The Auto Bailout Failure

A new paper from the Buckeye Institute affirms what the Antiplanner has said about the Obama administration’s “bailout” of the auto industry: it did more harm than good. “The auto bailout transferred over $25 billion in taxpayer dollars to the United Autoworkers labor union,” says the paper, “while actually hindering the kind of ‘fresh start’ that is necessary for the industry’s future success and that normal bankruptcy procedures, without political meddling, provide.”

“When a public policy produces worse results than doing nothing, it properly should be described as a failure,” the paper adds. “The Obama Administration auto bailout is such a failure.”

What better way to spend a day with your special someone than to watch buy cialis without prescription the overall tone you’re conveying with your emails. The desired buy cialis from canada will reach to you in short days. levitra is one of the best supplements available in the market today for ED. Do not let cheapest viagra your partner being acknowledged with all secrets. order levitra online A healthy sexual life is required to lead a happy life with consuming this drug. The administration’s “claim that the auto bailout saved 1.5 million jobs is demonstrably false,” the paper continues, as it is based on an assumption that, not only would GM and Chrysler have completely shut down without the bailout, so would Ford, Toyota, Honda, and other U.S. factories owned by foreign carmakers. As the Antiplanner has done, the paper also accuses the administration of violating the rule of law in order to favor some interests (unions) over others (creditors).

By “injecting politics into the reorganization process,” the paper concludes, the administration actually hindered the industry’s recovery. The lesson is not that a Bush or Romney would have done any better, but that future administration’s should keep their hands off of floundering industry’s and let the bankruptcy process and rule of law sort things out.

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About The Antiplanner

The Antiplanner is a forester and economist with more than fifty years of experience critiquing government land-use and transportation plans.

40 Responses to The Auto Bailout Failure

  1. Frank says:

    For those who might challenge this study on the guilt-by-association fallacy basis rather than its merits, there has been at least one other study by an orthodox economist showing that Chrysler Might Have Done Better Without Bailout:

    An academic study of Chrysler’s performance since it received a $12.5 billion bailout in 2009 shows the automaker likely would have performed better without the government’s help — even if that meant its facilities were sold off to different companies.

    Mercantilism is alive and well and has been since Lincoln killed the Republic.

    • bennett says:

      Mercantilism??? You’re going to have to explain that one. Cronyism? Sure. Socialism? You can make a case. But mercantilism??? Maybe I have my history wrong, it’s been since freshman year in college since I’ve read any Jean-Baptiste Colbert.

      • Frank says:

        Essentially corporatism. Rothbard defined mercantilism as a system “which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state. Thus, mercantilism held that exports should be encouraged by the government and imports discouraged.” Rothbard also maintained that “in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.”

        Rothbard goes on to state that:

        Thus, a policy of favoring exports and penalizing imports had two important practical effects: it subsidized merchants and manufacturers engaged in the export trade, and it threw up a wall of privilege around inefficient manufacturers who formerly had to compete with foreign rivals. At the same time, the network of regulation and its enforcement built up the state bureaucracy as well as national and imperial power.

        Seems to describe the auto bailout to me.

        • bennett says:

          I’m not sure that employing one aspect of mercantilism means that it’s “alive and well” (same goes for socialism for that matter).

          However, I will agree that the auto bailout was essentially a “special subsidy… to individuals or groups favored by the state.” I disagree that it has anything to do with imperial ambitions.

        • Frank says:

          Another impetus for the bailouts was to “save” the American auto industry, thus encouraging exports and discouraging imports. It seems to have backfired. According to one source, “Ironically, the government’s rescue was a trigger for those tariffs. China called the rescue an ‘illegal subsidy.'”

          Additionally, Obama placed tariffs on tires, and it was the US consumer who got screwed, according to one study that found that “higher prices triggered by the tariffs left less money for consumers to buy other goods, contributing to cuts in retail employment. The institute estimates the tariffs resulted in a net loss of 2,531 U.S. jobs and cost about $1.1 billion in 2011.”

          Special subsidy: check.
          Protectionism: check.
          Obama winning Ohio because of bailout subsidy and protectionism, thus increasing imperial state power: check.

          I’d say mercantilism (or corporatism or whatever you wanna call it) is alive and kicking!

    • metrosucks says:

      Well said Frank, thanks for posting this before Dan started with the hand flapping.

