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Brooks Wilson's Economics Blog: A Political Edge to Dealership Closings?

Thursday, May 28, 2009

A Political Edge to Dealership Closings?

Mark Tapscott, ("Furor grows over partisan car dealer closings," Washington Examiner, May 27, 2009) reports that there may be political overtones to the closing of Chrysler dealerships. Dealerships of Republicans and their campaign contributors seem to be closing in larger numbers than their Democratic rivals. Josh Painter of reports a high correlation between dealership closings and Republican congressional districts ("Dancing with the Dealers 3: Targeting GOP Districts," May 27, 2009). Two reasons for caution come to mind in reporting the story. First, sounds like a blog written by people with a conservative or Republican viewpoint, which might affect their objectivity. Second, I have not seen statistical analysis demonstrating the correlation, and correlation is not causation as the old saying goes. I must note that both writers have offered the necessary disclaimers given their lack of statistical reporting.

If the authors are correct and there is correlation between party affiliation and the closings, this should be a national scandal. It shows the dangers of increased government involvement in the economy--the opportunity to distribute more blatant political favors.

Here are some of Tapscott's observations,
Evidence appears to be mounting that the Obama administration has systematically targeted for closing Chrysler dealers who contributed to Repubicans. What started earlier this week as mainly a rumbling on the Right side of the Blogosphere has gathered some steam today with revelations that among the dealers being shut down are a GOP congressman and closing of competitors to a dealership chain partly owned by former Clinton White House chief of staff Mack McLarty.

The basic issue raised here is this: How do we account for the fact millions of dollars were contributed to GOP candidates by Chrysler who are being closed by the government, but only one has been found so far that is being closed that contributed to the Obama campaign in 2008?...

Also fueling the controversy is the fact the RLJ-McCarty-Landers chain of Arkansas and Missouri dealerships aren't being closed, but many of their local competitors are being eliminated. Go here for a detailed look at this situation. McClarty is the former Clinton senior aide. The "J" is Robert Johnson, founder of the Black Entertainment Television, a heavy Democratic contributor.

A lawyer representing a group of Chrysler dealers who are on the hit list deposed senior Chrysler executives and later told Reuters that he believes the closings have been forced on the company by the White House.

"It became clear to us that Chrysler does not see the wisdom of terminating 25 percent of its dealers. It really wasn't Chrysler's decision. They are under enormous pressure from the President's automotive task force," said attorney Leonard Bellavia.'s Josh Painter has a useful roundup of what has been found so far by a growing number of bloggers digging into what could be a very big story indeed. Also, see my column on this issue and how it fits into the larger context dubbed by the Examiner's Michael Barone as "gangster government."

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