If you invested more than $100 in a company, would you be happy if your shares were worth only $36? By anyone's definition that investment would have been a terrible failure.
Yet, that is how the federal government's investment in General Motors looks. The federal government has put in well over $100 billion into shoring up General Motors, but the entire company, not just what the government owns, was worth only $36 billion on Tuesday.
GM sales have bounced around, rising in March and then falling in April, but investors' best guesses for what future sales will be are already in GM's stock price. And surprisingly, a recent Rasmussen poll shows that support for the bailout has been rising and now 44 percent of likely voters say that the bailout was good for America.
The money the government spent adds up quickly: $50 billion in TARP bailout funds, a special exemption waiving payment of $45.4 billion in taxes on future profits, an exemption for all product liability on cars sold before the bailout, and $360 million in stimulus funds. Other money of which it is harder to quantify GM's share includes the $15.2 billion Cash for Clunkers program and the $7,500 tax credit for those who buy the Chevy Volt. And all those costs don't even include the billions taken from GM's bondholders by the Obama administration.
The accounting shows the trouble with claims that much of the TARP money is getting paid back. The Obama administration only compares the $50 billion in direct bailout funds with the price it will eventually be able to get for selling the GM stock it owns. But that assumes exempting GM from paying $45 billion in taxes and other subsidies don't increase the stock price. By the Obama administration's logic, if the stimulus simply gave large enough grants to all the TARP recipients, all the TARP money could be paid.
But the Obama administration keeps saying what a great success the auto bailout was. President Obama just bragged at the end of April in a White House speech that the bailout "saved probably a million jobs" and that "GM is now the number-one automaker again in the world."
The "million jobs" claim is quite a stretch. Before filing for Chapter 11 bankruptcy in July 2009, GM had 91,000 employees in the United States. You can reach a 400,000 total assuming that all of GM's jobs, as well as all the jobs of their parts suppliers and car dealers, would have been lost.
Obama's economic advisers told him during an April 2009 meeting that auto-industry job losses would only be a fraction (10 to 20 percent) of these claims, even for the much weaker Chrysler. The advisers reported the obvious: Bankruptcy would not cause all General Motors' jobs to be lost and, even with cutbacks, suppliers would pick up other work. But these private warnings were never admitted to the public.
Even saving 20 percent of 400,000 comes at quite a cost, implying at least $780,000 per job. How many workers would have been willing to quit working for GM for a $400,000 severance payment?
The "number-one automaker" claim is no more accurate. Obama's sales totals includes 1.2 million mostly cheap commercial vehicles built by China's Wuling, a company in which GM owns a very small stake, and it excludes sales by vehicle makers in which Volkswagen owns a majority share. Fortune magazine lists GM as smaller than Volkswagen, Daimler, Ford, and Toyota.
The only real winners from the GM bailout were unions, who were protected from pay cuts, from losing their right to overtime pay after less than 40 hours per week, and from cuts in their extremely generous benefits. They only faced minor tweaks in their inefficient union work rules.
Having just $36 billion to show after a $100 billion-plus investment would get a chief executive of any private company fired. Unfortunately, Obama does not seem to understand how this money has been wasted.
E-mail John R. Lott Jr. at firstname.lastname@example.org.