Forum Discussion
- Auto bailout saved the government money (Commentary)
Michigan Radio
9/19/2013
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Probably everybody in Michigan knows that the federal government saved General Motors and Chrysler less than five years ago, by pouring $80 billion in cash into them to keep them afloat. Afloat, that is, till both went through cushioned bankruptcies. They were soon reborn as leaner, meaner, and now highly profitable companies, though Chrysler is now part of Fiat.
The so-called government bailout was highly controversial at the time and bitterly opposed by Republicans in the U.S. Senate. Two presidents went around them, however, and it is worth remembering that the bailout was begun by former President George W. Bush, though President Obama continued it.
Well, the bailout turned out long ago to be highly successful, and a lifesaver for the state and regional economies. The folks at the non-profit Center for Automotive Research in Ann Arbor have numbers to prove this; their estimates are that had there been a total collapse and a bankruptcy liquidation of GM and Chrysler, that would have meant the loss of more than 1.3 million jobs in 2009 alone. That never happened.
The bailout was so successful that the government, which at one point was the major owner of GM, is now close to selling off the last of the shares the treasury owns.
That’s considerably ahead of schedule. Share prices are up, and the White House said this week that the government is realizing “significantly more than expected,” as it sells them.
Still, I heard and read something in news reports yesterday that ticked me off because it was so thoughtless. To quote from one of the Detroit papers, despite the successes, in the end, “the government is still likely to lose about $10 billion dollars on the GM bailout.”
What that means, I suppose, is that after all the shares are sold, the government will take in that much less than it spent to save the automakers -- and the economy -- five years ago.
That is sort of like Geoffrey Fieger saying, “Well, it is true that I have a successful law practice and am now a multimillionaire, but I still lost thousands of dollars paying for my education.” The money Fieger spent on school was an investment. So was the so-called bailout.
Last night I called Kristen Dziczek, director of the labor and industry group at the Center for Automotive Research. She told me their estimates were that the bailout saved the government $28.6 billion alone in Social Security and income tax payment that otherwise would have been lost.
That figure, of course, only begins to scratch the surface of the financial impact of the bailout. State and local governments would have lost heavily too. There would have been increased welfare expenses of various kinds, not to speak of the incalculable human misery from all those jobs being lost.
But even if you don’t care about that, and focus on the narrowest dollars and cents basis possible, Dziczek told me that as long as the total government “loss” on the deal ends up under $28 billion, the bailout actually saved the government money.
Frankly, given the current deficits, Washington could use a few more programs that “lose” money that way. spoon059 wrote:
Charlie D. wrote:
In addition, the companies in red got tens of millions in aid from the states for setting up new factories. I don't see any difference in them than I do GM or Chrysler. It all comes from the taxpayers.
The difference is that they received tax credits that REDUCE the amount of taxes paid, but they still pay a LOT in taxes. From real estate tax to payroll taxes to sales tax to import taxes to export taxes. They generate a lot of jobs and pay a lot of employees who pay income taxes and buy things and pay sales taxes.
The states figure they would rather give a tax credit to woo the companies in and then collect all those taxes on the back end, rather than let some other city or state benefit from the taxes.
Fear not, in the situation that you are talking about, the government still gets their piece of the pie. Find a factory that you thing is getting "millions in aid" and then find out how much tax money that factory generates for the governing authority that granted that tax credit. Once you see the numbers, you'll realize that it isn't the same as handing out $25 BILLION to a single company.
Thank you for pointing out the reasons that a bailout of the auto makers was a good investment.Perrysburg Dodgeboy wrote:
They sent GM and Chrysler through bankruptcy because they (the experts) said it was the only way GM and Chrysler could survive. The Loans were given to us because the banks would not extend our lines of credit and at a very high interest rate. Not sure why people get so upset, the Dumbberment is making money off GM & Chrysler. Unlike the billions they give away to other Countries, never to see it again.
But help out our own Country and everyone goes bat**** crazy.
Don
Very true Don, and the Obama administration insisted on cleaning house at the top at GM. Good thing they did, GM is doing fantastic now, as is Chrysler.- They sent GM and Chrysler through bankruptcy because they (the experts) said it was the only way GM and Chrysler could survive. The Loans were given to us because the banks would not extend our lines of credit and at a very high interest rate. Not sure why people get so upset, the Dumbberment is making money off GM & Chrysler. Unlike the billions they give away to other Countries, never to see it again.
But help out our own Country and everyone goes bat**** crazy.
Don Charlie D. wrote:
In addition, the companies in red got tens of millions in aid from the states for setting up new factories. I don't see any difference in them than I do GM or Chrysler. It all comes from the taxpayers.
The difference is that they received tax credits that REDUCE the amount of taxes paid, but they still pay a LOT in taxes. From real estate tax to payroll taxes to sales tax to import taxes to export taxes. They generate a lot of jobs and pay a lot of employees who pay income taxes and buy things and pay sales taxes.
The states figure they would rather give a tax credit to woo the companies in and then collect all those taxes on the back end, rather than let some other city or state benefit from the taxes.