      On the other hand, looks like msetty has already laid the blame at the feet of racist white people.

      • Scott says:

        Yeah right, doncha know, racism is factor for automakers. There are fewer minorities who buy cars, and any differences between racists has got to be because of something that Whites do or didn’t do.

        Here’s another example: 72% of Blacks are born out of wedlock. That rate was around 10% 50-60+ years ago. It was white policy to give out welfare — taking away incentive to work & breaking up the family-unit — that created that. Don’t mind sub-cultures & such.

        Public transit transport carries a higher % of minorities, making them pro-minority, except when it comes to LRT & commuting routes to the CBD & the cutting of buses. — Haheehaw! (:-))>

  2. LazyReader says:

    Why is the government giving billions of dollars to the automobile industry. Then meanwhile spending tens of billions or hundreds of billions on systems of transportation that they say is greener and more efficient than the automobile. It’s like they don’t even know what money is for.

    http://www.youtube.com/watch?v=Wp7Jv3mwbW4

  3. msetty says:

    Ignoring the Buckeye Institute’s (and apparently The Antiplanner’s) animus towards unions, an objective analysis is located here:

    http://money.cnn.com/2012/09/06/autos/auto-bailout/index.html.

    At least the workers and retirees didn’t get screwed in the GM and Chrysler deals, unlike most corporate bankruptcies. And NO, there is absolutely no assurance that both companies wouldn’t have been completely liquidated in 2009, e.g., at the bottom of the near depression we have been going through. At that time, the market for automobiles was dropping through the floor and a mainstay of our industry would have disappeared.

    So Obama’s decision to bail them out was certainly the correct decision from a political standpoint, even if unpopular at the time. If he carries Ohio and spares us from Romney, then I find little fault with the decision–it was worth it to prevent the Repugs from regaining complete control of Washington.

    • LazyReader says:

      How well is Ford doing. Did they take any bailout money. Even supposed secret money not part of the Stimulus?

    • Sandy Teal says:

      So what if GM was liquidated? People will still want new cars and new car companies would come in to sell them. It might be Honda building cars in the US instead of GM building cars in Mexico.

      Obama saved the current union members and doomed their children. Have you seen Detroit? It makes post-Katrina New Orleans look like a resort town.

      • msetty says:

        That process could have taken many years, while in the mean time the dismantling of GM and Chrysler could have pulled us into a full-fledged depression–against which I’ll sacrifice “ideological purity” about capitalism any day.

        Besides helping stave off a major depression (in concert with other measures), there was the small matter of otherwise lost federal, state and local taxes in the interim while waiting for “other” companies to fill the gap, as the CNN article mentioned.

        As for the City of Detroit, the gradual movement of auto assembly plants out of the city over decades by the industry is but one of the reasons why Detroit is such a wasteland. Racism and the seeming inability of the the U.S. to deal with social pathologies–particularly when it involves the “other” e.g., “dark” peoples, has a lot more to do with it. And of course there is the entire movement to the suburbs by millions of people, most of whom would rather not have to take the steps necessary to deal with those social pathologies. But I digress…

        • MJ says:

          Still blaming racism for Detroit’s demise? Well I guess you’re partly right. The virulent anti-white racism of Coleman Young during the 1970s and 1980s ensured that the only people left in Detroit during that period were those with literally no other choice. Poor them.

          As for social pathologies, I’m not sure how that is anyone’s problem but Detroiters themselves. The war on poverty was in full swing during the period when Detroit was losing most of its population. Those who wanted help could avail themselves of it, buttressed by a host of state and local programs. Meanwhile, city hall fell into the hands of demagogues like Young and outright thieves like Kwame Kilpatrick. Now, honest but overmatched people like Dave Bing are left to try to pick up the pieces. Bankruptcy seems inevitable.

        • metrosucks says:

          Wow Mikey, is there a single argument you can make that doesn’t involve some dark conspiracy of racist, transit-hating, pickup driving white people?

          Just curious.

    • Scott says:

      Oh, because of objections to greedy, lazy, over-powering monopolistic unions, then everything must be wrong. Good job betty, with your reasoning skills, critical thinking & analytical evaluation, per abnormal for you.

      Maybe you should begin to look at how destructive to companies & the economy unions are. Compare companies with & without unions, especially the auto industry, and between states — those with fewer unions have better performance.

