Unemployment in the United States increased again last month to 9.1 percent, with the Obama economy adding only 54,000 jobs—the fewest in eight months. Today’s terrible jobs report is much worse than expected. Economists surveyed by Dow Jones Newswires had grimly predicted 160,000 new jobs and an unemployment rate of 8.9 percent earlier this week.
But despite the dismal news that 13.9 million Americans remain unemployed, President Barack Obama is holding a victory party today at a Chrysler plant in Toledo, Ohio, trumpeting the only jobs he can manage to create—those bought and paid for directly by the U.S. taxpayer.
The President’s celebration comes amid word that Fiat SpA will pay $500 million for the U.S. government’s remaining 6 percent stake in Chrysler Group LLC, taking majority control of the company. For the Obama Administration, that’s news enough to signify a corporate turnaround following its bailout of Chrysler and GM in 2009, a bright spot in a day where millions are out of work. But what the President likely won’t mention is the continuing costs of the auto bailout that have fallen on the backs of U.S. taxpayers.
According to the government’s own reports, those costs come up to a staggering $14 billion, out of $80 billion shelled out to bail out Chrysler and General Motors in 2009. Then there’s other subsidies provided to Chrysler, as well as other automakers, including a plea for a new $3.5 billion loan from the Department of Energy to fund retooling of plants for more energy-efficient cars. But if you listen to the President (or an ad from the Democratic National Committee), his actions are responsible for saving an industry. Not so fast.
The Heritage Foundation’s James Gattuso explains that Chrysler and General Motors are where they’re at today because of a bankruptcy process, not because of a costly bailout that could set a dangerous precedent down the road.
President Obama should get credit for finally forcing the two into bankruptcy in early 2009. Unfortunately, however, it was accompanied by a massive inflow of taxpayer cash, government ownership of the two firms, and a manipulation of the bankruptcy process to advantage politically favored interests (notably the unions) at the expense of shareholders.
Going forward, the danger is that this intervention will become a precedent, legitimizing bailouts as a standard tool of economic policy. Such a result would be disastrous not just to taxpayers’ wallets but to the economy as a whole as firms (and investors) evade the consequences of their own decisions.
And if you hear the President brag today about the Detroit Three’s increase in market share in May, take it with a grain of salt. The Detroit Free Press‘ Sarah A. Webster writes that “the gain was largely the result of the sizable setback Japanese automakers endured as a result of the horrific March 11 earthquake and tsunami, which devastated the country and left much of its industry scrambling to get back to work, to try to build microchips and cars, among other products.” That’s no cause for celebration, either.
And when the President brags about Chrysler’s increased sales, keep another thing in mind, too. It’s not the President’s favored green cars that Chrysler customers are snapping up—it’s Chrysler’s SUV, the Jeep Grand Cherokee, that has lifted the automaker.
Then there’s this: Last week, DNC Chairwoman Debbie Wasserman Schultz (D-FL) hyperbolically stated “we would be driving foreign cars” absent the President’s actions. Today, the President will celebrate his hand-picked buyer, Italian-automaker Fiat, taking a controlling stake of Chrysler. But don’t forget that the company’s Italian CEO Sergio Marchionne once called the American taxpayers “shysters” for the high rates on the loans Chrysler demanded.
As always, the devil is in the details, and they likely won’t be invited to the President’s victory party today. You probably won’t hear mention of the other losers in the auto bailout, either, like the shareholders who suffered so President Obama could financially reward his political allies at the United Auto Workers union. Unfortunately, they’re not the only losers in the Obama economy, as America learned with the unemployment numbers that came out this morning.