Columnists across the political spectrum agree that the auto bailouts were a lot more costly, and a lot less justified, than their supporters have been willing to admit.
In the Wall Street Journal, David Skeel points out that the auto bailouts were much more costly than is commonly assumed. The Obama Administration claims that taxpayers will ultimately lose only $14 billion from the bailouts of GM and Chrysler. But as Skeel notes, that “$14 billion figure omits the cost of the previously accumulated tax losses GM can apply against future profits, thanks to a special post-bailout government gift. The ordinary rule is that these losses can only be preserved after bankruptcy if the company is restructured—not if it’s sold. By waiving this rule, the government saved GM at least $12 billion to $13 billion in future taxes, a large chunk of which . . . came straight out of taxpayers’ pockets.”
Moreover, the politicized way that the administration handled the bailouts (which fleeced bondholders and non-union retirees, leading veteran political commentator Michael Barone call it “gangster government”), had “indirect costs” that were even greater, sending the harmful “message that, if a politically important industry is in trouble, the government may step in” and rip off creditors. As a result, “lenders will be very hesitant to extend credit under these conditions. This will make it much harder, and much more costly, for a company in a politically sensitive industry to borrow money when it is in trouble.”
Moreover, the bailouts weren’t even needed to keep car factories running: “General Motors was a perfectly viable company that could have been restructured under the ordinary reorganization process. . . .Although Chrysler wasn’t nearly so healthy, its best divisions—Jeep in particular—would have survived in a normal bankruptcy, either through restructuring or through a sale to a more viable company.”
The Washington Post’s Charles Lane notes that when Obama claims to have saved jobs through the bailout, he’s playing deceptive numbers games that take credit for jobs created by foreign companies. Obama’s jobs figures cite jobs created by GM and Chrysler’s foreign competitors and their auto dealers, including “not only the Detroit 3, but also all of the plants operated by foreign car makers in the U.S., the entire supply chain and all car dealerships around the country!” (Emphasis Lane’s.)
Obama’s misleading jobs figures bring to mind the Obama Administration’s previously-debunked claims about the $800 billion stimulus package, which it defended by citing imaginary jobs created in 440 non-existent Congressional districts, such as Arizona’s 15th and 86th districts. Meanwhile, economists concluded that the stimulus had wiped out 550,000 jobs in the real world.
The liberal-leaning Lane also notes that GM and Chrysler were artificially propped up by the Japanese earthquake and tsunami, “a natural disaster that crippled their Japanese competitors,” but still didn’t do that well despite that temporary advantage. Their underlying weakness is made clear by the fact that Korean automakers snagged nearly twice as much of the market lost by Japanese automakers as U.S. automakers did.
Earlier, the Washington Post’s liberal editorial board admitted that the Chrysler bailout was a mistake, and that many autoworker jobs would have survived even without a bailout.
Recently-released documents show that the Obama Administration previously deceived the public about the costs and consequences of the GM bailout.
