Auto Bailouts Represent a Signature Failure of Obama Administration

 

The auto bailouts have shaped up to be President Obama’s paramount achievement in office.  At least that’s what Obama has been claiming at campaign stops throught the Midwest over the past few months, and what his cheerleaders in the punditocracy have declared. Take for example E.J. Dionne, writing this past September.

Have you noticed that one of the Obama administration’s most successful programs is also its most “socialist” initiative?

…[T]he bailed-out companies have come back, as Dick Cheney might say, big time. In August, GM announced that its second-quarter profits had nearly doubled, to $2.5 billion. To put that in context, in April 2010, GM reported losses of $4.3 billion. Revenue at GM rose 19 percent, to $39.4 billion.

In a sluggish economy, the auto industry is providing us with good news. And this good news was brought to you in part by the government of the United States of America, paid for by taxpayers just like you and me.

We taxpayers will reap rewards, too.

The problem with this narrative, of course, is that there’s no data to support it.  In fact, the numbers tell a very different story.  Reason’s Shikha Dalmia crunches the numbers.

The Treasury Department yesterday  revised its loss estimate for the Government Motors bailout from $14.33 billion to $23.6 billion, thanks to the company’s sinking stock price. GM’s Sept. 30 closing price, on which the new estimate is based, was $20.18, about $13 less than its December IPO price and $35 less than what is needed for taxpayers to break even.

The $23.6 billion represents a 25 percent loss on the feds $60 billion direct “investment” in GM. But that’s not all that taxpayers are on the hook for. As I explained  previously, Uncle Sam’s special GM bankruptcy package allowed the company to write off $45 billion in previous losses going forward. This could work out to as much as $15 billion in tax savings that GM wouldn’t have had had it gone through a normal bankruptcy. Why? Because after bankruptcy, the tax liabilities of companies increase since they have no more losses to write off.

This means that the total hit to taxpayers, who still own about a quarter of the company, could add up to $38.6 billion.

$38.6 billion is bigger than all of the thuggish loans and no-bid contracts and bailouts that Denise Moss outlined here yesterday by a factor of more than 18.  And yet, somehow Obama is not made to feel shame over this disgraceful waste of taxpayer dollars, but is instead permitted to celebrate it as the hallmark of his administration!

There are 12 comments.

  1. The (apathetic) King Prawn Member

    If GM is the most positive thing Obama can say about his presidency then maybe we’re not in that bad of shape going into ’12.

    • #1
    • November 18, 2011, at 5:55 AM PDT
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  2. WI Con Member

    Thanks for that analysis – I never believed the line that GM & Chrysler were coming back better than ever. This is just simply more of those Washington DC accounting tricks.

    Is anyone aware of the percentage or dollar value of federal, state & local fleet purchases in these company ‘turn arounds? I’ve seen only one Chevy Volt and the owner is basically a government contractor working on LEED / ‘Green’ certifications.

    I’ve never seen things this disfunctional. Everything but the military seems broken beyond repair.

    • #2
    • November 18, 2011, at 5:57 AM PDT
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  3. Chris Johnson Inactive

    In fairness, that was E.J. Dionne, rather easy pickings.

    I know that every single person in my home now owes $48,000 dollars on a debt that we didn’t sign for, and I am ashamed. Even if we divide our debts amongst the pets and livestock, we are deeply in arrears and the Boyz are less clueful than at least one of the dogs.

    I have an education, and a budget. I drive a 6-cylinder, gasoline SUV, because I can earn money with it.

    Obama rode around in this, before he ran for President. 8-cylinder Hemi engine and minimal utility.

    Now, except for photo-ops, he rides around in a tank with a Cadillac skin. That’s the person that is adding me and my family on, as a cosigners to his loans. When did I sign this Powerof Attorney over?

    • #3
    • November 18, 2011, at 6:25 AM PDT
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  4. Percival Thatcher

    E.J. has never, and will never, allow something as mundane as facts to get in the way of his vision of our Bright Shiny Socialist Future®.

    The Left never gives up. Every time their solution is tried, it fails, and it is always because they just needed a little more money, or a little more power.

