Big Government Helps Buddies

Big Government Helps Buddies

by Dustin Siggins

On June 13, Heritage Foundation Senior Fellow in Labor Policy James Sherk released a paper analyzing how the Obama Administration’s auto bailout could have cost the taxpayer nothing in the long run if the United Auto Workers (UAW) had received normal bankruptcy treatment. Instead, they were provided special treatment which violated numerous aspects of traditional contract law, and were given approximately $3.5 billion more in treatment than the total cost of the bailout. In short, according to Sherk, the taxpayers were charged $26.5 billion on their maxed-out credit card.

On Tuesday, Ed Carson wrote in Investors Business Daily that taxpayer losses may be worse than Sherk calculated, given General Motors’ continuing drop in stock price. From Carson’s op-ed:

General Motors (GM) shares fell to a fresh 2012 closing low of 19.57 on Monday. The stock hit 19 in mid-December, the lowest since the auto giant came public at $33 in November 2010 following its June 2009 bankruptcy. 

Normally you might say, tough luck investors. But this is Government Motors. The Treasury still owns 26.5% of GM, or 500 million shares… 

Those shares were worth about $9.8 billion as of Monday. That would leave taxpayers with a loss of $16.6 billion. 

But that's not the full tally…[T]he administration essentially gifted $45 billion in write-offs (book value $18 billion) to GM. So when GM earned a $7.6 billion profit in 2011…it paid no taxes. 

Include that $18 billion gift, and taxpayers' true loss climbs to nearly $35 billion.

Regardless of whether you look at Sherk’s or Carson’s numbers, the losses dealt to the public as a result of special treatment for the UAW are significant. While admittedly only one percent of this year’s expected deficit, and a much smaller fraction of the totality of deficits since the auto bailout was first initiated nearly four years, it is another reminder that big government will always help out its buddies and special interests first. This assistance flourishes under both parties, whether it’s by protecting farm subsidies and defense contractors, bailing out banks via TARP, giving the insurance industry a generation of guaranteed customers via the individual mandate, providing college students further taxpayer subsidization in an election year, or giving a bailout to the UAW.

With Democrats controlling most of Washington during a period of the largest deficits in the history of America, including Congress under the last two years of the Bush presidency, it’s easy for Republicans to claim such government favoritism is a problem mostly confined to the Democratic Party. However, this ignores the history just prior to 2006, when then-record deficits were brought by Republicans, and ignores that many Republicans have supported the individual mandate, farm subsidies, TARP, and student loan subsidization over the years, and have defended the defense industry to the hilt. Mitt Romney, for example, has taken four of these five positions in the last couple of years alone.

Big Government is a bipartisan problem, and conservatives would do well to remember this as we head into the fall elections and the potential for a Republican sweep in Washington. Voting for a party won’t prevent us from falling off the fiscal cliff we are heading towards – voting for a number of candidates might.

Dustin Siggins is a policy and politics blogger who regularly contributes to HotAir.com, HotAir.com’s Green Room, Race42012.com, and RightWingNews.com. He is the co-author of a forthcoming book on the national debt with William Beach of The Heritage Foundation.

Jonah Goldberg: Low Volt-age

 Jonah Goldberg, columnist

Low Volt-age
The Chevy Volt is a vanity car for the well-off, and the government is subsidizing it.

Let us compare the Volkswagen and the “Voltswagen.”

The original Volkswagen was intended as the “people’s car” (that’s what Volkswagen means). The idea of a cheap, safe, reliable car for the working man was popular before Adolf Hitler embraced it, but as a self-proclaimed man of the people, he made the idea his own. Whereas industrialists and aristocrats didn’t think the common man needed a car (“The people’s car is a bus” was their refrain), Hitler sided with one of his heroes, Henry Ford, arguing that everyone deserved his own ride. He ordered the German Labor Front, the union arm of the Nazi party, to start building a people’s car. When it looked like the car might be too expensive, the Labor Front created a savings program that promised a car for even the poorest workers.

At the 1934 Berlin Motor Show, Hitler proclaimed: “It is a bitter thought that millions of good and industrious people are excluded from the use of a means of transport that, especially on Sundays and holidays, could become for them a source of unknown joy.”

And then there’s the electric-gas hybrid Chevy Volt, a.k.a. the “Voltswagen.” At $41,000, about as much as the average American makes in a year, this is no people’s car. GM, owned by the government and the labor unions, is pitching it to affluent hipsters who don’t need a lot of space for a family. Deloitte Consulting says that the demand for such cars is from “young, very high income individuals” from households that make more than $200,000 a year, which is why the Volt will be rolled out in upscale, trendy urban markets. (Meanwhile the Chevy Cruze, the gas-only version of the Volt, has more room inside and is a mere $17,000.)

