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.
Jack Lessenberry is Michigan Radio’s political analyst. Views expressed in the essays by Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.