Club Statement on the Auto Bailout

Club for Growth Pleased with Rejection of Auto Bailout, Urges White House to “Just Say No”

Washington – The Club for Growth is pleased with the Senate’s rejection of the auto bailout. It is, at least, a temporary victory for American taxpayers. While Senator’s Corker’s substantive proposals might be the reforms needed to save the auto companies, these changes should happen in the context of a bankruptcy proceeding, not a taxpayer bailout.

At the same time, the Club for Growth urges the White House to reject plans to use a piece of the $700 billion TARP money to salvage the auto bailout. This would be a grievous mistake.

For starters, the auto companies are not “too big to fail.” America is lucky to have a thriving car manufacturing industry—it just happens to not be in Detroit. The bankruptcy of the big three auto companies will not have systematic catastrophic effects on the overall economy.

Second, bankruptcy is not a death sentence. It will give these companies an opportunity to restructure their balance sheets. In fact, bankruptcy will give them a new lease on life so that they will not need government financing.

Finally, as the federal government considers stepping in to save the day, it is important to consider how we got to the mess we’re in. Management and labor certainly deserve their share of the blame, but so does the government itself. Congressionally-imposed CAFE standards forced auto companies to make cars Americans don’t want to buy, contributing significantly to the companies’ troubles. How can we trust the federal government to save the auto companies when they played a major role in nearly killing them?

“The last thing the American taxpayers need is the federal government managing the auto industry from Washington,” said Club for Growth President Pat Toomey. “The federal government’s interference in the past is part of the reason they are in this mess. We urge the White House to drop plans to reconstruct the auto bailout in some other form. As Nancy Reagan used to say, ‘Just say no.’”