The Essential L…

The Essential Lesson of the Auto Bailout

What do companies get when they act responsibly? Government-subsidized competition.

On July 5 in the swing state of Ohio, President Obama treated voters to his campaign-2012 synopsis of the 2009 auto industry bailout: “When the American auto industry was on the brink of collapse and more than one million jobs were on the line, Governor Romney said we should just let Detroit go bankrupt.”
His message was clear: The Obama administration’s 2009 decision to bail out the auto industry allegedly saved it from the fate it would have suffered had Romney’s approach—bankruptcy—won the day.
The map below, adapted from the Ohio affiliate of the U.S. Census Bureau, shows automobile assembly plants in the Midwest and South, and helps to illustrate the “industry” in question. Red indicates companies rescued by the bailout; green indicates companies that didn’t participate in the bailout.
Also in his speech, Obama noted that top-down economics doesn’t work, and that risk-taking, hard work, and taking responsibility should be rewarded. The irony in that was easy to miss: The bailout was the government version of top-down economics, and the companies that had responsibly prepared themselves for surviving a downturn were not rewarded, they were penalized.

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