By: Jeremy Lott

In the final months of his presidency, George W. Bush has finally found a bailout he doesn’t like. Either that or bailout fatigue is finally setting in on the American body politic and being felt even at the top.

Heads of General Motors, Ford and Chrysler — the Big Three American auto manufacturers — testified before Congress on Tuesday that they need $25 billion in emergency loans. The Drudge Report cheekily labeled the auto execs “beggars on the Hill.” True enough, but remember that the executives had to come to Congress to ask for money because Treasury Secretary Henry Paulson had already turned them down flat.

Paulson defended his decision to Congress. He testified that while it would certainly “not be a good thing” to have “one of the auto companies fail, particularly during this period of time,” he would not use one red cent of the $350 billion to $700 billion at his discretion to deal with the problem.

The Treasury boss explained that he felt “a great responsibility to stick with … the purpose” of the bailout that he’s been charged with overseeing — to prop up America’s troubled financial system. “The auto companies fall outside of that purpose,” Paulson said.

For good measure, Paulson advised lawmakers that they should think hard about appropriating additional funds for Detroit. What was needed, he said, was “a solution that leads to long-term viability, sustainable viability” — and they weren’t likely to get there by simply throwing money at the problem. The firms would need to change the way they do things. More money would merely paper over difficult problems of slumping sales and expensive labor. Injecting more money would be like pumping air into a tire with a gaping hole in it.

Senate Majority Leader Harry Reid (D-Nev.) wasn’t having any of it. “We will not wait until January,” he said, to vote on the auto bailout and other measures meant to cut more checks to industry and poorer Americans.

But help might not be on the way. If the package gets through Congress — a big “if” at this point — President Bush has said he’ll veto it. And even liberal members of Congress are skeptical. Senate Banking Committee Chairman Chris Dodd (D-Conn.), who was quick to promote a bailout for financial firms that had gotten themselves in trouble, called the car companies’ wounds “largely self-inflicted.”

In their criticism of the Detroit bailout, Paulson and Dodd are admitting much that applies to the original bailout. Self-inflicted? Many of the problems that banks are experiencing were certainly self-inflicted. Despite warnings, the banks underwrote countless questionable loans, pretending that it made no difference.

Throwing a lot of money at the bank problem didn’t help matters much. We have seen wild drops in the stock market even after funds were appropriated. Paulson concedes as much in the way he continues to restructure the bailout on the fly. In fact, Treasury may not spend the entire first $350 billion installment of the $700 billion, and it may forgo the pro forma request to Congress for the second. That’s as close as that particular government agency ever gets to admitting error.

Bush could yet fold on this initiative or make a deal that trades a Detroit bailout for something he wants, such as the Colombia Free Trade Agreement. But don’t bet on it. It looks like the next Congress and new administration will have to determine what happens to the auto industry. The question is: Will they have learned the right lessons from the failure of this administration?

Jeremy Lott is author of “The Warm Bucket Brigade: The Story of the American Vice Presidency.”

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