Lessons from the auto bailout
WASHINGTON — When will the criticism of Obamacare finally end?
I’ve done some research on the question, and by my calculations, judging from current trends, this will happen approximately … never.
I base this on the criticism of the auto bailout of early 2009. Almost five years later, the industry is healthy again and large swaths of the Midwest have been spared what would have been certain economic devastation. All this was achieved for a relatively modest sum: When the government’s last shares of General Motors were sold last week, the total cost to save GM and Chrysler came to about $12 billion. It would seem that the argument against the bailout has been settled. Yet opponents continue to argue their case — if anybody will listen.
On Monday, I resolved to listen. I went to the National Press Club, where the National Legal and Policy Center, a conservative group, was arguing that the GM bailout was a big mistake. When I arrived two minutes before the start of the news conference, I was the only reporter in the room; eventually, two others joined me.
Peter Flaherty, the group’s president, stared into a lone camera. “At its most fundamental level, the auto bailout is a failure,” he proclaimed. “There’s only been a modest culture change” at GM, he said, and “the bailout did not save jobs.” What’s more, he said, GM’s reorganization “was government-orchestrated theft.”
When Flaherty finished speaking, he asked for questions. Nobody stirred. Feeling pity, I asked if he really thought the auto bailout had no impact on U.S. employment.
“Yes,” he replied.
And the Troubled Assets Relief Program — which the auto bailout was part of — that returned a profit to taxpayers of $11 billion overall?
“I think it was a mistake,” he said.
Flaherty was offering a pre-buttal to GM’s chief executive, Dan Akerson, who spoke at the press club two hours later. Unlike Flaherty, Akerson had some concrete evidence to show why the bailout had been worth the cost: a $21.3 billion initial public offering for GM, 15 profitable quarters and total profits of nearly $30 billion, $10 billion invested in U.S. facilities (including $1.3 billion announced Monday), a return to an investment-grade rating for its bonds, and 26,000 jobs preserved.
Akerson — who is soon to be replaced by Mary Barra, GM’s chief of product development and the first woman to run a major automobile company — was a private-equity guy who joined the company after the bailout. But asked his opinion of the bailout decision, he cited a study by the Center for Automotive Research that concluded that overall it saved the government $36 billion to $38 billion in costs such as unemployment benefits, and that didn’t include $26 billion in pension liabilities that would have been dumped on taxpayers.
“The automotive industry in this country is somewhere between 3.5 and 4 percent of total GDP,” he said. “To have ceded that to foreign competition — in my opinion, as an American — would have been a serious mistake.”
The study Akerson cited calculated that the bailout saved 1.2 million to 2.6 million jobs in 2009 alone. But the National Legal and Policy Center’s Flaherty offered a breezy dismissal of that report: “Not surprising, in light of the fact that the center is substantially funded by the government.” (The Center for Automotive Research reports that 16 percent of its money comes from the government.)
Few people have heard of Flaherty or are likely to care what he thinks of the bailout. But his undiminished opposition to it, a position many conservatives share, is worth examining because there is apparently no pattern of facts that would change it. This, I suspect, is what Obamacare is up against.
Flaherty was sure the bailout didn’t work because his theory says it couldn’t work. “The massive misallocation of capital to an inefficient market purchase can only cost jobs in the long run,” he argued.
But in the long run, we’re all dead. And the dramatic, and rapid, collapse of the American automotive industry in 2009 could have rippled across the economy, setting off panic and perhaps a depression. Again, Flaherty scoffed. “These dire stories … about a depression being triggered or the economy of the Midwest collapsing were just totally overblown and wrong,” he said.
We will never know for sure. But we can believe either opponents of the bailout, or our lying eyes.
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