Aaron Robinson: Rejoice, ‘Tax Dollars at Work’ Actually Worked; Or, How the Bailouts Were a Bargain

From the April 2014 Issue of Car and Driver

Those of you still grumping into 2014 on the belief that the government should never have bailed out GM and Chrysler probably weren’t terribly swayed by the video images of the vice president striding through the Detroit auto show in January with grateful car-company execs nipping at his heels. The man with the tawny skin and silver mane gave good photo ops, climbing up the side of the new F-150 and wedging himself behind the wheel of the Z06 with new GM CEO Mary Barra at his side. In a speech, he linked the government’s profligate doling from the public larder in 2009—$51 billion to GM alone—to the supposed resurgence of domestic manufacturing, saying, “We bet on American ingenuity, we bet on you, and we won.” Not mentioned in this de Gaulle-returns-to-Paris moment was its final price tag, paid by us all, of $10.5 billion. Those of you repelled by Biden’s crass triumphalism in a city where, just a few blocks away, the broken windows vastly outnumber the few taxpayers who vastly outnumber the remaining auto workers can be forgiven for switching channels at that moment. The political vaudeville at Cobo Center perhaps only cemented your certainty that GM and Chrysler should have been left alone to swirl down capitalism’s commode, and I won’t argue with that.

Instead, I’ll let a recent study by the Center for Automotive Research (CAR) take up the case. Based in the shadow of Detroit in Ann Arbor, Michigan, the non-profit CAR tracks trends in the industry and released a report last December, almost concurrently with Uncle Sam selling off his final 31.1 million shares of GM stock, examining the economic effect of the General’s government-aided restructuring. In short, the researchers tried to measure exactly what U.S. taxpayers bought with their money.

GM CEO Mary Barra, U.S. Vice President Joe Biden, and the 2015 Chevrolet Corvette Z06 at the 2014 North American International Auto Show

Quite a bit, it appears. The collapse of GM alone would have immediately put more than 84,000 people drawing paychecks onto the street. Factor in manufacturing jobs directly dependent on GM, and the number swells to 238,000 headed for the unemployment line. CAR further calculates that impacts to spinoff industries and non-auto jobs would have caused about 1.2 million people to lose their jobs, hammered personal income in the U.S. by $79.5 billion, and cut income tax and Social Security receipts by more than $17 billion.

That’s just in 2009. In 2010, another 674,000 jobs would have vanished, and the country would have made about $50 billion less in personal income. When CAR tallied up the full apocalyptic scenario, which includes a Chrysler shutdown, the total job loss in the U.S. economy is pegged at more than 4 million over the two years. That’s a lot of workers walking around with their “Hoover flags flying,” as the Depression-era saying goes, referring to people’s empty, turned-out pockets.

U.S. Vice President Joe Biden and the 2015 Ford F-150 at the North American International Auto Show

The modern industry’s interdependency is what accounts for the horrifying multipliers involved with automaker upheaval. Among GM’s suppliers, reports CAR, more than half also deliver parts to Ford and Chrysler, and 37 percent sell bits to Euro makes. About two-thirds of Ford’s suppliers also sell to GM and Chrysler. In early 2009, the report’s authors posit, this support industry was desperately low on capacity utilization, a weakened stalk just waiting for the right breeze to blow it over. A GM or Chrysler closure would have amounted to a hurricane.

The latest CAR report is consistent with forecasts the organization made during the crisis about the economic doom from a shutdown, predictions that bailout critics called “fantastical” or “worst-case.” They criticized CAR’s findings for not examining less drastic scenarios, such as a ­stand­ard Chapter 11 bankruptcy and reorganization, which might have prevented politicians from taking action. Perhaps.

But now that the shoving and shouting are over, the industry bailout seems like an incredible bargain, even if you only accept the smallest numbers, or 84,000 direct GM jobs saved at the net cost of $10.5 billion. Consider the members of Congress who lined up last December behind a defense-spending bill specifically prohibiting the U.S. Air Force from cutting the aging A-10 ground-attack plane. The Air Force would like to ax it and shift the expected $3.7 billion savings to the new F-35, supposedly a more flexible, do-it-all weapon.

Top: A-10 Thunderbolt. Bottom: F-35B Lightning II.

While strategists argue the pros and cons of the switch, the senators and reps are really eyeing the estimated 6000 jobs on the line, mostly at local Air National Guard bases where the A-10 serves. That’s about $617,000 per job, compared with $125,000 we spent for each direct GM-payroll job spared. Or $44,000 per auto-industry job if you accept the next most conservative unemployment number of 238,000. Or $8750 per job if you buy 1.2 million jobs being saved, and so on.

If you’re still bothered by the bailouts, consider all the things the newspaper has given you to be grumpy about since then. Why waste your negative energy on an old story? In the event, the bailouts ended as a relatively cheap three-pointer in a decade full of expensive American failures.

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