    • #4
    • November 18, 2011, at 7:27 AM PDT
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  5. Give Me Liberty Inactive

    This is no time for truth there is a Democratic President to re-elect!

    CJRun:

    Obama rode around in this, before he ran for President. 8-cylinder Hemi engine and minimal utility.

    That’s how gangstas roll, Holmes. 8^|

    • #5
    • November 18, 2011, at 7:40 AM PDT
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  6. KC Mulville Inactive

    At the end of Obama’s first year, the country was in a financial mess. He could say, with good reason, that he wasn’t the cause.

    It’s now the end of Obama’s third year. He has shown that he isn’t the solution, either.

    • #6
    • November 18, 2011, at 8:26 AM PDT
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  7. Palaeologus Inactive
    Diane Ellis, Ed.

    $38.6 billion is bigger than all of the thuggish loans and no-bid contracts and bailouts that Denise Moss outlined here yesterday by a factor of more than 18. And yet, somehow Obama is not made to feel shame over this disgraceful waste of taxpayer dollars, but is instead permitted to celebrate it as the hallmark of his administration! ·

    You’re right Diane.

    However, GM & Chrysler aren’t Solyndra. There weren’t a bunch of Solyndra dealers, Solyndra retirees, Solyndra employees, folks who made money off Solyndra employees, businesses who sold parts to Solyndra, neighbors of Solyndra employees, (who didn’t want to see more foreclosures) terrified of the consequences of not bailing out Solyndra… in highly competitive electoral areas at that.

    This message is an electoral positive for Barry, though it’s no home run. Any worthwhile opponent will note sweetheart union deals, massive costs adding to crushing debt, and an unclear ROI.

    But there just aren’t many folks who really dig the “creative destruction” of free markets. Essentially those folks boil down to three groups: serious ideologues, young people with little-to-no obvious stake, and those insulated by academic sinecures.

    That’s not a big, mobile, bloc of the electorate.

    • #7
    • November 18, 2011, at 8:36 AM PDT
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  8. Anon Inactive

    And yet, somehow Obama is not made to feel shame over this disgraceful waste of taxpayer dollars, but is instead permitted to celebrate it as the hallmark of his administration!

    As David Horowitz has pointed out numerous times – liberals fight dirty, conservatives don’t fight. Jack Kemp, Bob Dole, John McCain, were gentlemen to the end – that’s our end, by-the-way. Jack Kemp actually thanked Gore for saying he’s not like all the others in his party. Bob Dole backed away when Clinton challenged his space during a debate. McCain allowed no mention of Ayers, Wright, etc., The left tore him to shreds, and Obama lied without contradiction.

    That’s what makes Newt so popular. He fights back – effectively, and he seems to be the only one of the candidates that does.

    As for Obama not feeling shame, heck, he learned that from the Clintons.

    • #8
    • November 18, 2011, at 9:13 AM PDT
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  9. David Williamson Inactive

    Mr Obama looks kinda outa place in the Volt, which runs on coal or, worse still, nuclear energy — his bicycle suits him better — so much better for the planet.

    • #9
    • November 18, 2011, at 9:59 AM PDT
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  10. Give Me Liberty Inactive
    Anon: As for Obama not feeling shame, heck, he learned that from the Clintons.

    I think Obama had no shame long before he had ever heard of a Clinton!

    • #10
    • November 18, 2011, at 10:23 AM PDT
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  11. RW Cook Inactive

    GM has come back big time? Domestically at least their sales are less than half what they were ten years ago…

    • #11
    • November 18, 2011, at 11:17 AM PDT
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  12. Diane Ellis Contributor
    Diane Ellis Post author
    David Williamson: Mr Obama looks kinda outa place in the Volt, which runs on coal or, worse still, nuclear energy — his bicycle suits him better — so much better for the planet. · Nov 17 at 8:59pm

    Well, to be fair, he’s just sitting in it for the photo. I doubt the keys were anywhere in the vicinity.

    • #12
    • November 19, 2011, at 1:28 AM PDT
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