Big-Government Motors
April 1, 2009 | By Nathaniel Ward
General Motors CEO Rick Wagoner announced on Sunday that the Obama administration had asked him to step down, raising many concerns as to just how involved the federal government intends to be. Sunday's announcement made clear who is really calling the shots for General Motors: Washington.
"Did we elect a president or a car salesman?" Heritage Foundation expert Conn Carroll wonders. "Problem is, when we let the government become a market participant, there is no difference"
Heritage's James Gattuso offers a glimmer of hope for those who don't want big government in charge of industry. "Bankruptcy – which would provide a politician-free process for enabling (and forcing) GM and Chrysler to restructure, is being actively considered by the Administration, with the president himself today implying that the two firms may need to use 'our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger.'"
Heritage experts have consistently favored bankruptcy proceedings for Detroit instead of bailouts using funds earmarked for financial recovery. In a recent article, Heritage legal analyst Andrew Grossman cites the numerous advantages of Chapter 11 bankruptcy, including the fact that it's a non-political process.
Although recent developments suggest the Obama Administration may favor bankruptcy,
Grossman warns in a separate article that a speedy bankruptcy for GM puts the company's future at risk. The objective of bankruptcy filing should be reorganization, not swiftness, he argues. One key to proper reorganization is eliminating government funding, as it "threatens to undercut a chief virtue of reorganization in bankruptcy: discipline." Guaranteed government bankruptcy funding provides little incentive for companies to truly restructure.
—Amanda Reinecker
Other Heritage work of note
- As part of its effort to advance conservative ideas, Heritage Foundation experts send their research and analysis directly to Congressional staffers. These messages are getting through: in the average week, 4,500 to 5,000 Heritage e-mail messages are opened in Capitol Hill offices.
- A bill pending in Congress would give "dangerously broad" new powers to the Treasury Secretary, Heritage's Brian Darling writes. The plan "would grant the Treasury Secretary unprecedented powers to allow the seizure of non-bank financial companies if government officials believe the failure of a company would damage the economy." Darling also turns a critical eye on the Treasury's "toxic asset" program, citing his colleagues James Gattuso and David John, who argue that "actions such as the PPIP program should be a last resort."
- The Supreme Court recently ruled that drug companies can be sued even if their products meet FDA approval. Heritage legal expert Hans von Spakovsky argues this may be more harmful than helpful. If federal approval no longer protects drug companies from lawsuits, costs will increase substantially, forcing many manufacturers “to pull the plug on potentially beneficial treatments that present too great a legal risk.”
- Heritage homeland security expert James Carafano notes that while billions of dollars have been poured into homeland security since 9/11, "this spending spree has [not] done much to improve national preparedness or security." Rather than funding "pork-barrel" projects around the country, Carafano urges lawmakers to redirect funds to where they're most useful—"like cooperative law enforcement initiatives to protect our communities along the southern border."
In other news
- Intelligence agencies have evidence that North Korea has developed nuclear weapons that can be delivered by missile, according to news reports.
- Obama administration attorneys have found the proposal to grant Congressional representation to the District of Columbia to be unconstitutional. Attorney General Eric Holder, who supports the idea, has overridden their ruling.
- French President Nicolas Sarkozy threatened to walk out on the G-20 summit meetings should his country's demands for global financial regulations not be met. The Obama administration rightly resists these demands, but instead wants other countries to commit to more "stimulus" spending.
- Sen. John Kerry (D-MA) has called for a ban on importing assault rifles such as the AK-47. The move is justified as an effort to quell the drug-related violence south of the border.
- Secretary of State Hillary Rodham Clinton has addressed the growing tensions between the US and China with a call to improve "the world's most important relationship." She says cooperation between the two economic powerhouses is essential to solving the global financial crisis.
- Iraqi insurgents seem to have found a new life as the United States prepares to withdraw.
- Proposed legislation in the Senate would give bureaucrats in Washington the power to regulate private computer networks in the name of security.
Coming up at Heritage
To attend these or any other events at Heritage please RSVP at Heritage's website. Or you can view these events live online. All times are Eastern.
- On Thursday, April 2 at 11:00 a.m., a panel of experts discusses how to build a culture of enterprise at a time of bailouts and big-government interventionism.
- On Wednesday, April 8 at noon, experts from NASA's Jet Propulsion Laboratory discuss the use of robotics for defense and civilian purposes.
Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. Amanda Reinecker contributed to this report.
