-- The Providence (R.I.) Journal
Bailouts alter markets
Government Motors is no more. The U.S. Treasury sold its remaining shares of General Motors common stock Dec. 9. “Taxpayers recouped about $39 billion of the $50.1 billion pumped into GM in late 2008 and 2009,” Joanne Muller of Forbes magazine reported.
In 2009, President Obama and automotive executives promised taxpayers would get back all of the bailout money they provided, and then some. Muller explained why the repayment seemingly came up $11 billion short but actually accrued in taxpayers’ favor. “A study released by the Center for Automotive Research concluded that the government bailout of GM spared 1.2 million jobs in 2009 and preserved $39.4 billion in personal and social insurance tax collections in 2009 and 2010,” she wrote.
That assertion requires a healthy dose of skepticism. For one thing, the Center for Automotive Research receives 20 percent of its funding from the automotive industry, according to financial writer Paul Ebeling, so its researchers were motivated to paint the brightest possible picture of the bailout and its aftermath.
Moreover, the center’s findings are speculative. Had GM and Chrysler been allowed to slip into conventional bankruptcy, their strongest units -- for example, GM’s Chevrolet and Cadillac divisions, and Chrysler’s Jeep and Ram truck operations -- would have been snapped up by healthier automakers. The job-preservation and tax-collection priorities pursued via the bailout strategy would have been achieved by different means.
For many decades, America grew thanks in part to a process known as “creative destruction,” under which some companies died as demand for their products waned, or others came up with ways to build better products at lower cost. Today, the government picks winners and losers, often for reasons rooted in corruption or ignorance, and the result is manifest in the nation’s persistently sluggish growth.
-- The Republican American of Waterbury (Conn.)