During an appearance last year in Toledo, Ohio, President Obama declared the federal government’s bailout of the U.S. auto industry, including its $49.5 billion “bet” on General Motors, an unqualified success.
That $49.5 billion bet on GM bought the federal government a 61 percent stake in the automaker. And, said the president, speaking to a friendly, unquestioning audience in the Buckeye State, “Three years later, that bet is paying off.”
Well, four years later, that bet is not paying off. Indeed, while the Obama Treasury Department has recouped $38.4 billion it sank into GM, there’s less than zero chance it will recoup the remainder of the nearly $50 billion fronted by the taxpayers.
Indeed, Treasury Deputy Assistant Secretary Tim Bowler announced last week that the department intends to unload its remaining 31.1 million shares of GM common stock by the end of the year. That will bring the federal government’s total recovery from the GM bailout to $39.6 billion.
One needn’t own a gold bracelet from the World Series of Poker to recognize that the government’s bet on GM was a losing proposition. The taxpayers didn’t win. They didn’t break even. In fact, they lost about $10 billion.
“Our actions enabled the industry to rebound,” Mr. Bowler stated last week. And it is a fact that GM in 2011 reclaimed the crown of the world largest automaker, that it posted a record $7.6 billion profit in 2011, that it currently boasts some 212,000 employees.
But it also is a fact that federal tax credits, which artificially stimulated demand for certain GM makes and models like the electrified Chevy Volt, helped the Detroit automaker lead the world in auto sales;
That GM paid absolutely no federal taxes on its ginormous $7.6 billion profit, because of a sweetheart tax break that allowed the automaker to write off roughly $45 billion in post-bankruptcy losses against post-bankruptcy profits;
And that, while GM has created more than 13,000 U.S. jobs since emerging from bankruptcy in 2009, it also created overseas jobs in countries like China, where it broke ground this past June on a new $1.3 billion Cadillac factory, and Mexico, where GM announced this past July it was spending nearly $700 million on three plants.
There is no dispute that the government’s nearly $50 billion GM bailout, along with its $12.5 billion Chrysler bailout and $25 billion low-cost loan to Ford, helped the Big Three automakers overcome the 2007-09 recession (albeit at a total $15 billion loss to the taxpayers).
But other major industries suffered during the Great Recession as much as, if not more than, the auto industry. That includes the homebuilding industry, which lost at least 830,000 jobs during the downturn. It also includes the publishing industry (excluding Internet), which shed more than 100,000 jobs.
The Obama administration did not see fit to provide direct taxpayer bailouts to either the homebuilding or publishing industries, nor most other U.S. industries adversely affected by the Great Recession.
And, no matter the pronouncements by the president and the statement by the Treasury Department’s deputy assistant secretary, the auto industry should have been treated no differently.
— From the Orange County Register