There were a couple of updates in the news today about the auto industry and the economy. Thus, it is probably a good time to update how our massive bailouts and stimulus tax dollars are performing.
Government Motors – It appears as General Motors moves towards bankruptcy it is more than likely the company will be government owned. Maybe I was naïve, but I thought once the GM was in bankruptcy, it would not require anymore taxpayer bailouts. Apparently, that is not true. I am hearing that it could cost the taxpayers anywhere from 100 to 200 billion of taxpayer money to keep GM afloat. The government will own about a 70% stake in GM and the United Auto Workers (UAW) will own a large portion as well. The government and UAW are two entities I have very little confidence to turn around GM. In fact, I think both the government and UAW have played an important role in auto industry demise. Government regulations such a CAFÉ Standards and the UAW has driven employee pay and benefits to record levels where U.S. auto makers cannot compete with foreign auto makers. In fact, Government Motors board of directors will still consist 50% of current board members that have driven the company into bankruptcy. It is crazy to continue to employ the same poor leaders. Right now, I am not overly confident that GM will survive, especially facing new CAFÉ Standard regulation and the UAW will not yield any concessions in pay and benefits. To put the GM bailout in perspective, we could pay more for GM then we have paid thus far for the Afghanistan War. This is a ridiculous price to pay for ONE company. Especially for a company that employs fewer than 100 thousand employees and that number continues to decline sharply as they close plants and dealerships. At one time GM employed nearly 700 thousand workers. The government and American taxpayers now OWN: GM, Chrysler, and banking giant AIG. This is not only dangerous policy, it is not consistent or fair policy since the government chooses who to help survive and who they should let fail including hundreds of small businesses.
Economy – Unemployment seems to have peaked last month and has started to decline which is a good sign. However, this is no thanks to Obama and his stimulus package. The administration is claiming that the stimulus package has saved or created approximately 150 thousand jobs. First, I am not too sure how they measured this statistic. Second, over the same period of time over 2.5 million jobs have been lost. Thus, I would not be bragging too much if I were Obama if the massive stimulus has only affected the economy by a mere 6%. In any event, much of the stimulus money will not get into the economy for several years and the recession better be over by then. I am still sticking by my original assessment that the economy could have recovered on its own, without any interference and the above statistics reinforce this because the stimulus is not really helping in the recovery. A trillion dollar spending bill should be having a minimum impact on the economy of greater than 25%.
My Book: Is Ameria Dying? (Amazon.com, Barnes and Noble)
My Blog: The Theory of Mediocrity (http://patrickbohan.blogtownhall.com/)