If the president’s Labor Day speech at a General Motors plant in Detroit is any indication, Barack Obama may be hoping to use his administration’s cozy relationship with Big Auto as a boon to his reelection campaign, especially since his efforts to boost the economy and cut unemployment have fallen flat. Here’s what Obama had to say on Monday:
I know it. I’ve seen it. I’ve been to GM’s Hamtramck plant. I’ve been to Chrysler’s Jefferson North Plant. I’ve seen Detroit prove the cynics and the naysayers wrong.
The Obama administration has made the auto bailouts a priority, since expanding the program first started under the Bush administration. For instance, the White House spent a good deal of 2010 (and some of 2011) hyping GM’s electric car, the Chevrolet Volt, including offering a $7,500 tax rebate to consumers who purchased one. Sales of the electric vehicle have been dismal, and many of those sold were purchased by the federal government. That’s just the administration using the power of the government to achieve market effects it desires.
A recently granted Freedom of Information Act request by the Competitive Enterprise Institute (CEI) shows an even friendlier relationship between the Obama White House and GM. On April 21, 2010, GM began airing a television commercial claiming that it had repaid its government loan “in full, with interest, five years ahead of the original schedule.” It was quite a claim that, if true, would have allowed GM to shake off its “Government Motors” moniker and would have validated the Obama administration’s bailout policy.
A CEI complaint to the Federal Trade Commission pointed out that GM had paid back only about ten percent of the loan at the time the ad aired, and that payment had been funded by money GM received from the Troubled Asset Relief Program. The Congressional Budget Office backed this up with its March 2010 report, which stated that GM still owed about $48 billion to the government. The ad was completely misleading about the nature of GM’s debt to the federal government, and it seems that the Treasury Department was involved in coordinating their PR campaign with the company’s.
The FOIA response, satisfied nearly a year after CEI’s request was made, revealed emails starting on March 30, 2010, that showed Treasury Department and White House officials coordinating with GM on the announcement that GM had paid off its loan. “Just talked to GM,” writes Ron Bloom, then a senior Obama aide, in an email to Treasury officials on April 1. “We are set for a meeting at UST [United States Treasury] for 3:00 pm on the 21st.”
Treasury secretary Timothy Geithner issued a press release on April 21, the same day GM’s ad began airing, announcing the company had repaid the Treasury loan. And once lawmakers like Iowa senator Chuck Grassley began challenging GM’s claim, the emails show Treasury working to coordinate a response. It’s the kind of activity that smells of the crony capitalism that Sarah Palin decried last weekend.
The Labor Day speech was just another example of a recent effort to translate the cronyism into a positive reelection message. Back in May, Politico reported that a PR campaign for the auto bailouts could form a cornerstone of the Obama reelection effort. “With General Motors back on its feet — it announced $2 billion in new investments at 18 GM plants Tuesday — and losses from the government’s intervention shaping up to be minimal, Democrats hope to punish Republican presidential candidates for their early opposition,” reporters Ben Smith and Byron Tau wrote. “The party is building the groundwork for that argument in the key swing states of Michigan, Ohio, Indiana and Pennsylvania, and using it to target the blue collar voters whose allegiance Obama has struggled to retain.”
Obama has long been staking his success on the auto industry’s. On November 17, 2010, GM raised $20.1 billion from its initial public offering after being reorganized. The White House immediately sent out its chair of the Council of Economic Advisers, Austan Goolsbee, to herald the “rebirth of the American auto industry.” Citing the president’s “tough decision” to “make a $49 billion investment” in GM, Goolsbee said the government’s intervention helped make the company profitable for the first time in years. (Recently, this statistic was inflated by Obama from “years” to “decades,” a dubious claim that Jonathan Last thoroughly debunked.)
Just days after GM’s IPO, Obama was on the road in Kokomo, Indiana, to continue to sell his bailout policy in a city that has four Chrysler plants. The Washington Post called it a “campaign-style visit” and reported that the administration was claiming its stimulus and auto bailouts were the reason for Kokomo’s unemployment rate drop from 20 percent in 2009 to 12 percent in 2010.
The campaign really ramped up in 2011, though, as the administration began a serious effort to highlight the apparent success of their bailout policy in many important 2012 swing states. At his Facebook town hall on April 21 in Virginia, Obama answered a question from a Facebook employee originally from Detroit by plugging the stimulus and the auto bailouts. “[W]e essentially saved the U.S. auto industry,” he said. The White House weekly address on May 28, delivered by Vice President Joe Biden, “[celebrated] the success of the American auto industry in the wake of Chrysler paying back its loans.” On June 3, Obama visited a Chrysler plant in Toledo, Ohio to praise the bailouts. He did the same on June 28 during a speech on manufacturing at an Alcoa plant in Bettendorf, Iowa. By then, even the automakers were backing away from the administration’s rosy assessments of its policies.
At the same time, other Democrats have been doing their part to show how the Obama administration’s bailout has saved automobile manufacturing jobs. In May 2011, GM announced new investments at plants in Ohio and Kentucky, with the requisite appearances by politicians from those states. That same month the Democratic National Committee began running ads slamming Republican presidential candidates for their criticisms of the auto bailouts. “Thousands of American jobs were saved,” one DNC ad said. “Shuttered plants reopened. Communities are being restored.” Never mind that last month, GM announced it would be closing its assembly plant in Shreveport, Louisiana, while the future of another plant in Spring Hill, Tennessee remains doubtful. In the critical swing states, the auto jobs are safe–for now.
It seems the Democrats are doubling down on their effort to make crony capitalism a campaign theme. Their message is clear: More government involvement in this major industry helps save jobs (while keeping the money flowing to their candidates’ coffers). Will the eventual GOP nominee have a response?
