Car Bailouts and Democracy

There has been a bit of a discussion in the blogosphere over whether Treasury’s actions under the TARP in bailing out the car industry should be thought of as anti-democratic. Robert Reich argued this Wednesday and Gordon Smith and David Zaring have addressed the issue—here and here—as well.

I have struggled to follow the discussion. Congress passed the original bailout bill and that created whatever authority it created. Treasury either does or does not have power under the bailout bill to act, but that authority arose in a standard act of our democracy.

Congress subsequently considered a specific bailout bill for the auto industry and failed to enact that legislation. What does that do to the legal authority of Treasury to act under TARP? Absolutely nothing, say it again. An effort to enact a bill that fails can’t have the effect of altering preexisting legislation. The only way for Congress to alter prior legislation is to pass new legislation. The current Congress may believe that the prior legislation doesn’t reach the case that the proposed legislation purports to address, but they can’t implement that understanding of the prior law without enacting new legislation. This is true, as is the case here, when it is precisely the same Congress acting in both contexts, that is to say, when the same Congress has passed the original legislation and has subsequently attempted to pass new legislation to address the purported failure in the first legislation. The failed legislation is just another version of post-enactment legislative history.

Treasury either does or does not have power to act under the original bailout bill as to the car industry. The fact that Congress considered passing legislation directly addressing the car industry doesn’t alter the prior legislative act. All of that is noise. Failed legislation doesn’t alter passed legislation and it is that passed legislation that establishes what Treasury can and cannot do under the TARP.

Comments

[Uzair Kayani]

I agree with Professor Picker. This is an interesting question of statutory interpretation, but I think the post is correct under most interpretive theories.

For textualists the case is simple. The fact that some other legislation (the auto bailout) was considered and rejected does not affect the meaning of the prior legislation (the original bailout statute) in any way. For a textualist, I think that both failed legislation and overlapping legislation are irrelevant to the meaning of a particular statute. Thus, if five statutes regulate the exact same transaction, then the meaning of each statute is entirely independent of the meaning of the four others. The only exception is if a new statute unavoidably conflicts with a prior statute; in these cases the latter statute explicitly or implicitly modifies (or repeals) the prior one.

Under a legislative history approach, the question may be more difficult. Under FDA v. Brown & Williamson, an agency (such as the Treasury?) cannot regulate areas that Congress has otherwise regulated through a comprehensive scheme. For example, In Brown, the Court said that the FDA could not regulate tobacco because there were several other statutes that already regulated that industry. The existence of the tobacco-specific statutes meant that there was a comprehensive alternative scheme to regulate tobacco businesses; the Court felt that this implied a limit on the FDA's power to regulate there. Here, the analogy would be as follows: if there were a comprehensive scheme that already dealt with the auto industry bailout, then the Treasury might be precluded from intervening under the original bailout act. However, we don't face that situation here, precisely because Congress failed to provide an alternative "comprehensive scheme" for car makers.

As a pragmatic matter, the issue is less clear still: it makes sense to use the TARP funds to minimize the turmoil in the economy, but we are still unsure whether the right approach is to prop Detroit up or to let it reorganize or liquidate under market forces. But all this means is that there is no clearly wrong answer here.

[Kimballcorson]

Bailouts for what? So the CEOs can continue to fly to Washington in company jets and the companies can go on producing giant SUVs? Give me a brake! Ha. Without a coherent agenda, they shouldn’t get a dime. Help their suppliers retool for something else instead. The car companies pension obligations sink their ship like nothing else, even their lack of good ideas.