The GOP Primary and the Auto Bailouts

There aren't any votes scheduled in the GOP Presidential Primary until Tuesday, Feb. 28, when Michigan and Arizona voters go to the polls.  So instead of looking at the horse race and the Santorum surge, I thought we might take a closer look at the race through the perspective of a single issue, the bailouts for GM and Chrysler.

There were two pieces of high-visibility news on that front in the last week or so:

• Several influenctial Republicans -- mostly notably Karl Rove -- harshly criticized Clint Eastwood for a Super Bowl ad that essentially said, "America is good. Now go buy a Chrysler".  I suspect I wasn't the only one who mistook that new item for something from The Onion.
• Mitt Romney followed up by opening his Michigan campaign with an op-ed piece in the Detroit News that essentially doubled down on his November 2008 call to let Ford and GM go bankrupt, a stance that will get considerable scrutiny in the 2012 primary and general elections, especially in the state of Michigan which has seen an economic rebound since the bailouts.

So what the heck was going on?  The Karl Rove item made Newt Gingrich's moon-base proclamations look pretty tame.  Let's try to take a look and see if we can make a bit more sense of it all, starting with the Clint Eastwood kerfluffle.

I suspect Michigan governor Rick Synder spoke for the great majority of Republicans when he called Rove's criticism of the ad "absolutely silly." But Rove's comments didn't arise in a vacuum. They came as a series of economic reports show that at long last the U.S. economy is beginning to show some genuine job growth after the long downturn of The Great Recession. Karl Rove is a very smart man who understands elections very well, so why did he say something that most of his fellow Republicans would describe as "silly"?

There's a lot of evidence to show that the direction of economic growth and the unemployment rate in the year preceding an election has a greater impact on an incumbent president's chances of re-election than the absolute numbers themselves or even a comparison with the economic statistics at the time a president comes into office. This makes sense. Voters tend to judge an administration on whether it is making things better or worse, and most people have a sense that it takes times for a new administration's policies to be enacted and to have effect.  And the "national mood of America" (however you define it) is always a reflection of where we are now and where we think we're going, not where we've been.

These current-year numbers may be especially critical in this year's election because of the statistical haze the exists over the full record of the Obama administration because of the economic plight of the U.S. and world economy in November 2008. The employment losses of the Great Recession began in February 2008 and reached their peak in the October 2008 - March 2009 time frame, at which point the economy was shedding somewhere around 700,000 jobs per month.

And so, we can all expect to be inundated with a flood of charts and graphs that show economic statistics dating back from either October 2008 (the last full month before Obama was elected), February 2009 (Obama's first full month in office), March 2009 (the first full month after the stimulus act was signed) or even subsequent dates as various pieces of Democratic legislation were enacted.  Normally these sorts of statistical shenanigans have a marginal effect with no real impact on the narrative.  However, the timing of the economic implosion of 2008-2009 creates an enormous difference between October 2008 and March 2009.  For example, the unemployment rate in October 2008 was 6.5% while the unemployment rate for March 2009 (the first full month following the signing of the stimulus bill) was 8.7%. That's an enormous difference.

There are no Marquis of Queensbury rules for statistical presentations in presidential elections, so I leave it to you, gentle reader, to decide which version of statistical reality you prefer.

But in any of those realities, the Obama administration's bailout of the auto industry was one of the hallmark acts of government intervention.  The bailout was severely criticized by most of the Republican Party, especially by Republicans outside of Michigan and the Midwest. It has already become a central point of contention in the 2012 election.  And the assertion that it was mismanaged by Obama has been a central tenet of conventional Republican wisdom over the past several years.

Now let's add something to that combustible mixture: American icon Clint Eastwood ambling in at halftime of the Super Bowl with a raspy reminder that the bailed-out automakers are still here, are now profitable, are growing, and are selling some nifty American-made cars built by American autoworkers.  This is not a narrative that helps your central argument.  And so, Karl Rove did what Karl Rove excels at. He shifted the narrative.  Instead of spending a week or two talking about how great it is that the bailout worked and that the auto industry is growing, most of the chattering classes spent a week talking about how silly it was to criticize Clint Eastwood for a totally awesome ad that made us all want to bolt a truck body on a steel frame, punch a Honda, and then peel out of a driveway in a new muscle car.

And then Whitney died and the news cycle moved on.

Karl Rove is a very smart man.

Mitt Romney is also a very smart man, but he did something that mystified me this week by opening his Michigan campaign with the complaint that the terms of the managed bankruptcy under the Obama auto bailout were far too favorable to autoworkers and retired autoworkers. There were some reasons that may have made sense within the echo chamber of the Republican media and electorate, but it struck me as a position that will be difficult to defend in the general election, and a wasted opportunity for him to change his own narrative arc for the better.

Here are some relevant pieces of the bailout timeline:

November 2008 - Mitt Romney writes New York Times op-ed piece: Let Detroit Go Bankrupt, calling for managed bankruptcy for GM and Chrysler and considerable restructuring of those companies.
December 2008 - President George W. Bush extends loan guarantees to GM and Chrysler.
February 2009 - President Obama convenes auto task force and approves second round of bridge loans.
April-May 2009 - Chrysler and GM go into managed bankruptcy. Both companies later emerge after considerable restructuring, and begin again turning profits and growing.


