Romney Caught Trying to Swiftboat the Auto Rescue

November 1st, 2012 at 12:48 am

One of the most deceptive jujitsu moves in modern campaign is known as swiftboating: trying to turn one of your opponent’s strengths into a weakness.   Given the centrality of Ohio to electoral success less than a week from today (!), it should be no surprise that the Romney team choose that locale to go after the success of the President’s auto rescue.

Full disclosure: as a member of the President’s economics team I strongly advocated for the rescue, as per both my principal (the Vice-President) and the view held by myself and others that the employment costs would be particularly steep in communities that comprised the relevant supply chains.  When you think about auto jobs, don’t just think about the factory at the end of the line where they assemble the cars and trucks.  Think about all the small and medium size manufacturers that make those parts.

That’s where many of the new jobs in Ohio are coming from and it’s an important piece of evidence for the bailout’s success.  Which makes it catnip for the Romney swiftboaters.

Dana Milbank takes this apart in this AM’s WaPo, but the gist is that Chrysler recently announced that they’d be expanding production of Jeeps—adding new plants—in China to help sell into that market.  Note that they’re not talking about shifting US production overseas.  They’re talking about tapping a trend that I’ve written about before here at OTE: producing closer to your target markets.

But in Romney-world, this became an attack on the President auto rescue because according to the campaign, Chrysler was planning to move all of their US production of Jeeps to China.  Romney:  “I saw a story today that one of the great manufacturers in this state, Jeep, now owned by the Italians, is thinking of moving all production to China.”

Milbank prints the response from an aghast Chrysler exec:

Romney’s fiction was apparently based on a misreading of a Bloomberg News report a few days earlier, which said that Chrysler would resume production in China for the first time since parent Fiat SpA bought the company — in addition to Chrysler’s production in Michigan, Illinois and Ohio.

Let’s set the record straight: Jeep has no intention of shifting production of its Jeep models out of North America to China,” Chrysler executive Gualberto Ranieri wrote in a statement, using italics for emphasis.  “A careful and unbiased reading of the Bloomberg take would have saved unnecessary fantasies and extravagant comments.” Ranieri said the conclusion that it was moving all production to China was “a leap that would be difficult even for professional circus acrobats.”

But what’s particularly ridiculous here is that Romney is criticizing Chrysler’s global expansion.   Since when do conservatives object to that?  Is there anyone who believes for a nanosecond that expansion abroad by US multinational’s would be viewed critically by a Romney administration?

Back here in reality what we should be debating right about now is the relative positions of the candidates on policies that really matter to both auto production here and investment abroad.  Gov. Romney opposed the government’s role in GM and Chrysler’s managed bankruptcy.  Given the absence of private financing at the time, had he been in charge, these companies would have been facing liquidation.  Instead, as the chart shows, the American auto industry has added 250,000 just since its turnaround (and not that this chart is a few months old; autos employment is up to 250K and sales are on track for 15 million this year).

Moreover, on international tax policy there are big, important differences that haven’t gotten enough emphasis so far.  Gov. Romney’s plan is to allow multinationals to avoid paying any American taxes on their overseas earnings, a clear incentive to outsource, and one according to economist Kim Clausing would lead to 800,000 jobs shifted overseas.

Note the difference between this and the Jeep case.  The Chrysler executive cited above explicitly denounced shifting production overseas.  Clausing’s analysis, however, suggest that Romney “territorial” tax plan would incentivize precisely such shifts.

The President’s plan is to increase the tax incentives for producing here, not abroad.  These include a lower corporate tax rate with benefits for manufacturers and for onshoring formerly offshored work, paid for in part by closing loopholes that currently make it cheaper to produce abroad.  Given my view of the most relevant elasticities in play here, the most potentially helpful proposals in this space are President’s minimum tax on foreign earnings (a whack at tax havens) and an end to deferral (where foreign earnings can be endlessly held abroad).

Look, neither candidate should pretend to be against globalization.  It’s deeply woven into the fabric of our economy and our lives and that’s not going to change.  And if successful American companies want to expand abroad to sell more directly in those markets, good for them–they’re not displacing workers here.  It’s especially silly for Romney to take a position against this, and even more so given that his position has nothing to do with the reality of the Jeep case.

But public policies should not increase the incentives to produce abroad.  If anything, they should go the other way.  Obama’s do, Romney’s do not.

QED.

Source: Treas Dept.

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6 comments in reply to "Romney Caught Trying to Swiftboat the Auto Rescue"

  1. Nick Batzdorf says:

    My idea is to allow “repatriation” of money already earned – if half the money is deposited in a federal infrastructure bank for a good long period of time. But going forward, of course you don’t want tax policies that encourage companies to outsource.

