The New Jersey Star-Ledger labeled the General Motors bailout “arguably Obama's best investment”:
[H]istory will show that the industry is thriving because it had a government that trusted it could redefine itself back in 2009 – the year President Obama refused to let General Motors and Chrysler die by completing a $79.7 billion bailout that saved the two companies and their parts suppliers – along with the one million jobs that depended on them.
I left these comments:
It doesn’t take an economist to see the fallacy in the alleged “success’ of the GM bailout. It just takes some knowledge of basic economics, a proper moral compass, and the willingness to think.
A thoughtful person knows there’s no free lunch. As [the great classical liberal economist Frederic] Bastiat taught, proper economic analysis must take into account not just what is seen, but what is not seen. What we see is what the Star-Ledger reports. What is not seen is the private investments not made. What is not seen is the more competently run auto company(s) that would have emerged or expanded (including a new GM and/or expanded Ford, which did not take a bailout). What is not seen are the jobs that would have been created. What is not seen is that investments, automaking, and jobs would not have disappeared: They would have taken on a different, market-oriented form. The GM and Chrysler assets, including much of the existing workforce, would have been re-deployed. Many of the existing employees would have been hired for the new auto jobs that would have opened up. What you don’t see are the new people who would have gotten jobs in the restructured auto companies but who today are still unemployed or underemployed because of the jobs “saved” for the beneficiaries of cronyism. No one can know precisely what is not seen. What we do know is the assets would have been put to work creating wealth and jobs.
What is ignored is the terrible moral hazard going forward. What reckless behavior will American auto companies engage in knowing that the politicians will be there to loot the taxpayers to bail them out? Why should the auto companies use flush times to prepare for the inevitable downturn? After all, the government will be there to break the taxpayers’ piggy bank on their behalf. The GM/Chrysler story is not over.
What is definitely seen is the immorality of the bailout. That bailout crushed the new opportunities that would have opened up for auto industry entrepreneurs and job-seekers to step in to fill the void left by a legitimate GM bankruptcy. What we see is the bailout money was forcibly seized from private citizens who did not volunteer to lend or invest the billions of dollars GM received. What right do politicians have to “invest” where private citizens won’t voluntarily do so?
Political hacks see GM as a government success story. Thoughtful people see that the bailout was, is, and never will be anything more than what it was—crony socialism. To call this an “investment” is an insult to real investors. To speak of “conscience” in the context of crony socialism for big business is a moral atrocity. The “clueless narrative” belongs to those who don’t consider what is not seen.
That Which is Seen, and That Which is Not Seen—Frederic Bastiat