As Christmas approached, the news went from bad to worse. Having laid off twelve thousand workers in 2008, Chrysler announced in December that it would halt production at all thirty of its manufacturing plants. Dangerously low on cash and headed for bankruptcy, the company seemed unlikely to survive very far into 2009.
President Bush was preparing to leave office, but the emergency couldn’t wait for the transition. In December he boldly initiated a $17.4 billion bailout loan package, saying, “Bankruptcy now would lead to a disorderly liquidation of American auto companies.” To me, “disorderly liquidation” sounded like a cartoon whirlpool, with cars and workers waving their arms for help in the downward spiral toward the drain. A simpler way to put it was that millions of lives and hundreds of communities stood to be ruined. Yet the move to prevent this disaster was clearly not a political winner—something about the word “bailout” makes voters allergic—and the Senate was loath to vote for the package. When Congress refused to authorize funds, Bush acted unilaterally, rewiring money that Congress had authorized, with other purposes in mind, as part of the TARP bank rescue.
The new Democratic administration planned to continue the unpopular policy, but as President Obama took office in January 2009, it was clear that the funding was not enough to hold off a collapse. The new president faced an immediate choice about whether to put more cash into supporting the auto industry. The politics could not have been worse: one poll found that 72 percent of Americans were against further loans. Even in South Bend, many voters viewed the idea skeptically. The bank bailout had left a bad taste in our mouths, and some thought more cash into the auto rescue would just be throwing good money after bad. Bumper stickers began to appear around town with a sarcastic contribution to the debate: BAIL OUT STUDEBAKER. Within the White House, most of Obama’s economic advisers were opposed. They didn’t believe Chrysler could survive even with the additional loans. But Obama decided to proceed anyway, adding funding while helping to broker an alliance between Chrysler and Fiat to keep it in business.
And it worked. The newly formed, post-bankruptcy version of Chrysler was able to crawl, then walk, then run, and eventually the company exceeded expectations for sales and growth. And the auto industry comeback helped lead the overall economic recovery of the country. By the fall of 2010, all of the laid-off workers had been called back, and unemployment started moving back to normal levels. And with remarkable speed, the government had recovered most of the taxpayer money that had gone into the deal.
By 2012, this once-unpopular policy had come to be seen as a clear win. Obama used it as a cudgel against his opponent, Mitt Romney, who had opined against the bailout in a 2008 op-ed entitled “Let Detroit Go Bankrupt.” In 2008, that had clearly been the safe position to take, but by 2012 voters understood that bold action had been needed. The tables had turned, and now Romney was left trying to explain away his previous view. When it came to health care, Romney refused to admit that he was the true father of what came to be known as Obamacare. But when it came to the auto industry, the reverse was true: his campaign actually tried to take credit for the bailout he had once opposed. A campaign spokesman said of the structured bankruptcy: “Mitt Romney had the idea first.” To be fair, Romney was making some nuanced and sensible points in his article about the need for Detroit to modernize, but events had disproven his bottom-line 2008 prediction: “If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye.”
I knew what South Bend had to deal with after losing just one car company. Even now I shudder to think of what would have happened to the industrial Midwest if the entire American auto sector had been allowed to fall apart. South Bend’s current renaissance would have been impossible; in fact, it’s doubtful that the Great Recession would have been reversed at all.
MY CAREER IN ELECTED POLITICS, as I mentioned earlier, began in the midst of this American economic drama. What pulled me in was a weird subplot to the remarkable rescue: a lawsuit that almost stopped the Chrysler bankruptcy dead in its tracks. At work one day in the spring of 2009, I was calculating the effects of energy efficiency policies on utility balance sheets when I needed a break. The spreadsheet went into the background and I flicked through the news. An article caught my eye: “Indiana Pensioners Object to Chrysler Sale.” I clicked and read the unbelievable news that the state treasurer of Indiana, Richard Mourdock, was going to sue, demanding that a judge block the bankruptcy and liquidate Chrysler instead. In other words, an elected official in Indiana was attempting to stop the president from saving the livelihoods of thousands of Indiana families.
Mourdock was no household name even in Indiana, but if you followed our state’s politics closely, then you could see him doing this sort of thing. There was something genial and earnest about him, but you could also read in his eyes the fixations of a fierce ideologue. Trained as a geologist, he had become a coal company executive and then a perennial candidate, trying three times unsuccessfully to win southwest Indiana’s congressional seat. He finally landed a commissioner position in Vanderburgh County, and, after a couple other unsuccessful campaigns for different offices, managed to become treasurer in 2006. Through his many races, he established the reputation of a strong conservative, making it clear that bipartisanship was not his thing. He once told a cable news host that “bipartisanship ought to consist of Democrats coming to the Republican point of view,” adding that “to me, the highlight of politics, frankly, is to inflict my opinion on someone else.”
You might wonder how such partisanship could possibly play into a job as technical and non-ideological as state treasurer, whose main role is to manage the state’s pension funds for government employees and teachers. But someone with a deep enough ideological worldview, coupled with strong ambitions to run for something bigger, can always find a way to use an office—any office—to make a name for himself.
Mourdock was a purist when it came to free markets, and therefore was totally against the idea of government playing a role in the economy. The auto bailout was a Bush-initiated program designed to hold off a possible depression, but that didn’t make it any more acceptable in Mourdock’s view. Even worse, the terms of the negotiated bankruptcy were favorable to the United Auto Workers, anathema to a dyed-in-the-wool conservative who viewed organized labor with contempt.
Cleverly, Mourdock realized that Indiana’s pension funds owned some Chrysler bonds, and reasoned that this might give him standing in court to challenge the deal. When else would an obscure state treasurer get a chance not only to assert free-market principles and deal a blow to labor, but also to provoke a showdown with the hated Obama administration over a major policy priority? The temptation was irresistible, and so Mourdock went to court.