George W. Bush has come full circle. He started his public career as the beneficiary of a government bailout, and he ends it as the benefactor of another a thousand times it size.
George W. Bush, private citizen, purchased a financially shaky business firm, called the Texas Rangers, in 1989. Using his political connections, he was able to convince taxpayers to fund a new stadium. This taxpayer-funded bailout boosted the value of Bush’s investment from $800,000 to $15 million in nine short years. Not bad for government (funded) work.
I’ve been a Bush supporter over the past eight years. Yes, I was a Steve Forbes supporter during the primary, but after Bush won the nomination, I set aside the stadium corporate welfare and Papa Bush’s tax hike apostasy and gave the nominee the benefit of the doubt.
The results were always mixed. Bush caved to the liberals in 2001, abandoning the supply-side tax cuts he had promised during the campaign. Over the years, Bush caved on Sarbanes-Oxley, McCain-Feingold and Medicaid drug benefits. He caved on pork barrel spending. He threw Cheney under the (natural gas powered) bus and caved on fuel-efficiency mandates and alternate energy. Other than the supply-side tax cuts of 2003–which reportedly originated in Cheney’s office–Bush has caved on virtually every domestic economic issue on which he was pressured.
The bailouts are just the latest examples.
Instead of heeding the advice of men like Larry Kudlow, Steve Forbes and Brian Wesbury, the administration simply refused to recognize the dangers which regulations such as “fair value accounting” posed to credit markets. Many of us warned the White House repeatedly about the dangers of overreaction, overregulation and a “mortgage Sarbox” in response to the credit disruptions. Instead of eliminating the regulatory burdens which were strangling the banking sector, the administration concocted an enormous transfer of money from us to the banks.
Privately, some of us warned them that they money would not work without deregulation; privately, they assured many of us that they were aware of the problems. They got their money, and have done none of the things which they needed to do to erase the financial burdens government tinkering had imposed.
Ditto for “Bailout II: The Rise of the Autos.” I got off the phone with the White House minutes before writing this article. They are no more teachable this morning than they were last summer. Instead of relaxing the fuel-efficiency mandates that have wreaked havoc on the industry, they are reaffirming them. Perhaps it seemed like a good idea last year for Bush to make SUVs more expensive to make, but it hardly looks that way now. At the top of their non-negotiable list are prohibitions against corporate jets and limits on CEO pay. Yes, that’s what we need–stupider CEOs standing in long lines at airports rather than running their companies.
The arguments for this bailout are lame–beyond lame. The only stuff that may have any chance of working (for instance, rationalizing wage scales and getting rid of pay-to-not-work job-banks) are in the “optional” section of the plan. The next administration will decide whether to enforce them, and the next administration is headed by, oh yeah, a hyper pro-union community organizer from Illinois. There will be no car czar, just periodic reports to the incredibly busy Treasury Secretary.
The administration says that once the recession ends, the car companies will be able to survive without further aid. The only problem? GM lost money even during the boom years. When the economy was expanding rapidly after the supply-side tax cuts of 2003, they were spouting red ink. Is anyone seriously convinced that we’re likely to see better economic conditions than those over the next year or two?
The administration and congress say that people will not buy cars from a bankrupt company, even if the bankruptcy is just of the restructuring sort. On what basis do they conclude this? People deal with bankrupt companies all of the time. Large airline companies and steel manufacturers have run for years while in bankruptcy, decades even. I’ve had clients like that in the past. Forget the warranty problem; Warranties are maybe a billion dollars altogether for GM, and those funds can be restricted, even guaranteed, during a Chapter 11.
The President has left his party no choice. They must say no to the remaining funds for the bank bailout, and no to the auto bailout. Let Bush and Obama and the Democratic leadership collectively own the coming stagflation. Let them defend the Japanese-style zombie corporations–not really alive but not allowed to die either–that these bailouts create. Let them defend the inflation Bernanke stokes in his attempt to overcome the stagnation which bad policy creates.
And then, let us offer the American people a genuine choice in 2010, and in 2012. I think they’ll want one.