After GM, will Obama steer other firms, too?
The Obama administration has begun picking winners and losers in the auto and banking industries. Is this the beginning of a sweeping experiment in industrial policy?Skip to next paragraph
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Judging by the reaction of conservatives, it's a distinct possibility.
"This new reality should send a chill down the spines of all Americans," Investor's Business Daily opined Tuesday, echoing comments from Sen. Bob Corker (R) of Tennessee, who has pushed for a government-sponsored bankruptcy restructuring.
"This is a major power grab by the White House on the heels of another power grab from [Treasury] Secretary [Timothy] Geithner, who asked last week for the freedom to decide on his own which companies are 'systemically' important to our country and worthy of taxpayer investment," the senator wrote in a statement Monday.
The 'loser' tag
Since the Republic began, of course, government has picked winners every time it contracted for muskets or space shuttles. But rarely has it so clearly stuck the loser tag on a functioning American company as it did Monday with Chrysler.
"Chrysler suffers from a number of structural disadvantages that can not be addressed on a standalone basis," the president's auto task force concluded in its assessment released Monday.
The stock market, which doesn't mind government picking winners, tends to get skittish when it starts picking losers. It plunged when the Bush administration tagged Lehman Brothers with the loser label last fall. It fell 3 percent after Mr. Obama made his announcement Monday about GM and Chrysler.
When does it stop?
Perhaps the president is right: GM can recover and Chrysler may be too far gone to go it alone. But industrial policy is a slippery slope.
Having picked winners and losers in the auto industry and banking sector (which could be an outcome of the administration's stress tests on banks), the Bush and Obama administrations have opened the door to a potential flurry of industry bailout requests. [Editor's note: This sentence was changed to include the previous adminstration's actions.] Saying "no" requires political fortitude. Picking the winners is almost impossible.
The economy is just too dynamic to consistently make accurate guesses about its future.
So if you were president for a day, to whom would you give a thumbs up or thumbs down?