The True Cost Of The Auto Bailout

By Matt Patterson and Crissy Brown

Once upon a time, there was a company called General Motors. It made cars. But the company failed to adjust to changing market conditions, and that, combined with the high cost of its unionized workforce, drove it to insolvency. But before the doors were shuttered forever, a great and benevolent benefactor swooped in.

That benefactor was you — the American taxpayer..

It was you who stepped in back in 2008 and flooded GM with billions from the Troubled Asset Relief Program (TARP), a desperate attempt to shore up a variety of decrepit institutions whose imminent collapse threatened the entire U.S. economy (or so we were told). The initial bailout was followed in summer 2009 with another round of auto stimulus; all told, the taxpayer tab for General Motors bailout was a cool $50.7 billion.

What did we get for that money? Some jobs were saved. But President Barack Obama loves to embellish what the bailout actually achieved. He claimed at an April campaign event, for example, the bailout “saved probably a million jobs” and that “GM is now the No. 1 automaker again in the world.”

In truth, GM employed only 91,000 workers in the U.S. before it entered into bankruptcy in the summer of 2009. As John Lott notes for National Review, “[y]ou can reach a 400,000 total by assuming all of GM’s jobs, as well as all the jobs of its parts suppliers and car dealers, would have been lost.” In 2011, the entire U.S. auto industry employed only 717,000 people.

Ironically, that money could have supported a million households for about a year. For $50 billion, we could have given the average household income for 2011 — $50,678 — to 980,392 families.

That wouldn’t make much sense, of course. But neither did it make much sense to give all that money to an automaker. At least the families could’ve gotten something from it — paying down debt, tuition, etc.

Moreover, the government was not even fair about how it distributed our money. In 2009, the Treasury Department secured the pensions of union employees at Delphi — GM’s chief parts supplier — but let pensions of Delphi’s 20,000 non-unionized workers go down. Why would unionized workers get preferential treatment from the government?

Money, of course.

According to, in 2008, the United Auto Workers (UAW) political action committee spent $13 million total on the election, including $2 million to candidates for the House and $171,000 for Senate candidates. About 99 percent of this campaign cash went to Democrats.

So unions got serious bang for their campaign contribution buck. But what about taxpayers? Have we gotten enough bang for our bailout buck? And what about the opportunity cost? To put it another way, what else could we have bought with the bailout money besides a failed car company?

How many lives could $50 billion save? According to, more than “7.5 million children under the age of 5 die from malnutrition and mostly preventable diseases,” every year. Another 1.6 million people still die from pneumococcal diseases every year, making it the No.1 vaccine-preventable cause of death worldwide.” As Bill Gates points out in an interview with David Williams in the U.K’s Independent, the cost to prevent these types of diseases is vanishingly small, from the Western perspective: “Vaccines are … relatively inexpensive – polio vaccines are now available for 13 cents per dose, measles for 23 cents and meningitis vaccines are available for less than 50 cents.”

And it’s not like the U.S. government is flush. National debt now exceeds $16 trillion — more than the total of our GDP. Uncle Sam borrows 42 cents of every dollar he spends — about $4 billion per day.

Beyond the actual dollar amount of the auto bailout, there’s another intangible, but nonetheless steep, cost that often goes overlooked.  The higher-ups at GM have decided they now want out of their Faustian bargain with the federal government, not least because they perceive their association with Uncle Sam has tainted their reputation with consumers and investors.

So in the end, yes, the auto bailout saved some jobs. But let’s be more specific — it was really a jobs program for Obama’s union buddies. And as much as candidates of both parties use the bailout as political football, it also is ultimately a jobs program for politicians.

Which just goes to prove not all jobs are created equal, and not all jobs are worth saving.