Why betrayal? The Republicans did not say they opposed a bailout on principle under all circumstances, which is what free-market advocates would be expected to say. Rather they said they oppose the House version of the bailout. In its place they favor one in which the United Auto Workers makes bigger concessions.
The Wall Street Journal editorial page said:
Senate Republicans ... asked the auto workers to show they were serious about making Detroit competitive again. In exchange for a lifeline from Washington, [Sen. Bob] Corker wanted the union to set a "date certain" in 2009 for lowering the Detroit Three's hourly labor costs to the average of foreign-owned auto makers in the U.S....What's wrong with the Republican demand? What's wrong is that government has no business trying to abolish the wage differential between domestic and foreign-owned companies, which by the way is smaller than usually reported. (For the lowdown on the wage differential see David Leonhardt's article.)
The union's counteroffer was that it would bring down labor costs in 2011, when its current contracts run out.
It should offend any market advocate to see the government meddling in business-labor relations like this. By all means (well, not all means), work to deregulate and desubsidize business and labor, but do not encourage the state to determine the details of companies' labor relations.
It is hypocritical for Republicans to claim to favor the free market and then to use a bailout as a crowbar to break the union. If you favor the free market, say you favor the free market and oppose all bailouts on principle. If you favor government's breaking unions, say that. But don't sully the free-market position, as the Senate Republicans have done, by conflating the two. Are we to think it would have been some kind of libertarian triumph had the Senate GOP alternative passed?
Cross-posted at Anything Peaceful.