Taxpayers lose $10.5 billion on General Motors
You know, this could have been a lot worse. So… up-twinkles, I guess. Only losing $10.5 billion on a payoff to special interests (in this case, labor unions) qualifies as a roaring success by current Washington standards. And, sadly, I don’t just mean Obama standards.
Fox Business brings us the happy news that the “G” in GM no longer stands for “Government”:
The Treasury Department on Monday announced that the government has sold its remaining shares of General Motors (GM) and that losses from the 2009 auto industry bailout total about $15 billion.
In a conference call, Treasury officials said the government has recovered about $39.9 billion of the $49.5 billion earmarked for GM under the Troubled Asset Relief Program (TARP) approved by Congress as the company teetered on the brink of bankruptcy nearly five years ago.
“With the final sale of GM stock, this important chapter in our nation’s history is now closed,” Treasury Secretary Jacob J. Lew said during the conference call.
In exchange for the bailout, the government received $2.1 billion in preferred GM stock and a 60.8% equity stake in the company, which led critics of the bailout to refer to GM as ‘Government Motors.’
Treasury has intermittently sold its shares of GM but always at a price below that which would have allowed the government to break even on the deal, which accounts for the nearly $10 billion in losses.
Potential losses to the taxpayers from an emergency dump of the stock have been up to three times as high over the past five years, so getting it down to a $10.5 billion loss is an “achievement” under the rules of Big Government, which of course bear no resemblance to the business or accounting rules that govern the industries Uncle Sam meddles in. Try to imagine the CEO of a company giving a triumphant speech about the rousing success of an “investment” that lost over ten billion dollars… and not even mentioning the loss.
Fox is one of the few news sources to prominently mention that the total damage from the auto industry bailout is more like $15 billion, but why quibble over a mere four and a half billion clams? That hardly qualifies as a rounding error on the titanic scale of government spending.
Why are taxpayers, many of whom will never own a GM automobile, supposed to be happy about spending $10.5 billion of their hard-earned money to prop up a failed business enterprise? It used to be common practice to equate GM with the city of Detroit, and suggest anyone opposed to a bailout for the company wanted the city and its people to suffer bankruptcy, but nobody talks that way any more.
When the survival of a single business entity is portrayed as a social imperative that requires the confiscation of funds from everyone in the country, we’re not talking about “capitalism” any more. We also find ourselves dabbling in the highly selective invocation of opportunity costs by politicians and government officials. Brian Doherty at Reason nails Treasury Secretary Jacob Lew for claiming “inaction could have cost the broader economy more than one million jobs, billions in lost personal savings, and significant reduced economic production.”
Responds Doherty, “What might have happened to that money, those resources, those skills, those people, if they had not been diverted by government action? No one knows, or will ever know, and the government would prefer you not think about it.”
That was the very first topic I ever wrote about professionally, and it remains a fascination of mine. Politicians refer to opportunity cost only in the context of the terrible things that will allegedly happen if they’re not allowed to spend money, or exercise regulatory control. But every action includes opportunity cost, on every scale from individual decision-making, to corporate investment, and most especially to billion-dollar government policies, which amass their financial resources through compulsive force.
Most of us understand that buying a new Xbox One costs hundreds of dollars that we could have used to pay off debt, make an investment, or buy something else that we would have put to different use; we make a (hopefully) rational decision that the enjoyment derived from the purchase is worth not just the money we spend, but the lost income, enjoyment, or financial advantage we would have gotten by using the money in other ways. If we decide not to work an hour of overtime, we understand that we’re sacrificing the money we would have earned.
Corporate planners, at least the successful ones, are even more mindful of opportunity costs when they make decisions. But politicians pretend those costs do not exist at all. They grow visibly angry when the topic is raised. They never want to discuss what free people would have done with the money seized by government, or how opportunity might have flourished in the absence of regulations. And they’re virtually incapable of understanding that even the collapse of a politically favored operation like General Motors, painful thought it might have been, would have created real opportunities with positive value. We are strictly forbidden to contemplate what might have been, or question the ethical propriety of using compulsory spending to erase the history that free people taking responsibility for their own investments might have written. We’re not even supposed to ask what the government could have done with the $50 billion in parked in that GM investment for five years – that’s a lot of lost value and interest – only to achieve a net loss of $10 billion, instead of a profit.
It is forbidden to chart any course except what the Ruling Class has plotted on our maps, or to ask why this wealthy individual who earned every penny of his money is evil and selfish, while that rich executive deserves to have his lifestyle supported by billions of dollars in taxpayer loot. And don’t you dare ask Barack Obama how the highly-compensated union workers who benefited from the GM bailout factor into his “income inequality” diatribe. The radiant blessing of the Ruling Class has been bestowed upon this company; it deserves everything it has, and everything you were compelled to give it. Shed no tears over the unmarked grave of possibility, where all the things we might have individually chosen to do are interred.
Hopefully the rescued General Motors will become the very model of sustainable prosperity and wise management, with everyone duly mindful of the $10.5 billion everyone else was forced to contribute to their success. And if not… well, they can rest comfortably in the knowledge that we’ll bail them out again, can’t they?
Update: It’s worth remembering that the GM “comeback” has been accomplished with an awful lot of government support, and the whole saga began with unconscionable treatment of the company’s non-union creditors, who – let us not mince words – got robbed. Even if the taxpayers didn’t lose ten billion over five years on this deal, General Motors would still be a long way from a free-market success story.