      If want to learn (doubt it), these 2 sites are great resources on econ:
      http://www.fee.org/
      http://mises.org/

      Here are articles:
      http://www.discoverthenetworks.org/guideDesc.asp?catId=55&type=group
      http://www.westernjournalism.com/obama-didnt-do-that-alone/
      http://www.businessinsider.com/heres-the-real-problem-with-labor-unions-2010-9#ixzz0yZXREBM9
      http://www.cnsnews.com/commentary/article/75934

  4. msetty says:

    Well, Metrosucky, you’ve increasingly convinced me that you are in fact an MR if you seriously think racism still hasn’t had a huge impact on the U.S., particularly its increasingly trashy “culture.”

    Racism was and still is as American as apple pie. Fortunately it is is increasingly dying out as the old racists, who are overrepresented among tea-baggers, gradually die out.

    • metrosucks says:

      Wow Mikey, so you got all huffy again, huh. You are clearly a very angry person. Do you deal with all your opponents thru the usage of personal insults and put-downs? Or maybe you just call them racist, and then mentally retarded if they don’t admit that every white person is secretly harboring huge biases against every one of color.

      Is your “job” as a transit “advocate” mostly comprised of telling people they are racist if they don’t support billion dollar, gold-plated rail systems? What does transit have to do with racism, anyway?

      You moron, if Americans really were as “racist” as you claim they are (while wiping the spittle off your lips), they would not spend billions of dollars for transit and rail used by many poor, colored folks.

      • msetty says:

        The MR spaketh:
        Do you deal with all your opponents thru the usage of personal insults and put-downs?

        No, just YOU.

        Then the MR speweth:
        Or maybe you just call them racist, and then mentally retarded if they don’t admit that every white person is secretly harboring huge biases against every one of color.

        This kind of unsubstantiated claim is why I raise doubts about your intelligence and reading comprehension.

        For the record, Metrosucky, I didn’t call you or anyone else here a racist.

        I simply stated that racism still plays a very big and active role in U.S. politics. The tone of your comments appear angry that I don’t accept the right wing fiction that we now are all living in “post racial” America. Ha!

        If you believe that we are, THAT is why you come across as an MR who denies empirical reality, and that’s why I call you an MR and other names doubting your mental abilities–but then that’s how most right wing “thinking” (sic) operates today. And I am called “angry” because I simply state an irrefutable fact about current U.S. politics and culture. Who ever said most people can’t stand the truth certainly was correct, and I don’t mean the Nicholson character in that Marine move.

        I’m not so much “angry” as simply sick and tired of the B.S. and lies put out by the right wing, including the likes of you. If you think I’m angry, well, I REALLY don’t give a damn.

        And teabaggery includes many people who aren’t racist, but they still have more than their share of racists. And so on. And so on. Get used to the truth, buddy.

        And as Sirota pointed out in an article previous to the one I linked, White Privilege still is rampant in this country, and tens of millions of white people still benefit from it even if (1) they aren’t bigoted themselves; and (2) they had nothing whatever to do with its historic roots and creation.

        You many not believe it (as if I really care what you believe!), but I think we’ve made tremendous progress recently by electing, and hopefully reelecting, the first black man as President. If Obama is reelected, I’m looking forward to the racist sputtering from one of my Republibot neighbors, as well as the local Republican “coffee club” at the local convenience store.

        • metrosucks says:

          Dear Mikey,

          where do I even start?

          First of all, I know what sort of refuse you are. The smug, arrogant, all-knowing lib, full of the knowledge of his own superiority to everyone else, especially anybody with a conservative political ideology. The worst kind of liberal there is.

          You’re like Al Sharpton, decrying racism/whatever issue of the day out of one side of your mouth, while the other side secretly praises the existence of the problem for which you get paid handsomely to demagogue against.

          What’s the problem, Mikey? Why the obsession with “tea bagging”? Is that something you used to do at CSU, while “exploring” your sexuality? Is your sexuality the reason you always refer to homosexual slurs to smear anyone you disagree with? Do your gay friends, assuming you have any friends, know you use a gay sex act as a pejorative when arguing with people?

          What am I saying, you’re too much of a pathetic coward to admit that, or call anyone “teabagger” to their face. You’d get the beatdown of a lifetime.

