The Big Three and TARP: What Happened to Democracy?

What’s happened to democracy? GM and Chrysler say they desperately need money to avoid bankruptcy in the next few weeks. Treasury Secretary Hank Paulson now says the Big Three “will get the money as quickly as we can prudently do it.”

But didn’t Congress just vote down that money?

Don’t get me wrong. I’m among those who think there’s good reason to give the automakers a $14 billion bridge loan to stave off immediate bankruptcy until they come up with a restructuring plan (although, as I’ve said before, the plan ought to demand real sacrifices from every stakeholder). But I have to tell you, I’m deeply troubled by the administration’s likely decision to give it to them when last week Congress said they can’t have it.

Call me old-fashioned but I believe in the democratic process. Under our Constitution, Congress is in charge of appropriating taxpayer money. If Congress explicitly decides not to appropriate it for a certain purpose, where does the White House get the right to do so anyway by pulling the money out of another bag?

That other bag, by the way – called the Troubled Assets Relief Program, or TARP for short – was enacted to rescue Wall Street, not the automobile industry. Personally, I think there’s more reason to rescue big automakers than big Wall Street banks, but what I want isn’t the issue. It’s what our representatives voted for. When they voted for TARP, at the start of October, they didn’t say to the President: Here’s a $700 billion slush fund to use as you wish. They said: Here’s $700 billion for Wall Street.

If TARP is a slush fund, everything’s arbitrary. We’re no longer a nation of laws; we’re a nation of Treasury and White House officials with hundreds of billions of dollars of taxpayer money to dispense as they see fit. Why rescue autos and not, say, the newspaper industry, which is heading for oblivion. Better yet, why not rescue state and local governments? They’re running short about $100 billion this year and as a result are slashing public services, including the nation’s schools.

Even as it is, TARP is shrouded in secrecy. The Treasury has burned through $335 billion so far, and no one knows exactly how or by what criteria. Why, for example, did it set tough conditions on AIG while giving Citigroup the sweetest deal imaginable?

The dictionary meaning of a “tarp” is something used to cover things up, which is exactly we’ve got.

But our system of government depends on sunlight, transparency, and public awareness. It also depends on Congress exercising its constitutional duty to make laws and the President executing them.

An economic crisis is no excuse for turning our back on democracy.

About Robert Reich 545 Articles

Robert Reich is the nation's 22nd Secretary of Labor and a professor at the University of California at Berkeley.

He has served as labor secretary in the Clinton administration, as an assistant to the solicitor general in the Ford administration and as head of the Federal Trade Commission's policy planning staff during the Carter administration.

He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people.

In 2003, Mr. Reich was awarded the prestigious Vaclev Havel Foundation Prize, by the former Czech president, for his pioneering work in economic and social thought. In 2005, his play, Public Exposure, broke box office records at its world premiere on Cape Cod.

Mr. Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

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