A government-run auto industry?

In one of the most controversial elements of the proposal, Democrats propose banning auto manufacturers accepting financial assistance under the new law from "participating in, pursuing, funding, or supporting in any way any legal challenge (existing or contemplated) to state laws concerning greenhouse gas emission standards."

At a hearing on the energy implications of the auto bailout on Tuesday, Rep. Ed Markey (D) of Massachusetts said he expected a battle over this provision, which the White House opposes. American taxpayers deserve higher fuel economy performance in return for their investment in the auto industry, he said.

"If they're testifying to the effect that they can meet that standard, doesn't it make sense to put their promises technologically into the law, so at least the Sierra Club ... can sue them if they don't meet that standard?" Mr. Markey said at Tuesday's hearing of the Select Committee on Energy Independence and Global Warming. Markey is chair of the committee.

On Monday, the National Resources Defense Council (NRDC) released a report that converted the miles per gallon (m.p.g.) values in the companies' business plans to greenhouse-gas (GHG) emission rates.

If those company projections are accurate, both Ford and GM would "easily meet the 2015 California GHG standards nationwide," the report concludes.

"GM's plan states that it will achieve 2012 fuel economy levels of 37.3 mpg and 27.5 mpg for their new car and light truck fleets, respectively. The projected GHG emission level would enable GM to comply with a national version of the California GHG standards in 2012."

"The issue now is to make sure these are not false promises in exchange for bailout money," says Roland Hwang, NRDC vehicle policy director.

Congressional leaders say they expect to take up a draft version of this bill as early as Wednesday.

"There are two remaining issues that have been discussed with the White House. I'm confident that those matters can be resolved within the next hour or so," said Senate majority leader Harry Reid in a floor statement Tuesday.

Unprecedented intervention

If the draft legislation becomes law, it marks a dramatic move of the federal government into industrial policymaking.

From railroads in the 19th century to huge investments in aerospace and computer technology in the 20th century, the US government has a history of investing in major industries as well as crisis intervention.

"This goes all the way back to the founding of the nation," says Nancy Koehn, a business historian at Harvard Business School.

What's distinctive about the proposed auto bailout is the degree of government involvement. "With the exception of World War II, I cannot recall another instance where government was going to step in and regulate issues such as executive compensation or the use of corporate jets," she adds.

"It's not quite nationalization of our auto industry, but it's getting there," says Joan Claybrook, president of Public Citizen.

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