Enough already. The mythology of GM and Chrysler’s resurrection has transformed the automakers’ bailouts into the penultimate symbol of success for the Obama administration’s recovery efforts. If we throw enough money at a problem, we generally manage to come up with some sort of a solution. The repeated portrayal of this salvage operation as a recessionary heroic quest is deceptive and irresponsible, considering the potential for the new automakers to continue to burden the real heroes, the taxpayers who saved them.
There is a logical disconnect when the president and vice president attempt to explain how GM and Chrysler were brought back from the dead. Vice President Biden seemed confused in a November 23, 2010 appearance:
And so far we’ve created almost 75,000 new jobs, and a lot more to come.
And, folks, look, the government didn’t do this. The government didn’t do this alone. The government did was [sic] it was supposed to do.1
The president was more resolute as he took credit for those 75,000 jobs, deftly adding Ford Motors to the mix despite Ford’s refusal of Uncle Sam’s handout:
Since GM and Chrysler emerged from bankruptcy, the industry has created more than 75,000 new jobs. For the first time in six years, Ford, GM and Chrysler are all operating at a profit.2
It is easy to forget that using TARP funds to rescue the automakers was a last-ditch Bush administration strategy that riled Republican lawmakers. Democratic reinvention that heaped blame for the recession on President Bush also gives President Obama credit for following his predecessor’s lead. To hear Mr. Obama tell the story, nothing was done before he assumed office:
That was before anybody knew how devastating the recession was going to be. So by the time I took office, just a few months later, the financial crisis had hit, the auto industry teetered on the brink, and we were losing millions of jobs.3
Wrong. The auto industry had been on the brink for a very long time. The recession pushed it over the edge, but the waiting arms of the president’s Auto Team were there to catch it.
Balancing out the claim of 75,000 jobs gained are the thousands of jobs that were lost when the Auto Team summarily terminated dealerships in a process team leader and former union advisor Ron Bloom called “. . . taking the pain and getting past it.”4 The Auto Team knew that the closures would result in as many jobs lost as the administration is now taking credit for, 43,081 in the short-term and 25,597 in the long-term for the GM terminations alone.5 Nevertheless, job loss was not deemed a decisive factor when plans were hatched to swiftly close the dealerships.6 Those unfortunate enough to have lost their jobs or businesses because of the terminations have been brushed aside while the president lays on the praise:
Ron Bloom and Brian Deese are key members of the team that helped to engineer this rescue of GM and Chrysler. So it had not been [sic] for these two gentlemen, a whole lot of people might be out of work right now.7
Despite talk of new found profitability for the automakers, there are still great risks should the success story founder. The liability to the PBGC had the GM and Chrysler pension plans failed was estimated at $14.5 billion in 2009, with a $42 billion exposure for industry-wide losses.8 Projections show that billions in cash contributions may be required as early as 2013 to keep the plans afloat.9 Meanwhile, questions continue to be raised about the use of taxpayer funds to rescue union VEBAs (Voluntary Employee Beneficiary Associations) by transferring equity from the reconstituted automakers into the union plans, forcing taxpayers to fund union benefits while ignoring those unfortunate enough to have had their retirement assets invested in the “old” automakers.10
Administration officials are basking in the success created by buying GM and Chrysler out of bankruptcy, but this is not a simple story with a happy ending. It is a tale of what happens when rules are bent, billions are spent, thousands of jobs are sacrificed, and decisions are made as to who will survive and who will perish, neatly twisted into a success story for the benefit of those who paid the tab. The president’s preference is to cast this as an enormous benefit for taxpayers: “Americans taxpayers are now positioned to recover more than my administration invested in GM.”11 This is another popular TARP myth. Just how, exactly, is all that money the government talks about recovering for us going to work its way back into our pockets?
For more on the auto dealership terminations, see: The Small Business Shutdown Obama Doesn’t Discuss.