Federal President at the Auto Buffet: With no resistance, he ate the whole thing

Obama at the Auto Buffet. By Holman W Jenkins, Jr.
With no resistance, he ate the whole thing.
WSJ, May 20, 2009

With his latest installment of ever-higher fuel mileage requirements for the auto industry, Barack Obama embraces a momentary, crisis-spawned expansion of the art of the possible, unleavened by any art of the rationally desirable.

Detroit is dependent on Washington loans for survival. The industry's lobbyists and its congressional allies have collapsed in a heap, offering no resistance. So why not go for broke? If you're alone in front of the shrimp buffet, why not eat all the shrimp -- even if it makes you barf later?

Defenders of the Obama administration's Chrysler bankruptcy finagle misguidedly argue that, if not for taxpayer money, the company's secured creditors would have gotten as little or less than they did in the imposed settlement.

They miss the point. Anyone can always imagine an outcome more "fair" than the outcome provided by people duly exercising -- and the legal process duly upholding -- their rights. Fairness in a law-abiding society is due process. In the Chrysler bankruptcy, the administration hijacked the legal forms for a political end that it could have delivered honestly by the government buying Chrysler out of liquidation and handing it to the UAW.

But then Mr. Obama's purposes would have been exposed a little too nakedly for public consumption.

Already, of course, the swim of events has moved on, into deeper and more chaotic waters. The union will own 55% of Chrysler, and it would be quite rational to prefer an additional dollar of wages and benefits to 55 cents of earnings (55 cents being the union's share of a dollar of earnings).

Even this overstates the union's incentive to concern itself with the auto maker's profitability. The Chrysler stake would actually be owned not for the benefit of current workers but for retirees, since its ostensible purpose is to fund retiree health care. Yet power would still rest with a union chief elected exclusively by active members.

The administration at least understands the conflict it has set in motion. Under a reported new Chrysler contract dictated by the White House, the union surrenders its right to strike for the next six years. A redolent fact, though, is that Ron Bloom, the administration's real acting car czar in this case, was a principal in the now-defunct investment banking firm of Keilin & Bloom, which secured the 55% stake for the unions in United Airlines in the mid-1990s.

United's pilots did not strike in pursuit of what eventually became the richest contract in the industry. They did engage in work slowdowns that led to thousands of canceled and delayed flights and ferocious anger among the airline's customers. Pilot leader Rick Dubinsky told management in 2000: "We don't want to kill the golden goose. We just want to choke it by the neck until it gives us every last egg." United filed for bankruptcy two years later.

So far, the Obama administration has yet to lay out its magical thinking on how the homegrown auto makers are to become "viable" when required to subordinate every auto attribute that consumers find desirable in favor of achieving a passenger-car average of 39 miles per gallon by 2016. Nonetheless the answer has quietly seeped out: Taxpayers will write $5,000 or $7,000 rebate checks to other taxpayers to bribe them to buy hybrids and plug-ins at a price that lets Detroit claim it's earning a "profit" on its Obamamobiles.

Mr. Obama was supposed to be smart. His administration was supposed to be a smart administration. But the policy coming out has not been smart. It has been a brute shifting of power to the president's political allies, justified by the shibboleths of copybook liberalism (though Mr. Obama is clever enough to know that nothing he's done will have a meaningful effect on atmospheric carbon or climate change or the country's need for oil imports).

With no overarching philosophy in evidence, the art of the possible has come to define the Obama administration. One thing that has proved possible is an untrammeled power grab over the auto industry. Yet it all seems mainly to testify to the limitations of Saul Alinsky as a political philosopher. The doyen of community organizing, his views profoundly influenced Mr. Obama. The late Alinsky was unsentimental about power, and about accumulating it in order to extract from "the system" benefits for his constituents.

But a president also has to represent the system. He has to care about whether the setup is sustainable and ultimately meets a nation's needs and reflects its values. In delivering unlimited sway over the domestic auto makers to the greens and labor, Mr. Obama is creating a catastrophically unbalanced "system" with no effective pushback on behalf of profits (aka "viability") -- that is, except from consumers, who ultimately will doom his attempt. How so? By declining to pay enough for the forthcoming Obamamobiles to cover the cost of designing and building them.