By Jon Cassidy | Ohio Watchdog
COLUMBUS – The auto industry bailout is supposed to be a story about pulling together and making a comeback, a story to stir the soul when Clint Eastwood tells it during halftime of the Super Bowl.
Some reporters are having a hard time adjusting to the reality: that General Motors is plummeting in the direction of a second bankruptcy, taking tens of billions in taxpayer dollars with it.
In a news story Saturday, Joe Vardon of The Columbus Dispatch held Republican Senate candidate Josh Mandel’s feet to the fire, pressing him to take a position on the bailout.
But in the story Vardon told, he made a glaring factual error that says a lot about common misperceptions and why it’s hard for an Ohio politician to tell the plain truth about the bailout.
According to Vardon’s account, Mandel took a good 12 minutes not saying what he would have done about the bailout, responding to repeated specific questions with general remarks on free markets and government regulations.
In a text that could be used by journalism schools, Vardon took 290 words to demonstrate that Mandel wouldn’t give a yes-or-no answer to his bailout questions.
Then Vardon demonstrated he didn’t know what he was asking about, referring to “$80 billion in federal money loaned to General Motors and Chrysler in 2008 and 2009.”
The federal government loaned GM $10 billion, not $80 billion.
Most of the rest of the $79.7 billion package bought the taxpayers shares in Chrysler, GM and GM’s former financing arm, now known as Ally Financial.
Those shares are worth some $25 billion less than the cash taxpayers pumped into the companies; the government doesn’t expect to get that money back.
Aside from the cash the government distributed up front, it’s also allowing the companies that took money under the Troubled Asset Relief Program to pretend that old losses weren’t wiped out in bankruptcy. Put another way, GM won’t have to pay taxes on $45.4 billion in future earnings – that’s a tax credit worth around $15 billion.
According to the Special Inspector General for TARP’s quarterly report to Congress, as of June 30, “Taxpayers are still owed $44.5 billion” for the auto bailout. The figure includes $27 billion given to GM, $14.7 billion given to Ally, and a $2.9 billion final loss on the Chrysler bailout.
Despite the growing size of the boondoggle, the auto industry bailout plays well among Ohio voters, according to pollsters.
Polls have consistently shown a disconnect between voter perceptions of federal bailouts and reality. The bailout of Wall Street investment banks infuriated the public, although the banks have repaid almost all of what they owed. The only laggard has been AIG, which is still 53 percent owned by the federal government, but the company’s share price is high enough that Treasury expects to make $18 billion on its AIG dealings.
In the bailout, the one big money pit has been GM, but that doesn’t seem to bother the public or politicians.
U.S. Sen. Sherrod Brown, D-Ohio, brags of his support for the bailout in ads and interviews, and points to the $220 million Chevrolet is investing in Lordstown and Parma, Ohio, as evidence the bailout worked.
GM is almost entirely propped up by taxpayer dollars, which make up some $27 billion of the company’s market capitalization of $33.5 billion, yet there’s almost no local outrage that the company turns around and spends $559 million to put the Chevrolet name on Manchester United jerseys.
President Obama talked up the bailout on the campaign trail in Colorado earlier this month, saying that it was an example of what “we can do in manufacturing across America” and that it “means supporting investment here.”
“That’s good,” Luis Woodhill wrote at Forbes earlier this month, “because, if he wins a second term, he is probably going to have to bail GM out again.”
Woodhill bases his argument on declining market share and reported poor vehicle quality, to which there are counter arguments – namely, that the company has $33 billion in cash.
Indisputable, though, is that new GM’s stock price has fallen from $33 on Nov. 17, 2010, when it went public, to $21.20 at the start of this week. It would need to get up to around $53 a share for the taxpayer to get his money back.
That makes the GM bailout the one glaring failure of one of the most controversial policies of the past decade, a policy that gave birth to the tea party movement. Yet almost nobody in the Ohio press investigates the issue, presses Brown on his support for it, or even troubles to mention it.
The Toledo Blade followed the Dispatch’s lead and published a story Monday headlined “Mandel mum on auto bailout.”
There was no mention of $25 billion in taxpayer losses or $15 billion in tax credits, no mention of the rest of the bailout’s relative success. In the Blade’s view, the GM bailout is a “rescue,” which is one way to describe spending billions in public money for private profit.
By itself, GM is going to cost the public nearly a quarter of the bill for the S&L bailout of the 1980s, yet the Ohio press only wants to know why that guy Mandel can’t admit how awesome it is.