The Truth About the Auto Bailouts

Todd Zywicki

Last month, President Obama barnstormed through Ohio, unveiling his surprising decision to claim credit for the success of the multi-billion dollar government bailouts of General Motors and Chrysler.

Why surprising?

Because despite the efforts of the administration and its willing accomplices in the media, the belief that the auto bailouts were a success is simply a myth. Leave aside the obvious point that the government still stands to lose billions of dollars on its investment as well as many billions more from the preferential tax treatment of the reorganizations. Not only was the bailout unnecessary to save the American automotive industry but the politicized bankruptcy process left both General Motors and Chrysler in a weaker competitive position than if they had simply reorganized in a standard chapter 11 process…

…Celebrating the auto bailouts as an affirmative success can really have only one rationale: to lay the foundation for similar interventions in the future. For if the auto bailouts were truly a triumph of industrial policy why shouldn’t the government intervene in the future to save major firms in other industries from the rigors of bankruptcy?…

Read the entire article at RealClearPolitics.

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