          While you were discussing “teabagging” at CSU, my parents came from Europe with twenty bucks in their pockets, and two teenage kids. They worked their way up, only taking foodstamps for a few months, working any and all jobs they could. My dad bought his first car, an old Chrysler station wagon, which served him for over ten years. Today, they’re one of the millionaires next door, owning their properties outright, and no debt.

          While you were hand-flapping or teabagging in some alley, my SAT scores got me an invitation letter from Brown University. I’m guessing you got a letter from Chico Community College. All my siblings have bachelor degrees. There are two engineers in my immediate family. One of my brothers went to UW, the other to PSU, and my sister to Pacific University.

          You? You’re nothing, you’re a loud-mouthed piece of trash. You’re a pathetic race-baiter and victimologist. You’re the sort of person who denigrates his opponents as “teabaggers”, decries racism, and then in the next breath, refers to Herman Cain using the N-word.

          You’ll piss off the wrong person one day, and get the pummeling of a lifetime. I wouldn’t waste my time on garbage like you, but I wanted everyone else who visits this blog to see what you are.

          It should tell everyone a lot that the only one who consistently agrees with you here is the highwayman.

    • Scott says:

      Hey, you contradicted yourself, in the same sentence. You basically said that racism is still very prevalent, but almost gone.

      You are very wrong on there being racism in tea party ideology. That’s a huge false narrative being pushed to discredit the push for a responsible, limited government.

      The racism charge has been used for decades to demonize the opposition & suppress real discussion.

  5. msetty says:

    http://www.salon.com/2012/10/24/five_signs_racism_still_dominates_our_politics/.

    The ongoing denial here about the truth and history of racism in the U.S. is truly disgusting.

    • metrosucks says:

      Mikey, you could probably find proof of pervasive racism in a box of cornbread mix. You’re worse than Dan, just an angry, foul-mouthed blowhard whose chief skill is alienating everyone you meet. At least Dan probably believes his own spew, he doesn’t know any better.

    • Scott says:

      Yeah betty,
      I disagree with you because of your European ancestry — haheehaw!
      However, I am of the same source (British & German for me) — g-parents migrated in 1800s. So what?

      Oppose ideas from a person from elsewhere — racist?

      Please look at substance, rather than a genetic irrelevant distraction.

      Should the US have density & lessor development like Africa or Latin America?

  6. Fred_Z says:

    For too long the rest of us have taken the foul slime dished out by foul mouthed lefties out of a desire to be polite and forbearing. I am pleased to see more and more people taking them to task with righteous anger and invective.

    As for the substance of the matter, we have strayed into economics and you might want to try timworstall.com. Some of his major points are that jobs and exports are bugs, not features. A successful economy, at its extreme, impossible, end-point, provides goods and services without work and provides them from foreigners who cheerfully export their goods and services to the recipient economy for free.

    Hollywood seems to come closest to this ideal. Can anyone call what Brad Pitt does work?

    Increasing or preserving boring, difficult, smelly, dangerous industrial jobs is folly.

    • bennett says:

      “For too long the rest of us have taken the foul slime dished out by foul mouthed lefties out of a desire to be polite and forbearing. I am pleased to see more and more people taking them to task with righteous anger and invective.”

      That gave me a good chuckle. I love me some group think. Hello pot, meet kettle.

      “As for the substance of the matter…”

      Interesting take. Many of the arguments that take place here happen in a theoretical vacuum. However, forms of social organization, politics and physics often make the theoretical argumentation worthless because in the real world it just can’t play out the way we theorize. Obviously me and my peers are as guilty of this an anybody, but this is why I’m more of a pragmatist and not an objectivist. With pragmatism you have the chance to test your theories and change your opinion depending on the outcome. With objectivism the theory is considered truth no matter the outcome.

  7. Sandy Teal says:

    The #1 sign that racism still infects our society:

    The liberal college professors enforce a system of blatant racism in college admissions where they judge students by the color of their skin. Moreover, they are proud of their racism and feel morally superior when they can ensure that no minority will ever feel like they built anything.

  8. Scott says:

    The claim that “Detroit was saved from bankruptcy” is a funny-flaw. Here are a few items, often missing from analysis:

    1.) The “city of” Detroit has been very close to bankruptcy & has been in terrible shape due to Dem policies: losing a million+ people, having <40% (forget exact) HS grad rate, and having many (30%+ ?) of residents on taxpayer assistance.

