WASHINGTON -- Taxpayers are likely to lose nearly $14 billion on the bailouts of General Motors and Chrysler, but an analysis released today by the Center for Automotive Research says the intervention should still be seen as a success.
According to the Ann Arbor, Mich., center, every dollar spent on taxpayers’ behalf led to nearly eight dollars in savings. This is because the bailouts of 2008 and 2009 averted a wave of bankruptcies that would have wiped out $284 billion in household income in 2009 and 2010 and drained $105 billion from federal coffers by chipping away at tax revenues and hiking demand for services, such as unemployment insurance.
Based on this economic modeling, the center “is confident that in the years ahead this peacetime intervention in the private sector by the U.S. government will be viewed as one of the most successful interventions in U.S. economic history,” wrote Sean McAlinden and Debra Menk, the senior researchers who authored the report.
The analysis comes as the Treasury Department prepares to sell its remaining GM shares by year end, allowing the automaker to shed the “Government Motors” moniker coined by its critics.
The stock sale also will open new possibilities for GM, which has faced restrictions on executive pay and shareholder rewards since the government bailout.
General Motors CEO Dan Akerson has a speaking engagement scheduled for Monday, Dec. 16, at the National Press Club in Washington -- a speech in which he may discuss the company’s post-bailout future.
Taxpayer losses remain a sensitive subject, particularly because a resurgent GM is now earning billions of dollars in profits annually, and because the bailouts of large banks that took place in 2008 and 2009 have, in sum, made money for taxpayers.
“This sale will almost certainly restart the discussion over the question of the ‘worthiness’ of the government’s ‘investment’ in the new GM or its actual return to the general public,” McAlinden and Menk wrote.
The U.S. Treasury Department has reported a $1.9 billion loss on Chrysler. The center estimates Treasury will lose another $11.8 million on GM stock, for a total of $13.7 billion.
Talking to reporters at a press event in Detroit today, GM North America President Mark Reuss cited “tens of thousands of people who now can put food on the table” because GM and Chrysler are still in business and growing.
"The towns where those plants are. The supply bases. The restaurants again. All of the service businesses operating again. How can you put a number on that?" Reuss said. "I’m not sure it was the same as some other industries that were granted (federal bailout) funds."