General Motors’ announcement this week that it will be closing five plants in North America inspired a swift response from President Trump, who has since tweeted multiple times criticizing GM CEO Mary Bara and the company’s move.
President Trump told reporters “the United States saved General Motors.” He did not mention that the auto bailout effectively moved GM into a taxpayer-funded conservatorship for the better part of a decade. Rather than responding to market needs, the company was bound by rules set by short-sighted regulators looking to recoup taxpayers’ unwitting investment in the auto giant.
Luckily, GM is now helmed by a private sector leadership looking to build a car company for the future, not the past. No longer a beneficiary of taxpayers, GM must now evolve along with the market it serves. As such, the company made the tough decision to close factories that primarily made cars no one was buying. In fact, 70 percent of car purchases made in the U.S. are sports utility vehicles or trucks. As such, GM moved to shutter divisions that produce lightweight, small cars such as the Chevy Volt and Cruze.
Many factors contributed to GM’s decision, including the increased production costs thanks to escalating trade tensions and lower gas prices, which have allowed people to stay comfortable in bigger vehicles.
However, rightsizing a workforce during a time of economic strength avoids making a tough decision even harder when the labor ecosystem deteriorates. Just as GM is no longer the same company it was 10 years ago, neither is our economy. With 3.7 percent unemployment and more than 7 million jobs available, workers have never been in a better position to search for work in the modern era. GM’s involuntary underwriters (taxpayers) should be encouraged that GM has emerged from its bailout conditions committed to evolving in a way that allows it to plan and prevent sudden job losses in the future.
What’s more, GM is under fire for closing plants that produce cars no one wants, but we have federal tax policy that provokes the same kind of behavior. GM is a beneficiary of a tax loophole currently up for debate in Congress that allows wealthy car buyers to claim a hefty tax credit for purchasing an electric car. It is particularly troubling that Trump will issue threats about “ending subsidies” for GM but would allow this special interest tax credit to persist in the code.
This tax credit, bundled into a package known as “tax extenders,” expired last year and will be permanently extinct if it is not renewed by the end of the year by Congress. Thanks to efforts over the past few years, combined with the passage of the Tax Cuts and Jobs Act, the list of tax extenders demanding congressional attention has shrunk. However, there are still 30 or so provisions whose future hang in the balance. In particular, now that Republicans only have a few weeks left controlling both chambers, Congress should take this opportunity to continue the work it began with tax reform by eliminating special carve-outs in the code.
Rather than attempting to coerce private business through Twitter, Trump can level the corporate playing field by refusing to extend the electric vehicle tax credit and netting the twin victories of saving taxpayers from footing the bill for foolhardy tax policy and removing an unmerited tax benefit for GM.
Car companies in America are no longer just that. They are technology companies. In some cases, there are more sophisticated computers in our cars than in our homes. This requires intentional investment from companies who want to serve the next generation of American car owners, and it requires public policy that allows a competitive ecosystem where automakers compete with each other for customers, not for government handouts.
Mattie Duppler (@MDuppler) is a contributor to the Washington Examiner’s Beltway Confidential blog. She is the senior fellow for fiscal policy at the National Taxpayers Union. She’s also president of Forward Strategies, a strategic consulting firm.
