The Washington car wreck

Holman Jenkins:

The wrong folks were in the witness chairs in last week's congressional hearings on auto doom. A fantastic moment was Massachusetts Rep. Stephen Lynch assailing Rick Wagoner about whether GM was asking China for a bailout too. The implication seemed to be that GM can't afford its inflated UAW pay packages because it's squandering money to build cars in China.

Mr. Wagoner mildly answered that GM's China operations are profitable. They actually help to underwrite the massive losses in the U.S.

Mr. Lynch showed no sign he was actually listening, having illustrated his disapproval of foreigners. He didn't ask the obvious question: If GM can make cars profitably in China, why doesn't GM import them to the U.S.?

For that matter, any of the brainpans on the Hill might have asked why Ford and GM managed to build viable auto businesses all over the world but not in North America.

You don't need the Hubble telescope to tell the answer: The UAW is present only in the U.S., not all over the world.

What you wouldn't know is that the single biggest factor in preserving the UAW's monopolistic power has not been labor law but Congress's fuel-economy rules. These effectively have required the Big Three to lose tens of billions making small cars at a loss in UAW factories. Not only were the companies obliged to forgo profits they might have earned importing such cars, but CAFE deprived them of crucial leverage to control labor costs by threatening to move jobs to a factory in Spain or Taiwan or Poland. (Let's face it, that's what other successful U.S. manufacturers do.)

All this was deliberately designed to give the UAW the means to defend uncompetitive wages in the face of a globalizing auto business. It had nothing to do with making sure Americans have high-mileage cars. Yet not a single legislator last week breathed a hint of recognition that something might be behind Detroit's woes other than an improbable series of "stupid decisions" (as another Massachusetts congressman put it) by 18 CEOs over 30 years.

There's a larger lesson here for the Obama administration. A whole lot of Rube Goldbergism is coming home to roost, in the auto business, in the mortgage market, in the health-care market, in farm policy. We need to simple-down. The economy has a giant adjustment ahead, paying off debts, going from a heavy absorber of foreign capital and goods to a rebalanced relationship with the world.

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Democrats are the ones who don't trust markets and then blame markets when their tinkering backfires. But, how inept have the Republicans been in tagging Democrats with the responsibility for the mess created by Democrat meddling. The last election gives the answer.

The first lesson is that the Democrats never accept responsibility for the messes they make, and they are very good at shifting blame elsewhere when their screw ups can no longer be ignored.

Most of the time our economy is robust enough to work around the Democrat meddling. But when it become fragile the mess becomes exposed and the Barney Franks of the Democrat party go on offense in blaming others. You can see it now in the finance and auto business as well as in the schools.