Bush and the Auto Bailout: A New Era

In bailing out GM and Chrysler Friday by promising $17.4 billion in funds initially meant for TARP programs, President George W. Bush rightfully angered Republicans.

And should have angered us all.

Not only has Bush betrayed any last shred of a sense of limited government conservatism in this step toward nationalization of industries, he has also arguably violated the separation of powers inherent in our form of government.  The government's knee-jerk reactions to the financial crisis are centered on a narrow economic view of the situation.  Bush's response, especially, fails to account for another facet of the crisis: the limited government aspect.

The Legislative branch of government determined that no government funds should go to the automakers.  Bush then stretched authorization language in TARP beyond its boundaries - the funds were authorized for "financial institutions" - in order to act directly contrary to the will of Congress - and arguably beyond his authority as the Executive.  From whence, exactly, the executive power to make a financial bailout of private entities via an appropriation of taxpayer dollars?

I just took an exam Friday where I applied the famous tripartite test from Justice Jackson's concurrence in Youngstown to assess unilateral Executive action where it either has no clear textual basis in the Constitution or is arguably shared power.  It seems Bush's action today places him in Category 3 - where his power is at its lowest ebb, as he acted in direct contravention of the will of Congress.  And he acted domestically.  I view the Youngstown test as providing a court with a stoplight of sorts for assessing presidential action - and I believe a court would find Bush's action in the glare of a red light.  

In my early assessment of this action, Bush certainly seems to have violated the bailout authorization bill.  And I believe it's not out of the question to discuss whether this is an unconstitutional act.   I hope some injured party out there brings suit, if it can overcome the standing hurdles.

Why is this worth fighting?  Why should we care?  Eli L over at University and State called me "a vocal opponent" of the auto bailout - I'm glad to paste that label proudly on my chest.  Here are my reasons in sum:

1.  Limited Government: The federal government, generally, should not have this much involvement in the private economy.

2.  Separation of Powers:  Even if the federal government has this much power, it should not be in the hands of the Executive, but in the hands of Congress - and the auto bailout failed to pass the Senate.  Congress only delegated power to the Executive with respect to the $700 billion for financial institutions in TARP.

3.  Debt:  The short-term sky-is-falling response by the government will saddle our generation with a massive debt crisis on top of existing entitlement crises down the road.  The total federal government outlay during the crisis now weighs in somewhere over $8 trillion by some accounts.

4.  Rejuvenation: Propping up companies that went into the financial crisis in a very weak state artificially avoids the creative destruction necessary for a disease to run its course and permit truly renewed health.

5.  Precedent:  Bush's action in saving Detroit means a line has not been drawn in the sand...and it remains to be seen where the bailouts will stop.

In the end, I think some segments of America will look back at TARP and the hasty, fear-induced $700 billion bailout to the financial sector as a Patriot Act of sorts - a somewhat unwise rapidfire legislative response that has far-reaching implications beyond what any of the supporters even understands at the time.

One final aspect of the auto bailout occurs to me...national defense.  Given the centrality of heavy manufacturing capacity to wartime needs of the nation, I wouldn't be surprised if a military need for the convertible assembly lines of Detroit underlies some of the government decision-making.  A little debate about that issue unfolds here.