Romney Unfairly Criticized for Saying Auto Companies Should Have Gone Bankrupt

Back in 2008, Mitt Romney published an editorial in the New York Times saying that American auto companies should go bankrupt. He’s received some criticism for that op-ed, but the criticism is unfair because in fact, under President Obama’s watch, they did go bankrupt. Romney defends his 2008 opinion here, and further criticizes the way the Obama administration handled the bailout. Romney’s initial editorial was arguing that the bankruptcy that did happen should have happened.

The headline of Romney’s op-ed, “Let Detroit Go Bankrupt,” has received as much negative press as the contents of the op-ed. It was the Bush administration that provided an initial bailout of the auto industry, and was the target of Romney’s op-ed, not the Obama administration, which actually did put Chrysler and GM into bankruptcy. What Romney’s headline said should happen, happened. Why is he being criticized?

Romney is critical of the Obama administration’s bailout in his recent follow-up op-ed, saying it was crony capitalism and a payment to “the union bosses who contributed millions to Barack Obama’s election campaign.” But Romney isn’t being criticized for his opposition to the Obama bailout.

Many people don’t understand that bankruptcy isn’t the same thing as going out of business. Most businesses that go into bankruptcy restructure their finances and remain in business, but Romney’s critics make it appear that he was saying Detroit should close up shop.

I’m not writing this to support Romney, the candidate, although on this particular issue I think his criticism of President Obama’s policies is on the mark. Rather, I’m noting it as an odd case of political rhetoric.

I suppose that in politics you just throw up any criticisms of your opponents you can think of, and see which ones stick. In this case critics are criticizing Romney for saying that the bankruptcies that actually happened should have happened. It doesn’t seem that the Obama administration could criticize Romney on this count, and any Republican criticism appears to be arguing against free markets and in favor of government control — what Romney has correctly called crony capitalism.

Where is the logic in this? It’s politics, so maybe it doesn’t need any logic.

Randall G. Holcombe is a Senior Fellow at the Independent Institute, the DeVoe Moore Professor of Economics at Florida State University, and author of the Independent Institute book Liberty in Peril: Democracy and Power in American History.
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