The men's NCAA Basketball Championship Final Four may be the only good news headed to Detroit this week, as nearby Michigan State University has made a surprising run to the semifinals. But even this small sports interlude and accompanying economic influx will not compensate for the lack of bailout funds the city’s automakers believed were destined for their coffers. On Monday, the White House denied bailout funds to Chrysler and General Motors on the grounds that they had not submitted acceptable proposals for restoring their businesses to prosperity. While we should admire the financial restraint shown by the Obama administration in for once denying funds to a company that has not merited them, the fact that it has displayed good sense in this scenario should not outweigh the alarming scope of power being assumed by the executive branch. Desperate times may call for desperate measures, but they do not excuse the setting of bad precedents.
The alarming degree of involvement assumed by the Obama administration in economic affairs stems from a climate that has encouraged excessive government involvement in the economy. This has been discussed in other articles, and merits no further venting of frustration here. Suffice it to say that large government bailouts are in and of themselves a bad precedent to be setting, and have not to date demonstrated a reliable track record. These bailouts, however, have remained more in the domain of Congress, the body to which the constitution delegates the power of running the nation’s finances. In the case of this auto-industry bailout, however, the executive branch of the government has taken an overly prominent role. This executive involvement began when the Bush administration mandated that the final say on whether or not car manufacturers will receive their bailout money would pass through the White House. Current reports do not even mention Congress as having a significant role in dispensing the money collected by the taxpayers. They have been almost entirely cut out of the process. To cede any responsibility for releasing government funds to the executive branch, even in a time of severe economic strife, is a dangerous move. It risks blurring the lines that determine who controls the taxpayer’s money: the directly elected representatives of the people, or a single indirectly elected individual (and an executive branch full of unelected officials).
The excessively active role of the White House in the nation’s economy is demonstrated by the disposal of General Motors CEO Rick Wagoner. Reports agree that President Obama ordered Wagoner to resign, though reports that his resignation were a prerequisite for receiving more bailout funds have been denied, according to a Fox News report. The fact that the President of the United States can direct the head of a company to resign and has the necessary control over the national purse strings to make this happen indicates that the President has too much direct influence on the minutiae of the economy. Obama said today that the government has “no interest in running GM.” But when the President can personally discharge corporate executives and determine whether or not a company’s business plan is acceptable, then the difference is awfully difficult to determine.
The dangers associated with the executive involvement in the economy are that of a bloated, overly powerful executive branch wielding unchecked power. One of the flaws of the Bush administration was a war conducted almost exclusively by the White House. The new bailout measures extend this excessive executive power into the economy. The danger is especially troubling under the current circumstances, with both the executive and legislative branches under the control of the same party. With the economy still teetering, and the memories of huge bonuses to failing AIG executives prominent in the public mind, congressional Democrats will probably not oppose efforts by the Obama White House to deal harshly with the struggling car companies. Thus the expansive power of the executive branch will not meet a strong challenge from the legislative branch. In the long term, maybe nothing will come of this, and when the need for the government as a lender of last resort ends, the White House will refrain from interfering in the operations of individual corporations. But should the economic crisis become prolonged, along the lines of the Great Depression, then the executive involvement with GM might be only the first instance of the President directly influencing the direction of a company. While the White House showed good judgment this time in exercising its control over bailout funds, nothing guarantees that will be the case in the future. The New Deal left us with a legacy of the federal government expanding its role in an economic crisis. Let’s hope the current crisis will not leave us with an increasingly economically powerful executive branch.
Robby Colby’s column appears Thursdays in The Cavalier Daily. He can be reached at r.colby@cavalierdaily.com.
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