NCPA - National Center for Policy Analysis

Campaigning on the Auto Bailout: Is It a Good Idea?

June 3, 2011

It is kind of puzzling that Democrats are campaigning on the success of the auto bailout -- and not the bank bailout.  In fact, taxpayers fared far better through their "investment" in the banking industry than they did in the auto industry, says Daniel Indiviglio, an associate editor at The Atlantic. 

  • As of the U.S. Treasury's March bailout program update, the auto bailout is expected to cost taxpayers $15 billion. Meanwhile, the non-housing-related financial industry bailout is expected to provide the government with a net gain of $157 billion.
  • Obviously, the taxpayers were far better off rescuing the banks than they were rescuing out the auto companies.
  • From a profits standpoint, the financial industry has also performed much better since its bailout than the rescued auto companies.

Presumably, Democrats see a stronger populist narrative for the auto bailout.  But was the auto bailout really a success?  Democrats appear to think so, according to a Wall Street Journal article today by Sharon Terlep and Jeff Bennett, says Indiviglio.

  • The fact is, you can save just about any company if you throw enough money at it.
  • The auto companies were not on the verge of collapse due to anything having to do with the financial panic or the housing bubble.
  • Instead, they failed due to flawed business and strategy decisions that had built up over decades.

So the government threw a huge wad of cash at some companies with fundamental problems. They recovered after revamping their operations and using that cash to plug some holes.  Is that really so impressive?  

Source:  Daniel Indiviglio, "Campaigning on the Auto Bailout: Is It a Good Idea?" Nature, May 31, 2011

For text: http://www.theatlantic.com/business/archive/2011/05/campaigning-on-the-auto-bailout-is-it-a-good-idea/239703/

For data: http://www.treasury.gov/connect/blog/Documents/Financial%20Stabilization%20Program%20Update%20March%202011%20FINAL.pdf

 

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