To chants of “Four more years! Four more years!”, President Obama gave an impassioned defense of his auto bailout Wednesday. In front of a raucous crowd at the United Auto Workers conference in Washington, D.C., Obama said, “It wasn’t popular. And it wasn’t what I ran for president to do. … But now, three years later, that bet is paying off.” Obama got one thing right in that statement: Spending billions of tax dollars bailing out the auto companies rendered uncompetitive by the UAW and federal regulatory burdens wasn’t popular. And it still isn’t. According to a National Journal poll released earlier this week, 55 percent of Americans believe General Motors and Chrysler “should have been allowed to succeed or fail on their own.” The number was even higher among independents, 58 percent of whom said they were against the bailouts.
And for whom exactly is Obama’s “bet” on GM and Chrysler paying off? Not for taxpayers. Obama wagered $85 billion on the two auto companies, and his own Treasury Department has predicted that taxpayers will never see at least $24.77 billion being repaid. That works out to about $95,000 for every Chrysler and GM employee. If Obama gave every employee at The Washington Examiner $95,000, we’d probably be chanting “four more years,” too.
And that doesn’t include the $13 billion in tax benefits General Motors will receive over the next decade, thanks to special considerations from the Internal Revenue Service. Add those forgone revenues in, and the bottom line auto bailout loss is closer to $40 billion.
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So what did U.S. taxpayers get for their $40 billion? Not much. Obama claims his intervention saved 1 million jobs, but that claim is difficult to justify. It assumes, for example, that if General Motor and Chrysler had gone through Chapter 11 bankruptcy without government intervention, then all of their employees, and all the workers of their supplying firms, would have been summarily fired and unable to find work. That is a raw misrepresentation, and the president knows it.
And then there is the damage Obama did to the rule of law by interfering with Chrysler’s bankruptcy process. A linchpin of U.S. bankruptcy law is the absolute priority of secured creditors. If creditors aren’t 100 percent assured they will get their money back first in the event of a bankruptcy, no one would ever lend to troubled companies except at crippling interest rates. But by force of office, Obama violated this rule, forcing Chrysler’s secured creditors to take 29 cents on the dollar. This was an unprecedented violation of contract law.
And whom did this intervention benefit? The same union members chanting Wednesday for Obama’s re-election. United Auto Workers members got 100 percent of their pension and health benefits honored. Nonunion employees lost up to 70 percent of their pensions, and all of their health benefits. “Looking out for one another — that’s a value,” Obama told his UAW fans. But looking out for the 93 percent of American workers who aren’t union members is not an Obama value.
