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How the auto industry highlights the wisdom of James Madison

Vehicles pass under a sign at the Oshawa’s General Motors plant Monday, Nov. 26, 2018, in Oshawa, Ontario. General Motors will lay off thousands of factory and white-collar workers in North America and put five plants up for possible closure as it restruc Eduardo Lima, Associated Press

Last week, I wrote about James Madison’s proposal for dealing with special interest groups. In the 10th Federalist Paper, he described such factions as “moral diseases” that could destroy the young United States. Madison argued that the Constitution was the best way to prevent special interest groups from working together “to invade the rights of other citizens.”

His belief was that the only way to protect against this disaster would be to have lots and lots of special interest groups. While that’s counterintuitive to some, Madison expected that having many factions would lead to ever-shifting alliances between them. Sometimes powerful interests would work together and sometimes they would be on opposing sides of an issue. But they would never be able to form a permanent majority and tyrannize others.

Over the past few years, Madison’s wisdom was highlighted by the experience of the U.S. auto industry.

In 2012, national standards for vehicle emissions were established. Recognizing that adjustments are sometimes needed as circumstances change, the Obama Administration plan called for a review of the regulations in 2018.

However, things changed when Donald Trump surprisingly won the 2016 election. Rather than waiting for the new president to take office, Obama’s EPA Administrator Gina McCarthy short-circuited the review process and prematurely finalized the rules.

The auto industry was flummoxed and felt betrayed by that ruling. In a letter to President Trump, the heads of 18 U.S. based auto companies asked for a reinstatement of the rigorous review process. That request was accepted, a victory for the auto companies.

Then, last year, the Trump Administration signaled it would freeze emissions standards at current levels. That created a conflict with California and 13 other states whose laws called for ever stricter standards. Remaining united for a moment, the auto industry begged the Trump Administration and California to compromise by splitting the difference. The last thing they wanted were different sets of rules in different states.

But no compromise was forthcoming, and the industry unity disappeared. Each company calculated its own interests — some sided with the Trump Administration and some with California.

In making their decision, the companies had to deal with more than just the regulations themselves. They had to consider the political risks to their brand. Private internal research showed that the favorability ratings for all the auto companies fell as people learned which side of the fence each company was on. The decline was somewhat larger for companies that sided with the Trump Administration than with those who sided with California.

In this example, the auto companies behaved just as Madison had anticipated. For a while, the 18 auto companies spoke with one voice. But, when the situation changed, they split into two competing camps.

The same point about shifting political alliances can be seen clearly by looking at the Electoral College map. In recent years, the map has shown Democratic candidates winning coastal states while the middle of the country leans decidedly Republican. Sometimes pundits talk as if that Red State/Blue State divide is etched in stone.

However, in the first year that I voted, the dynamics were much different. In 1976, there was no gap between coastal America and “fly-over” country. Instead, there was a dramatic visual divide between eastern and western states. The Republican (Gerald Ford) won the West including California, Oregon, and Washington. Just as unthinkable in today’s world, the Democrat (Jimmy Carter) won the South including Texas.

Again, as Madison expected, alliances change depending upon the circumstances and the issues of the day.

It’s important to recognize that these ever-shifting alliances empower the American people. Consider the fact that public perceptions of even the large auto companies shift depending upon their policy choices. As a result, when these companies enter the public policy arena, they must carefully consider how their actions will impact their existing and potential customers.

In today’s populist era, there’s a lot to discuss about the proper role of large corporations. What responsibilities do they have to the country or community? How should they be regulated? And by whom? Those are topics I’ll be addressing as this column series unfolds. Next week, however, I’ll look at what many of our founders worried about — that the federal government itself might become a dominant special interest group.

Scott Rasmussen is an American political analyst and digital media entrepreneur. He is the author of “The Sun is Still Rising: Politics Has Failed But America Will Not.”