out of downtown
Detroit.

Obama's Treasury Department was also upset, apparently, when GM CEO Ed Whitacre
bought lender AmeriCredit without giving the government much advance notice. (Here the
problem was apparently that the acquisition might hurt another lender the government
already owned.)

If you think some firms really are "too big to fail," then at least some degree of unseemly
state-corporate comingling and influencing seems inevitable (http://www.newsweek.com/blogs
/kausfiles/2010/11/03/midterm-morning-after-the-walk-of-blame.html) when they do fail (and need
bailing). According to Alter, Obama recognized that this was uncharted territory and tasked
subordinates with drawing up some "rules of the road" to govern these situations. The
result was a report written by Lawrence Summers's deputy Diana Farrell, arguing (in Alter's
words) that "when new management is in place, the government's role would be hands-off."
The trouble is that Obama announced this rule, but then his government made "reluctant"
exceptions pretty much whenever it felt strongly enough. Then the exceptions were covered
up.

And then Obama complained the Tea Partiers who worry about government control didn't
listen to him? Maybe that's because they suspected, rightly, that what he said he was doing
and what his government actually was doing weren't the same thing. He won't meddle
except when he will. But, don't worry, it will be kept secret! It's enough to make even a
non-paranoid anti-corporatist wonder where it all ends--what else is going on behind the
scenes that we don't yet know about?

If Obama was going to break his "hands off" rule and give in to the temptation of
government control, it might have helped tamp down Tea Party paranoia if he'd publicly
announced those exceptions and explained them, no? One of the "rules of the road," you'd
think, should be official awareness that when the government owns 60 percent of a
company, citizens will be suspicious about how it uses its power and might not be satisfied
with righteous general assertions of purity. Extraordinary transparency would seem to be in
order (not just Steve Rattner leaking).

P.S.: The most common "symbol of Obama's overreaching," the firing of GM CEO Rick
Wagoner, probably shouldn't have been controversial. If you were writing "rules of the
road" to govern the bailing out of "too big to fail" firms, surely one rule would be: if a
"too big to fail firm" actually fails and has to seek a bailout, the CEO must lose his
job. Otherwise, where's the penalty that would serve as a deterrence to others (a penalty
normally provided by a bankruptcy court)? Even sacking the CEO is probably insufficient
deterrence--he's only one guy. How about a "clawback" rule requiring all the failed firm's
top executives to give up some substantial portion of their pay and bonuses for the previous
year or two?

2 of 3 11/28/2010 12:26 AM
http://www.newsweek.com/blogs/kausfiles/2010/11/23/obama-what...

Sure, good executives will be hurt by these rules--but that unfairness is outweighed by the
need for long-term deterrence. Plus, even arbitrary rules will be rules, acknowledged and
accepted before the game is played.

Given the inability of Obama to stick by even his own rule, it might be best if they were
written into a statute. ... 7:55 p.m.

___________________________

3 of 3 11/28/2010 12:26 AM

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