    2.) Only a small portion of the Big Three’s operations are in the Detroit area.

    3.) The US auto industry (obvious meaning of "Detroit") was not bailed out; it was #1 & #3. Ford got by without it.

    4.) There are many supplier companies to auto manufacturing, also having other companies as customers.

    5.) There many other automakers with production in the US.

    6.) GM & Chrysler DID go bankrupt, in violation of laws, which defrauded many people (ie bondholders & non-union workers’ pensions).

    7.) A regular type of bankruptcy [per law & regular practices] would have [in high probability] resulted in other companies & investors buying assets & paying some liabilities, leading to restructuring &/or absorption (ie part of Fiat). Operations would be more efficient than now, w/lower expenses (ie less UAW power) & better management, especially w/out Washington meddling.

    8.) Many jobs were still cut, including dealerships, which are not even expenses of the automakers & were political, based upon Repub owners.

    9.) The big 2 of 3, have continued outsourcing, especially to China, which is not actually a bad thing, but is a big contradiction [of many] to Barry’s rhetoric.

    I would guess that most of those points, plus many more are in that paper, which I’ll scan soon.

  9. bennett says:

    RE: Race. I saw this the other day and thought it was provocative.

    http://video.pbs.org/video/2289501021/

    • Scott says:

      bennett, Any connection of that video [about race] to this post or building?

      Are you trying to imply racism in voting against Obama?

      Well, there is racism in that many Hispanics & Blacks vote Dem to receive benefits from programs.

      People forget or don’t know that Repubs ended slavery & have been pro-civil rights. It was not until the 60s that LBJ changed his mind & developed the strategy to patronize minorities for their vote.

      BTW, all Presidential Democrat candidates since 1964 have received less than a majority of White votes & BO received the largest portion.

    • Sandy Teal says:

      The election of Obama did move the US to a post-racial society.

      For some stupid reason, PBS thinks that “post-racial” means the blacks have given up trying to extort money from the rest of the country. “Post racial” means that Asians, Hispanics and whites have moved beyond giving any credence to blacks who argue that all the problems of blacks are other peoples’ fault. The race baiting “black leaders” won’t stop wanting handouts for a hundred years, but the rest of the country has moved on.

      Bye-bye Jesse Jackson, JJ Jr., and Al Sharpton.

      • bennett says:

        Couple of thoughts. 1. I’m definitely not implying that voting against Obama is racist. 2. I pretty much agree with what Sandy has said with a few exceptions. I believe that the concepts of “white privilege” and coded racial language are still very real. Also, down here in TX there are places where white people are terrified and have definitely not “moved on.” There are places in America that may be “post racial,” but I have been many places in the last decade where the is not the case.

        I also thought the conversation about Obama rejecting his whiteness was interesting too.

        I posted the video because I thought it pertained to the conversation about race and I thought it was provocative enough to get a few comments. Mission accomplished.

        • Scott says:

          D’ya see [or are aware of] the minority favoritism in gov?

          Well, that’s how the recession was created — to give loans to Blacks.

          Understand? Doubt it. It began w/the CRA 1977 (further back: FDR’s FHA), which was strengthened under Clinton & HUD, w/pressure from ACORN & similar.

          Skipping — banks were coerced to make many loans (far beyond minorities), and there were false market signals — low interest rates & continually rising (unsustainable) home prices.

        • Sandy Teal says:

          I pretty much agree with bennet. I am sure there are people who are still old-style racists. I know there are many blacks who are old-style racists against dark-skinned blacks too. But this is an amazingly small part of the US today, just two generations after MLK.

          I think the “coded language” argument is clearly just ridiculous. You have to think that somehow there are voters that haven’t realized Obama is half-black to make the “coded language” argument make any sense. Hey, if you hear a “dog whistle” then science says you must be the dog it is aimed at.

        • bennett says:

          Obama uses coded language as much as anybody. I thought the point in the video re: Newt’s “food stamp president” is another good example.

          And it probably has more to do with class than race, which the video eventually got to. I’m my business I see it all the time, and not from “old style” racists (Opposition to a new bus stop at the mall because “criminals” ride the bus). Also, re: class, the most provocative statement in the entire video was “We’re all niggers in the eyes of the 1%.” Yowza!

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