American Elephants

Excuse Me, But The Auto Bailout Was a Failure. by The Elephant's Child

Vice President Joe Biden’s favorite line on the campaign trail is:”Osama bin Laden is dead and General Motors is alive.” Good soundbite, bad analysis. Bin Laden is dead, but al Qaeda is alive, active, and recruiting. Some economists have warned that GM may soon be facing bankruptcy again.

Economist Dan Mitchell emphasizes that “any company can be kept afloat indefinitely with taxpayer subsidies.” GM is spending scads of money on the Chevy Volt because of pressure from Washington, not because of consumer demand. And the CEO is advocating higher gas taxes in order to make the poor unwanted Volt more attractive to consumers.

Obama seems to believe that bankruptcy is a bad thing. But our bankruptcy courts and bankruptcy laws are designed to save companies by helping them to reorganize. One of the biggest reasons for GM’s failure in the first place was the burden of their overgenerous union contracts and overgenerous pensions.

The video doesn’t really get into the costs to bondholders who legally are supposed to have first call on company funds in a bankruptcy. Nor does it deal with the auto dealers — private businesses whose only connection to GM is that they buy their stock of cars from GM, who were just shut down by the government, and who each had up to 100 employees. Talk about a heavy boot descending on a business. Boom, you’re out of business, your businesses are worthless, your people are unemployed. Welcome to Obamaworld, where everything is always politics.

ADDENDUM: The auto bailout may have been a failure in the eyes of taxpayers. For Obama, it was a big win. Time for gangster government to call in the markers. The United Auto Workers donated $1 million  to President Obama’s super PAC and another million to super PACs that support Congressional Democrats in September, with totals for October yet to be announced. Whatever union members happen to think, that’s where their dues are going.

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