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As the president has ramped up into campaign mode, he has studiously avoided mentioning most of his signature accomplishments. One can see why. The health care legislation is unpopular, as is the stimulus. The one thing President Obama always seems to mention is the auto bailout. Given that automakers are profitable now, he asserts, his actions, which were purportedly opposed by Republicans, have been proven wise.
There is much about this line of argument that is objectionable. The auto bailout began in earnest when President Bush, in 2008, allocated part of the Troubled Asset Relief Program (TARP) to the automotive industry. That decision was not without controversy in Republican circles, since there was arguably no legal basis for this use of the funds designated to help financial firms. But Obama’s assertions about widespread Republican recalcitrance are incorrect.
President Obama did support the bailout once he assumed the presidency, and he bailed away with gusto. At the end of 2008, the Treasury had agreed to lend only $17.4 billion to General Motors and Chrysler, but by June 2009 the size of the bailout had grown to $55 billion, and by the end of 2009 it had reached $80 billion.
In the majority of his comments, the president focuses on the negative consequences that the bailout prevented and the number of jobs it created in the industry. According to Obama’s website, he “made the tough and politically unpopular decision to extend emergency rescue loans to the American auto industry, saving more than 1.4 million jobs and preventing the loss of over $96 billion in personal income.” The White House also states that “the industry has added 200,000 jobs in the last two-and-a-half years,and GM is once again the top-selling automaker in the world-posting its largest-ever annual profit in 2011.”
These assertions are poppycock. If the government had allowed the automakers to reorganize in bankruptcy courts, unions would have taken a bigger haircut, the automakers would be stronger today, and the government would have saved money.
But the administration’s most objectionable false statement regards the cost of the bailout to taxpayers. In a February 28 speech, President Obama referred to this expenditure of $80 billion as a bet on the American worker, and added: “Now, three years later . . . that bet is paying off, not just paying off for you, it’s paying off for America.” His implication that the bailout is succeeding-that it will not ultimately be a loss for taxpayers-is a constant theme of Democrats.
The nearby chart, drawn from information released by the Treasury, shows the current status of the financial assistance that the automotive industry has received through TARP. Out of the total $80 billion that has been paid out, only $35 billion has been repaid, some $7 billion has been written off, and $37 billion is still outstanding. That is, 9 percent of the original amount has already been lost, and close to half is still in limbo.
The latest Congressional Budget Office report estimates that the total cost of the bailout will end up being $20 billion. The biggest culprit will be GM, since the Treasury has no remaining investment in Chrysler, having sold its shares in July 2011.
The automakers may be profitable now, but only because we are not counting the taxpayer losses against the profits. If the president continues to avoid this simple math, perhaps someone should ask him why he didn’t shower billions on every industry and create millions more jobs.
Kevin Hassett is a senior fellow and director of economic policy studies at AEI.
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