Because the Volt’s sticker price might be too high for even that crowd, the government is offering a federal subsidy of up to $7,500 (Californians have a state subsidy, too), which means that working-class people will be helping to pay for playthings for upper-income people.

“Like the EV1 that GM tried to peddle in the California market,” Kenneth Green, an environmental scientist at the American Enterprise Institute, says, “the Volt is a vanity car for the well-off that will be subsidized by less well-off taxpayers at all stages, from R&D to sales and to the construction of charging stations.”

Indeed, the Volt’s price is $41,000, but the cost is much higher. “Government Motors” is already selling the car at a loss. According to the blogger Doctor Zero, if you apply the subsidies that have gone directly into the car to just the first 10,000 vehicles, the cost is more like $81,000 per car.

Of course, electric-car boosters say this sort of thing is necessary to get the industry up and running. (Green responds: “Supporters claim that electric cars need subsidies because they’re still in their infancy. Electric cars have been around for over 100 years. That’s some infancy.”)

But would it be a good thing if we all switched to electric cars? The point is to reduce CO2 emissions, right? But in some regions, we get our electricity from CO2-spewing coal. The more electricity pulled from the grid, the more coal is burned, essentially replacing dirty oil with dirtier coal (which is why some coal backers see much promise in electric cars). Studies confirm that China — which is allegedly “beating us” in the race to a green economy — would produce vastly more greenhouse emissions if it switched to electric vehicles.

The expected response to that is that we need stuff like CO2-free windmills to generate electricity. Don’t get me started on the Volkspropeller.

Regardless, no matter how you crunch the numbers or the science, there’s no disputing that this is a political car, designed to meet the demands not of an economic market but of an ideological one, directed by the collusion of big business and big government. In this sense, the Volkswagen and the Voltswagen have a lot in common.

If the government weren’t taking taxpayer money and spending it on toys for upscale urban liberals (Obama’s strongest base of support outside of black voters and labor unions), there’d be no reason to care about the Volt. If rich people want to be “early adopters” and buy expensive gadgets that help them preen the plumage of their political sanctimony, that’s great. It’s not so great when the government gets involved in wealth redistribution, and it’s outrageous when it involves redistributing wealth upwards.

Jonah Goldberg can be reached at JonahsColumn@aol.com.

The Conservative View: Road to the Poor House

The following is a weekly column written by Russell Turner, a Republican county commissioner from Adair County.

The Conservative View
by Russell Turner

Road To The Poor House

Being from Oklahoma I have a strong admiration of one of our most famous philosophers, Will Rogers. During his life he also experienced an economic upheaval early in the 20^th century. We Americans would do well to read some of the observations of the people that lived through the great depression. While technology has increased, human emotions and drives remain the same as they did all of those years ago. I once heard a quote by Will Rogers that went something like this, ” Americans are the only group of people in the world that ever went to the poor house in a new automobile”.

Over the past week there has been a feeding frenzy over the CASH FOR CLUNKERS promotion for buying a new car. Maybe I am wrong, but I feel that the reason our country is in the financial trouble it is in today is because we Americans have a bad habit of spending more than we can afford. Many people have the goal of having a new car, while that is ok we need to remember an auto is just a tool to get us to work and do the errands we have to do. I was raised not to waste things like food, money, equipment etc. Whenever I see someone pouring a liquid into a perfectly good auto and destroying an engine, it seems like such a waste to me. Some of these so-called clunkers may not get as good gas mileage as some of the newer cars, but they could serve the needs of many people who cannot afford to buy a new car. We Americans far too often are ready to fall for a deal that is too good to pass up. This whole scheme is supposed to help pull the American auto industry out of a slump, but from the numbers I have seen the majority of the new cars being bought are foreign imports.

Instead of getting more American manufactured autos on the road we will be having less. The cash for clunkers promotion will only give a short term boost, the only true solution is for government to get out of the way and allow American ingenuity and innovation to solve the problem and build the cars that the American public want instead of what some government bureaucrat thinks they need. I guess until then we will be on the road to the poor house.

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Chevy Player of the Game and Bailouts

Congratulations to OU, on smashing Missouri in the Big 12 title game, and on making it to the National Championship game.

Just a thought on Chevy's 'Player of the Game' scholarship program; if GM gets a federal bailout, should they continue spending your money on their 'Player of the Game' program?