Fear not, in the situation that you are talking about, the government still gets their piece of the pie. Find a factory that you thing is getting "millions in aid" and then find out how much tax money that factory generates for the governing authority that granted that tax credit. Once you see the numbers, you'll realize that it isn't the same as handing out $25 BILLION to a single company.Charlie D. wrote:
Perrysburg Dodgeboy wrote:
Ford, GM, Chrysler, Toyota, Honda, Kia, Hyundai, Mercedes, BMW etc all make a similar product. If one of those companies goes out of business, their market share is divided amongst the remaining companies."
The Companies highlighted in red ALL received money form their Countries! EVERY LAST ONE OF THEM!
In addition, the companies in red got tens of millions in aid from the states for setting up new factories. I don't see any difference in them than I do GM or Chrysler. It all comes from the taxpayers.
As much as I found it distasteful, IMO, the bailout was the best thing for the economy at the time.
I'm not convinced. The bailout was to keep them from going bankrupt. Which after taking the money. They went bankrupt anyway. Could have saved the money, and let them go bankrupt in the first place, and had the same outcome.Perrysburg Dodgeboy wrote:
Ford, GM, Chrysler, Toyota, Honda, Kia, Hyundai, Mercedes, BMW etc all make a similar product. If one of those companies goes out of business, their market share is divided amongst the remaining companies."
The Companies highlighted in red ALL received money form their Countries! EVERY LAST ONE OF THEM!
In addition, the companies in red got tens of millions in aid from the states for setting up new factories. I don't see any difference in them than I do GM or Chrysler. It all comes from the taxpayers.
As much as I found it distasteful, IMO, the bailout was the best thing for the economy at the time.ls1mike wrote:
I hope Hyundai/Kia starts making a truck for sale in the US. We can then throw that in the mix!
Hyundai & Kai aren't quite the punch lines they used to be; judging by their recent products, if they made a truck, I'm betting they'd get it right.
Thought I'd toss that in since we've already skidded way off topic LOLPerrysburg Dodgeboy wrote:
Spoon you won't get a "retraction" but I will give you that apology. Kind of a sore spot with me and when someone says that GM and Chrysler should have been left out in the cold. It is just mind boggling to me.
Just so you know, your statement
"I don't have an exact number of how many jobs are tied (tided...?typo sorry LOL) in to the auto industry, but I do have a simple understanding of the free market. Free market encourages competition. A company needs to make a product that the buyer needs, for a price that the buyer is willing to pay, at a cost that the company can afford to make and turn a profit. Ford, GM, Chrysler, Toyota, Honda, Kia, Hyundai, Mercedes, BMW etc all make a similar product. If one of those companies goes out of business, their market share is divided amongst the remaining companies."
The Companies highlighted in red ALL received money form their Countries! EVERY LAST ONE OF THEM! GM and Chrysler only needed their lines of credit extended. But the BANKS you know the ones that received Trillions most paying nothing back, refused to extend GM and Chrysler's lines of credit leaving them with no option but to go to the Government for help.
If you wish to not buy a GM or a Chrysler you won't hurt my feelings one bit. I have never said this before to anyone, but I hope you don't! So you know Ford and the other car companies all get their parts from the same suppliers, so yes if GM and Chrysler went under they would take all but the largest suppliers with them. Causing the other companies to also go under! Not to mention the fact that millions of Americans would be unemployed and collecting unemployment, food stamps, no health care, more home foreclosures, personal bankruptcy and God knows what else I have forgot.
So I'll ask you if you still think Bush and Obama did the wrong thing?
BTW here's your typo "I think that pricate (private...?) industry should remain private and the government should not show preference to onw (one...? company or one industry over another." Kind of childish don't you think?
Don
Don bear in mind in your rant that the majority of foreign cars are subsidized by their government. The Japanese in particular made the Prius and lost on every one they made but the gov made up the difference.
I am still waiting for the congress to try to survive a month on food stamps, most that have tried gave up from starvation or near it the first couple of weeks. Bush did as Obama told him prior to the transition by the way. Obama did the heavy lifting. The Great Recession is said to have cost the US 22 TRILLION in the latest Texas study. Kinda makes all the non job programs a drop in the bucket.- Don, we will have to agree to disagree. I think that GM should have been forced to go into bankruptcy, settle their debts and restructure. That is the standard business model. I still think that the bailouts were the wrong thing. You bring in another point I didn't even mention, the bailout of the banks. Government regulations, meant to HELP the economy, have been shortsighted in their goals and have been twisted around to cause all the issues. The banking industry owns a huge piece of the problem.
You have your "theory" about what would have happened. I have my "theory" about what would have happened. As it stands, we both have theories that neither of us can prove right. I respect your right to yours, and I think you respect my right to have mine. Things could be a LOT better, but I also submit that things could have been a lot WORSE. My biggest worry is what happens next. The government has set a precedent that they will step in and save a business that hemorrhages money due to bad/unsustainable business practices. I worry about where this path leads us.
I apologize for my spelling errors, I have an 11 month old daughter sitting on my lap and she likes to hit buttons. I catch most of the mistakes. Its kind of a sore spot to me knowing that our government is passing on huge and potentially unsustainable debts on to our children. There isn't really a standard in place for a government to declare bankruptcy and restructure...
