These days, a political story in the news has about a 3 to 4 day shelf-life before we're on to the next hot topic. What's more is that during that short life span, the political spin on the facts often becomes more popular - and more memorable - than the facts themselves. We repeat this cycle so often that we hardly ever take a moment to pause and look back on a story to see whatever became of all those partisan predictions on the Left and Right. Who had it right? Who had it wrong? Who was full of hyperbole? And who was actually close to the mark? One such story was the Auto Bailout story from 2008. Ahhhh, yes....the Auto Bailout. How could we forget about the good old "Big 3" (GM, Ford, Chrysler) Auto Bailout, right? Whatever happened with those guys anyway? Well, fortunately for us, the facts in this story have been very well documented in the public domain from 2008 all the way through to last week's op-ed piece by Treasury Secretary Geithner. So let's see if we can separate the fact from fiction.
As you might recall from the spin, the Big 3 Auto Bailout was a highly controversial and widely unpopular move that, according to conservatives, let us know in unequivocal terms that President Obama was a Socialist who's primary goal was to have the federal government nationalize the auto industry. The only problem with that spin (as with most spin) is that it is factually inaccurate because it was actually President Bush - and not President Obama - who made the decision to bail out the auto industry. On December 19, 2008, Bush gave $17.4 Billion in tax payer dollars to GM and Chrystler, apparently becoming the nation's first Republican-Socialist President. (that last part was sarcasm in case you were wondering)
Another interesting trivia fact from this time period is that with all these bail-outs and stimulus packages, the general public often associates all of the above with Obama when the fact of the matter is that President Bush created the $700 Billion dollar TARP in 2008 which was responsible for bailing out the Banking Industry and the Auto Industry; President Obama, on the other hand, created the $787 Billion Stimulus Package in 2009 which provided nearly $500 Billion in actual spending to federal agencies, the states and local governments and also provided $288 Billion in tax cuts to the same. Together, these 2 programs (one from Bush, one from Obama) grew the federal deficit by $1.4 Trillion dollars.
But getting back to the Auto Bailout, in 2008 when the Big 3 came hat in hand to the federal government, the substantive debate boiled down into 3 schools of thought:
1. The Conservative Approach - Companies should be allowed to rise or, in this case, fall on their own without government intervention no matter who they are.
2. The Progressive Approach - The government should help companies that are facing collapse during hard economic times.
3. The "Too Big to Fail" Approach - Irrespective of the Conservative or Progressive approaches, the Auto Industry employs between 1 to 3 million people and, if allowed to fail, will significantly contribute to the unemployment rate.
In the end, despite the chatter from the Left or Right, the Too Big to Fail Approach prevailed and President Bush decided to use the TARP to bail out the auto industry. Upon taking office, President Obama continued the bail out to GM and Chrysler (Ford was able to keep its head above water with a line of credit from the banks). In 2009, GM and Chrysler both filed for bankruptcy. All 3 companies were berated by the federal government which criticized them about everything from the corporate jets they took to appear before Congress to the fact that they had invested too much time and energy into gas-guzzling SUV's while their Japanese competitors profited from more fuel-efficient cars. At the end of the day, the Bush and Obama administrations had invested a total of $80.3 Billion. To say it was a risky investment would be an understatement.
2 years later, all 3 of the Big 3 Auto Makers are reporting profitability, including GM and Chrysler which re-emerged from bankruptcy. Not only are they all profitable, but they have paid back most of the $80.3 Billion to the federal government, which was one of the primary concerns for many tax payers who were against the bail out from the start. In fact, a few weeks ago, Chrysler, which originally borrowed $10.5 Billion from the feds, officially paid back 100% of its bail out loan to the U.S. plus interest at 12%, which means U.S. tax payers actually made some money off of the investment. Moreover, based on the size of the auto industry workforce, had the Big 3 been allowed to fail the current unemployment rate (9.1%) would be between 9.7% to 10.9% depending on which estimates you use.
This raises some questions worth exploring:
1. Even though the Big 3 will likely pay back all $80.3 Billion in auto bail out loans with interest, was it a good idea for the U.S. to have saved them from collapse?
2. Going forward, should the U.S. bail out another industry if it also employs millions of people? Why or why not?
3. What would the public reaction have been if the U.S. had not gotten involved and the entire American auto industry had collapsed?
4. Why are Democrats not capitalizing more on the fact that the auto bail out worked?