If this week follows the normal pattern, the public stock offering Thursday by a resurgent General Motors
will not be seen as evidence that presidents George W. Bush and Barack Obama made wise decisions to help the tanking auto industry. No, it will probably just remind Americans that the federal government is really, really big these days.
That is, of course, true. In part it's true because of two protracted wars and the money the government has spent to stabilize an economy that two years ago was in a stomach-lurching freefall. It seems true because of new regulations to reorganize the health system and prevent a repeat trip to the edge of the economic abyss. I say "seems" because most of those new regulations are in the planning stages, still to come.
The auto bailout, coming on the heels of the much despised Wall Street bailouts, was apparently more than Americans could bear. Obama dissolved into laughter in a March 2009 interview on CBS' "60 Minutes" when he was told that only 18 percent of
Americans wanted the government to help the industry -- while 76 percent said it should not. "The only thing less popular than putting money into banks is putting money into the auto industry
," he said. By August 2010 a relatively robust 43 percent in a USA TODAY/Gallup Poll said they approved of "government aid to U.S. automakers
that were in danger of going bankrupt." Yet 56 percent still disapproved.
If the facts were better known, would Americans think better of the auto bailout? Unclear, but here they are anyway: The government committed nearly $50 billion to GM (and received a 61 percent ownership stake for U.S. taxpayers); $14 billion to Chrysler (a 10 percent ownership stake), $17 billion to GMAC (the car and home loan arm of GM), and $5 billion to auto parts suppliers. Last month, the Federal Reserve estimated taxpayers would recoup
all but $17 billion of that $86 billion.
GM has just reported its third straight profitable quarter, one of many signs that the U.S. auto industry is here to stay. And Americans appear to be growing fonder of U.S. products, or at least feeling more loyal. In a new Rasmussen poll
, 41 percent said buying American is their top consideration when making a car purchase. That's up from 32 percent in 2008. Gallup, meanwhile, says 6 percent of Americans will only buy a foreign car
-- down from 15 percent in 2008.
The upshot is a healthy industry at a bargain price. Mark Zandi, chief economist at Moody's Analytics
and an adviser to Republican presidential nominee John McCain in 2008, said he initially estimated taxpayers could lose up to $60 billion on the auto bailouts. "This is a very significant win for policymakers. They did absolutely the right thing," he said in an interview.
The government plans to sell close to half its shares
this week, and might not hold the rest long enough to realize a profit. "We're not patient investors," Zandi said. "The general feeling is we are not very comfortable being major shareholders in GM. We'll sell early and lose money, but a very modest amount -- particularly compared to what it felt like we were going to lose almost two years ago."
Some conservatives are unalterably opposed to bailouts, even if they are temporary and profitable. As senator-elect Pat Toomey of Pennsylvania told me
during his campaign, "The goal is not to have taxpayers bail out failing companies in the hopes that maybe they turn around and they can get out with some kind of profit. That's a totally inappropriate role for the government."
Toomey would get no argument on that from Bush ("nobody was more frustrated than I was" that the government had to get involved, he writes in his new book, "Decision Points") or Obama (he has described the government's primary role in GM as "shareholders that are looking to get out
But what do you do when trusted economic advisers -- including the Treasury secretary and Fed chairman -- are telling you that capitalism hangs in the balance? "I decided that the only way to preserve the free market in the long run was to intervene in the short run," Bush writes of his decision to bail out Wall Street and the car companies.
Both he and Obama were told that letting GM and Chrysler die would mean the end of Ford and the auto parts supply chain, erosion of the manufacturing base, the steep decline of specific regions, and dire systemic impact on the whole country. "My economic advisers had warned me that the immediate bankruptcy of the Big Three could cost more than a million jobs, decrease tax revenues by $150 billion, and set back America's GDP by hundreds of billions of dollars," Bush writes.
What would a million fewer jobs do to the unemployment rate? Add nearly a point, Zandi says. That means that unemployment -- now at 9.6 percent
-- would have been well above 10 percent nationally for Obama's first two years. In the industrial heartland -- Michigan, Ohio, Indiana, parts of Kentucky, Wisconsin and Illinois -- we would have been looking at high teens.
Donald Grimes, a senior research associate at the University of Michigan's Institute for Research on Labor, Employment and the Economy,
said the auto industry had already lost 870,000 jobs in Michigan since 2000, its previous peak. Without a bailout, he said, it could have easily lost another 100,000 or more. Letting the companies go bankrupt in a deep recession "would have been a symbolic lights-out indication," he told me.
Grimes, who said he did not vote for Obama in 2008, has little sympathy for the companies or the United Auto Workers union. Like the Wall Street banks that received bailouts even though they were at the root of the crisis, they bear plenty of blame for overcompensated workers, crazy work rules, "archaic management" and old thinking, he said. "Everybody knew the day of reckoning was coming," he said. "Even people who worked in the industry referred to themselves as a bunch of dinosaurs."
From a PR standpoint, Grimes added, it's easy to understand why the auto bailout remains unpopular: If you are outside the industry and lose your job, nobody is rushing to bail you out. "This easily could be seen as unfair and probably rightly so," he said. "But you have to be practical. You can't be doctrinaire. We faced a potential calamity. You don't let things collapse."
Both Obama and Bush made short-term political sacrifices to save the economy. In approving $700 billion for Wall Street and auto bailouts, Bush went against his party and his ideology and lost standing with conservatives. Obama, who also followed economists' advice to pass an $814 billion stimulus package, reinforced the image of Democrats as the party of big government and risked the backlash that materialized at the polls this month.
Long-term, however, both presidents probably did their reputations some good. Bush writes that he told aides, "If we're really looking at another Great Depression, you can be damn sure I'm going to be Roosevelt, not Hoover." And if Obama and his party think they fared poorly by losing control of the House this year, imagine what 10.5 percent unemployment and utter Rustbelt devastation might have wrought -- in the election and in the history books.
In the here and now, both men are trying to make a tough sell. The "things could have been worse" pitch is unconvincing when there are five unemployed workers for every job opening. But this week there is actual good news to be sold, if Obama and his team can figure out a way to make the country take notice.
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