Less Government President Seton Motley today points out the Barack Obama Administration assertions that taxpayers would profit from the $49.9 billion Troubled Asset Relief Program (TARP) bailout of General Motors (GM) – and the news that the federal government intends to sell their shares this summer for what looks like an $11 billion loss.
“American taxpayers are now positioned to recover more than my Administration invested in GM.” — President Obama, November 18, 2010.
“I think the government’s investment is well placed and I think they’ll make a lot of money.” — then Obama appointee GM C.E.O. Ed Whitacre, January 11, 2010.
But…
“At Monday’s price, and taking into account shares sold during the IPO, taxpayers would lose more than $11 billion on the rescue if the government dumped the rest of its stake now.” – Wall Street Journal, April 19, 2011.
Less Government President Seton Motley:
“What a surprise – Government Motors isn’t working. Who would have thought that the federal government – that oversees a $14+ trillion and growing budget deficit, and created Social Security, Medicare and Medicaid that will soon be hundreds of trillions of dollars in debt, and that can’t profitably deliver the mail or run a railroad – can’t run General Motors either?
“Despite all the bluster and braggadocio from President Obama and his GM appointees that we’d make money on our government investment, it turns out what we who opposed it said all along is true – we’ll lose a ton. Because government is – government, and losing and wasting money is what government does.
“TARP was both unconstitutional and a terrible idea – two concepts that are mutually inclusive. The government has no business running businesses – we’re now again seeing why.”
The intervention at GM was never about making money, and it’s a cruddy metric for determining whether the particular intervention “worked” or was even a good idea. The GM intervention was undertaken to avoid the crashing and burning of a major employer in the middle of a financial crisis, which crash and burn would have sent Michigan, Ohio and Indiana back to the 1930s. Even if the government intervention turns out to facilitate a “soft landing” for GM employees, who end up having to find other work in a better job market, it will probably be “successful” in the eyes who designed it.
In the last Less Government quote, it states that “TARP was both unconstitutional and a terrible idea.”
While I could argue that both parts are true, the “terrible idea” is somewhat arguable. The concept of TARP, providing liquidity and stabilizing markets in assets “frozen” by indecision and legal confusion, could be seen as worthwhile. Of course, the execution — which involved setting up a $700B unaccountable slush fund that was promptly raided by politicians bent on rewarding supporters — has dealt lasting harm to liquidity, transparency, and the national debt. Of course, some far-seeing critics of the original concept also foresaw its implementation problems as inevitable, so there’s also that.
Who would have thought that the federal government – that oversees a $14+ trillion and growing budget deficit, and created Social Security, Medicare and Medicaid that will soon be hundreds of trillions of dollars in debt, and that can’t profitably deliver the mail or run a railroad – can’t run General Motors either?
He makes the common mistake of confusing the deficit with the national debt. The deficit this year is about $1.5 to $1.6 trillion. The national debt is the sum of all the national deficits and is $14+ trillion. Social Security, Medicare and Medicaid represent an unfunded liability of $100+ trillion.