Should US bail out businesses? Treasury chief says 'sometimes'
"In principle," says G. William Miller, "the government should not step in to give financial aid to a troubled company." Not a surprising statement from a man who headed Textron Inc., one of America's huge conglomerates, nourished by the US version of free enterprise.
But Mr. Miller now is Treasury Secretary to President Carter, whose administration is nibbling at the idea of an emerging "partnership" between government and industries needing help.
If "certain criteria" can be met, said Mr. Miller in an interview, government help may be the only way to "reorganize a major firm, outside bankruptcy":
* An ailing firm, or industry, he said, "should have enough impact, regional or national, to do serious harm to the community at large," should it fail.
In such a "very unique" situation, said the Treasury chief, "there may be a community interest in cushioning that loss."
Chrysler, in his view, is such a case -- a company making "a high-ticket, durable product, requiring a franchise system to provide sales and service."
The Detroit automaker, struggling to survive until it gets a competitive line of small cars on the road, now operates under a $1.5 billion US government loan guarantee.
* Government, Mr. Miller said, must ensure that the nation "retains an industrial capacity that the United States should not lose."
Here he cited Conrail -- the massive, government-backed reorganization of bankrupt US railroads in 1975 -- as an example.
Current focus is on the automobile industry as a whole. Slumping sales have thrown nearly a million people out of work in the auto, rubber, glass, steel, and other related industries. It also has closed the doors of many dealership -- the franchise system of which Mr. Miller spoke.
Next comes the huge American steel industry, the victim -- like US carmakers -- of competition from overseas that it cannot meet, at least without some protection from government.
Everyone agrees that steel, again like autos, must modernize to compete with manufacturers in Japan, Taiwan, Europe, and elsewhere.
The question is: To what extent, and in what ways, should government -- which means taxpayers -- help to do the job?
Do government financial props to ailing industries shield management and workers from painful changes, thus postponing -- not hastening -- fundamental adjustment to new market conditions?
"In turning to government," says former Federal Reserve Board chairman Arthur F. Burns, "we overlook powerful forces within the economy." Gradually, he believes, the private sector sets the conditions for recovery.
Meanwhile, Dr. Burns says, government is "doing a great deal already through built-in stabilizers" -- unemployment compensation, trade adjustment programs, food stamps, and other forms of welfare.
Election-year politics colors the whole issue, because of Mr. Carter's recent Detroit announcement of a "historic" compact between government and US carmakers.
On analysis, the President's program offers some financial assistance to automobile firms, dealers, and to city governments, but fails to address fundamental questions of how such a compact would work.
White House promotion of the program is spearheaded by chief domestic adviser Stuart E. Eizenstat, conscious of Mr. Carter's need to attract blue-collar support in industrial states this fall.
Mr. Eizenstat calls the automobile partnership a harbinger of things to come as government and industry team up to revitalize the US economic officials shy away from such enthusiasm, concerned that -- in the present emotional attitude toward Japanese car imports -- restrictions might be placed on trade that later would boomerang against the US.
Treasury Secretary Miller, meanwhile, noted that cooperation between the federal government and the private sector is not a new phenomenon.
Through the Economic Development Administration, Small business Administration, and other agencies, he said, government channels aid regularly to a variety of firms and distressed regions.
Already, he said, an "interface" exists between government and the automobile industry, through laws dictating fuel efficiency, environmental and safety regulations, and the like.