On June 13, Heritage Foundation Senior Fellow in Labor Policy James Sherk released a paper analyzing how the Obama Administration’s auto bailout could have cost the taxpayer nothing in the long run if the United Auto Workers (UAW) had received normal bankruptcy treatment. Instead, they were provided special treatment which violated numerous aspects of traditional contract law, and were given approximately $3.5 billion more in treatment than the total cost of the bailout. In short, according to Sherk, the taxpayers were charged $26.5 billion on their maxed-out credit card.
On Tuesday, Ed Carson wrote in Investors Business Daily that taxpayer losses may be worse than Sherk calculated, given General Motors’ continuing drop in stock price. From Carson’s op-ed:
General Motors (GM) shares fell to a fresh 2012 closing low of 19.57 on Monday. The stock hit 19 in mid-December, the lowest since the auto giant came public at $33 in November 2010 following its June 2009 bankruptcy.
Normally you might say, tough luck investors. But this is Government Motors. The Treasury still owns 26.5% of GM, or 500 million shares…
Those shares were worth about $9.8 billion as of Monday. That would leave taxpayers with a loss of $16.6 billion.
But that’s not the full tally…[T]he administration essentially gifted $45 billion in write-offs (book value $18 billion) to GM. So when GM earned a $7.6 billion profit in 2011…it paid no taxes.
Include that $18 billion gift, and taxpayers’ true loss climbs to nearly $35 billion.
Regardless of whether you look at Sherk’s or Carson’s numbers, the losses dealt to the public as a result of special treatment for the UAW are significant. While admittedly only one percent of this year’s expected deficit, and a much smaller fraction of the totality of deficits since the auto bailout was first initiated nearly four years, it is another reminder that big government will always help out its buddies and special interests first. This assistance flourishes under both parties, whether it’s by protecting farm subsidies and defense contractors, bailing out banks via TARP, giving the insurance industry a generation of guaranteed customers via the individual mandate, providing college students further taxpayer subsidization in an election year, or giving a bailout to the UAW.
With Democrats controlling most of Washington during a period of the largest deficits in the history of America, including Congress under the last two years of the Bush presidency, it’s easy for Republicans to claim such government favoritism is a problem mostly confined to the Democratic Party. However, this ignores the history just prior to 2006, when then-record deficits were brought by Republicans, and ignores that many Republicans have supported the individual mandate, farm subsidies, TARP, and student loan subsidization over the years, and have defended the defense industry to the hilt. Mitt Romney, for example, has taken four of these five positions in the last couple of years alone.
Big Government is a bipartisan problem, and conservatives would do well to remember this as we head into the fall elections and the potential for a Republican sweep in Washington. Voting for a party won’t prevent us from falling off the fiscal cliff we are heading towards – voting for a number of candidates might.
[Originally posted at Muskogee Politico.]