In Michigan that November 2008 Romney headline was perceived as the equivalent of "Ford to New York: Drop Dead":

So, the NY Times op-ed piece needed to be addressed by Romney before Michiganders voted. And however he characterized the content of his original op-ed piece, this was going to create a major frame for the Michigan primary.

I may have been mistaken about Romney's position after the bailout and in the early stages of the campaign, but I had thought that he had taken a pretty sensible stance along the lines: "I'm glad the Obama administration finally took my advice and proceeded with the badly needed managed bankruptcies that I advised, and that my recommended course of action has led to a resurgence of the American auto industry...."  That would be a pretty good narrative for Romney in which he can take credit for having advised the correct course of action, while also claiming that he would've gotten the process under way sooner, thus leading to a quicker recovery both in Michigan and nationwide.

Instead, he's chosen to characterize the bailouts as a failure. Worse yet, the basis of his criticism is that Obama didn't break the unions, didn't eliminate pension and health benefits for retired autoworkers, and failed to sufficiently protect the corporate profits of the creditors.  It looks to me as if the opportunity to combine criticism of Obama's record with a dose of anti-union rhetoric may have proven irresistable to Romney as he tries to rebuild his crumbling support from the GOP base in Michigan.

But having done so exposes several of his worst weaknesses:

1) Profits over pensions -- Some of the most damning charges of Romney's time in charge of Bain Capital involved the charge that Bain's profits came from bankrupting companies and draining their pension funds, leaving retirees dependent on the social safety net.  Charging that Obama erred by not doing something similar during the auto bailout won't help to immunize him on those charges. Worse yet, it explicitly makes the case to American workers that a President Romney would favor profits over protecting pensions.  In this way Romney has now made the case that Bain's business practices are extremely relevant to his campaign, a connection that Gingrich had trouble making at times.

Romney hasn't changed that narrative. He's made it worse.

2) Pandering -- Doubling down on his criticism of the auto industry bailout may strike some as a bold step in Michigan. And it would certainly be so within a general election.  But in a Republican primary in Michigan, criticism of the UAW is a positive boon.  The GOP and the UAW have a long history of antagonism, so there is no price to be paid in a Republican primary for saying that UAW workers should've come out of the bailout in much worse shape.  And claiming that Obama did something wrong will always be an applause line at a Republican rally.

I don't think Romney did himself any harm with the Republican base with this week's op-ed piece. It reads like a recapitulation of the standard Republican criticisms of the bailout.  But that's the problem.  With an issue at the core of his candidacy, Romney again failed to take advantage of an opportunity to cast himself as a leader or set himself apart from GOP orthodoxy on an issue.  This was a really great opportunity for him to re-set the narrative, and he missed it.

As a piece of practical campaigning on this issue, Mitt Romney would've been much better off declaring that he was right on this issue before Obama was even in office, that he's glad Obama eventually took his advice, and that a Romney presidency would've gotten us to the current situation more quickly and efficiently.

3) With Apologies to Peter King: Nobody likes a Monday-Morning Quarterback -- One of Obama's great weaknesses coming into 2012 has been a narrative that reads something like, "I know it's still bad, but it could've been a lot worse." That's not a real vote-mover. It's very difficult to make a case for election based on what could've happened. Voters are interested in two things: what did happen, and what will happen if you're re-elected.

Now Romney has chosen to make a "could've" case on the bailout issue, when the outcome of the bailout has been generally positive for the auto industry as a whole, auto industry employees, Michigan, the Midwest, and the overall American manufacturing base. Worse yet, Romney has reduced himself to arguing that a different set of timing and mechanics should've been used. His argument isn't that there shouldn't have been a managed bankruptcy, as indeed happened. His argument is that he would've liked to have seen a different process with an outcome that would've been more punitive to the UAW.

Again, this is a place where Romney would've done better to take credit rather than to criticize Obama. Because by framing an argument that the bailout and managed bankruptcies could've been handled better, he has conceded a framework in which the basic success of these actions is a given.

But that's the real problem that Romney has on this issue, and why this issue is a good stand-in for a lot of economic issues in 2012. If the auto industry continues to strengthen in 2012, the argument that the Obama administration's intercession was wrong and unsuccessful continues to weaken. Likewise, if the American economy continues to improve, the argument that the Obama administration's economic policies are wrong and unsuccessful will continue to weaken. Remember, the American electorate has a long history of judging economic success by the current trend and expectations, not by what happened in the past.

To bring this back to the broader campaign, what should we expect if the economic argument for voting Obama out of office is beginning to weaken?

Well, we might just see softening poll numbers for the business-backed candidate, and perhaps a rise in support for a social-conservative candidate who will make an argument against Obama on social issues.

What have we seen this week?

Say, "Hello," to Rick Santorum at the top of the polls.  And with him we see the unexpected emergence of birth control as a campaign issue in 2012.

Interesting times portend before Michigan and Arizona go to the polls.