Free Enterprise Undermined in Chrysler Bailout

Passage of the Chrysler bail-out legislation by the Congress revealed clearly the ideological bankruptcy of self-styled political conservatives who say they oppose Big Government and favor the rewards and risks of a free-enterprise system.

The Senate debate on the Chrysler bill should become a classic in the archives of political science. Rarely has the schism between ideological rhetoric and its power structure, both inside and outside the Senate, been greater. There is a reason for this difference–the power structure wanted the taxpayer bail-out for the country’s 10th largest industrial corporation while their politicians in Congress wanted to preserve their ideology on the record if not on the ramparts.

Sen. Barry Goldwater, R-Ariz., who calls himself the conscience of the conservatives, signaled that there would be no real opposition to the Chrysler lobby when he juxtaposed the following statement on the Senate floor with the announcement that he was not even going to remain in the city for the vote:

“I think this is probably the biggest mistake that the Congress has ever made in its history. I think future historians will register this action as a beginning of the end of the free market system in America….The company has been badly run.”

The federal loan guarantee of $1.5 billion passed the Senate by a vote of 53 to 44. It easily could have been defeated, with or without a filibuster, if the opposition’s lip-service had been replaced by a determination to win.

Look at the alignments on the bill. On the advocacy side was, of course, the Chrysler company itself with its multi-million dollar campaign for welfare buying newspaper ads and retaining Washington lobbying firms headed by Democrat Thomas Boggs and Republican William Timmons. Chrysler dealers also were swarming over Capitol Hill. The United Auto Workers, which, Sen. William Proxmire, D-Wis., reminded his colleagues, had opposed the Lockheed bail-out in 1971, rallied its power behind Chrysler management.

Opposed, in theory, to the Chrysler aid legislation were the powerful Big Business Roundtable and the National Association of Manufacturers. In practice, they did not lift a finger on Capitol Hill. The supremely hypocritical U.S. Chamber of Commerce did not even issue a statement in opposition.

Within the Senate, the same pattern prevailed. Describing himself as a “fiscal conservative,” Sen. Paul Laxalt R-Nev., said: “I am opposed to S. 2094, the Chrysler Loan Guarantee Act. In general, I think it is flawed in concept and impractical in application….Where mismanagement becomes a steppingstone to governmental rescue, it is easy to imagine how ingenuity and industry would stagnate.”

But along with Sens. Lowell Weicker, R-Conn.; Jake Garn, R-Utah; Adlai Stevenson, D-Ill.; and Senate Banking Committee Chairman Proxmire, Laxalt satisfied himself with a statement for the record. Earlier, Proxmire had told reporters that the bill was greased and there was no stopping it. He knows better. If he fought as he did against the taxpayer subsidy for the SST, there would have been no Chrysler bill of this kind this year.

One may be assured that the Senate conservatives like Orrin Hatch, R-Utah, or William Armstrong, R-Colo., would not have been so reticent if a consumer protection bill had been pending.

Opponents of the Chrysler bill filled their recitals with arguments that it was a bad precedent, that it was unfair to thousands of failing small businesses which are not given federal bail-outs, that the loan guarantee would not be enough to save Chrysler as a full-line auto manufacturer, that Chrysler could reorganize and scale down to a smaller, efficient company, and that the taxpayers shouldn’t be required to do what the banks would not do.

Laxalt even quoted John McGillicudy, the chairman of Chrysler’s lead bank creditor, Manufacturers Hanover, who said, “We don’t expect to loan money in circumstances in which we don’t expect to be repaid and that’s where the Chrysler Corp. is.”

Conceding the bill’s passage, none of the opponents tried to advance directly the taxpayers’ and consumers’ interests. They permitted $400 million of new bank loan money to have equal rights with those of the taxpayers in case of a foreclosure. They ignored job-producing recommendations to advance the existing national missions of energy efficiency, auto safety and pollution control by conditioning the Chrysler bail-out on a procurement-production program involving Chrysler in the Department of Transportation’s (DOT) practical prototype cars. One of these fuel-efficient, safe, and pollution-controlled cars was designed by Chrysler engineers for DOT.

All that was approved due to the efforts of Sen. Allen Cranston, D-Calif., and Sen. Paul Tsongas, D-Mass., was a six-month study by DOT of the advisability of producing in volume automobiles having these superior characteristics.

What the Congress did do is open another floodgate for a vastly improved loan guarantee climate for sizable business corporations. Already the Department of Commerce is gearing up for a major expansion of additional loan guarantee activity under other recently passed legislation.

Perhaps there is a saving grace to the Chrysler vote in the evening of Dec. 19. Not many senators, whether pro or con, felt very good about what was done. It was not just a feeling that they were in a no-win situation (for if Chrysler survived there certainly would be more troubled giant companies asking for congressional bail-outs, and if Chrysler failed there would be other kinds of recriminations); it was as if a voice was telling them what they knew to be true–namely, that the way to cripple a competitive enterprise system is to give it crutches.