The Auto Bailouts: Still A Huge Loss for Taxpayers, and a Failure in Stemming Unemployment
Columnist Shikha Dalmia explains how the auto bailouts are a huge money loser for taxpayers and the economy as a whole, despite recent earnings by General Motors. She pegs the cost for the “total bailout at up to $105 billion” for General Motors alone, factoring in less publicized costs commonly overlooked in calculating the cost of the federal government’s bailout, such as billions in special tax preferences GM received due to its quasi-governmental status. The Washington Examiner‘s Conn Carroll explains how Chrysler’s recent alleged “payback” of its bailout is phony and how taxpayers still have lost billions on its bailout. Chrysler is effectively using one taxpayer loan to pay off another.
If this massive amount of money had been left in the private sector, and thus spent elsewhere in the economy (rather than used for an auto bailout), it would have preserved far more jobs. There are far fewer jobs now relative to the beginning of the recession than in past “recoveries” — even compared with the massive recession that ended in 1975, which was a bigger worldwide recession in percentage terms.
We previously discussed how General Motors’ alleged payback of taxpayers was phony, and how taxpayers lost an enormous amount on the company that they will never get back.
While spending billions on wasteful auto bailouts, the Obama administration harmed other U.S. industries. It subsidized foreign green jobs at the expense of American jobs, and wiped out jobs in America’s export sector, through a stimulus package that was criticized by many economists.
John Berlau, who studies financial markets, had a grim assessment of the long-run consequences of the GM bailout, saying that the discriminatory way that the administration handled the bailout (such as ripping off the company’s bondholders to benefit the UAW union) set a negative precedent that made investment in American companies riskier, thus reducing investment (and new jobs).