    Also, the terms for subtle variations under the Shamefully Fraudulent Political Lies* category are somewhat confusing. I always thought “swiftboating” didn’t have to apply to an opponent’s strength, that it can apply to any lie you advertise over and over until it hangs around his neck? The Jeep fraud is what I would have called a “reverse rove,” where the standard rove is to accuse your opponent of your greatest weaknesses – a tactic Romney used over and over in the debates.

    * The full category title is Shamefully Fraudulent Political Lies That You “Fact-Check” Later After The Damage Is Done and Stupid People Are Repeating Them All Over the Internet.

    Question: why is it perfectly legal to deceive the American public in political advertising but not in product advertising?


  2. mike smitka says:

    Don’t forget dealerships! Parts firms employ 2-3x the number of people assemblers employ, dealers employ more than all of manufacturing. You can download that info from BLS (or go to my website) if FRED doesn’t do it for you. The formal category (dealerships & parts retail) saw an employment nadir of 1.6 mil in Feb 2010, but was up 110,000 jobs to 1.7 mil in Sept 2012, almost all at dealerships rather than parts retailers.

    One item of background: Beijing Jeep (started in 1984 as a joint venture by American Motors, four M&A transitions ago) ceased making Chrysler-Fiat products in 2009, so this is a plan to reenter the market. But look at what’s happening in the US and not just China: car companies tend to make where they sell, and the industry trend is towards greater investment in the US (and more generally NAFTA), not disinvestment, such as VW’s new Chattanooga plant (added here rather than to its existing manufacturing base in Mexico). So moving jeep to China is patently absurd, but just because Romney’s father ran AMC and Romney went to high school in Michigan doesn’t mean that Mitt knows anything about the industry.

    Finally, make the point that his earlier reversal was from doing nothing in 2009 to loan guarantees. But where’s the upside for the taxpayer (never mind that besides the US Treasury and the Fed no one was making loans in 2009, with or without guarantees)? Despite 7 years of campaigning for president, he can’t move away from proposals that would work to the benefit of hedge funds rather than the general public. Rattner, Paulson, Geithner et al. did a good job structuring deals to provide us with upside and not just downside.


  3. Jill SH says:

    Another (embedded/overlooked?) story in all this is that Ohio is one state where a “jobs act” was actually carried out and its very positive effects can be seen: The rescue of the auto industry led to Ohio, with one of the highest unemployment rates–well over 10%–at the crux of this recession, becoming one of the fastest improving state economies, with an unemployment rate now well below the national average and dropping.

    If Ohio all by itself is not a good argument for a federal jobs act, what is?


  4. save_the_rustbelt says:

    The auto bailouts are not universally popular in Ohio and Michigan, especially since the “prepackaged” bankruptcy picked UAW winners and lots of others as losers.

    There was a tradition among GM retirees of investing in GM bonds for security, and they got hosed. Then there is the Delphi white collar retiree pension issue.

    There is a strong belief (backed by 30 years of facts) that the auto companies and the UAW put themselves into the mess by throwing away almost 50% of the US market (ask Brad Delong about his Chevy Citation).

    And of course thousands of small business owners got nothing from the Obama administration or the bailed out banks except harassment by the IRS as they were sinking (lots of store fronts available for rent here, cheap).

    The bailout was necessary due to Wall Street malfeasance. The bailout was not designed or managed well.


    • JohnR says:

      “The bailout was not designed or managed well.”

      I wouldn’t dream of arguing this point. Still, one could say much the same about everything that anybody has done. Hell, the Allied effort in fighting the Second World War was largely not designed or managed well. So, by your logic, it would have been better not to have done it? Most of the time, the choice is between a less-than-optimal effort or no effort at all. An adequate job done now is almost always far, far better than a great job attempted later. Where the blame lies may be interesting; ‘cui bono’ may be important, but when the alternative to survival is absolute disaster, maybe something is better than nothing. It’s easy to criticise Obama; he has certainly been disappointing – but in what ways? Generally by trying to be more Republican. Do you honestly think that an actual Republican administration would have done or will do better than the disappointing effort we have got from Obama? I don’t. I’m extremely confident that it would produce an economic catastrophe.


  5. John T says:

    The Republicans are running their campaign in some kind of parallel universe, where up is down, wrong is right and whatever we said before doesn’t matter. Just trust us. After all this lying they are still neck and neck with the Democrats. What does that tell you about the voters?


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