Sometimes it’s no fun to be an economist. Or, to be more specific, it’s rather frustrating to understand Bastiat’s insight about the “seen” and the “unseen” and to always be asking “at what cost?” and “to what effect?” when politicians make inane statements.
The GM bailout is a good example. Politicians want us to believe that it was a success because the company is still in business. Heck, the Vice President’s favorite campaign statement is that “Osama bin Laden is dead and General Motors is alive”
But if you’re the type of person who recognizes the importance of tradeoffs and incentives, then it’s easy to see how a political success can be an economic failure. Which is the message of this new video from the Center for Freedom and Prosperity Foundation.
This is music to my ears. I’ve been saying for years that any company can be kept afloat indefinitely with taxpayers subsidies. So if that’s the definition of success, we can party until we hit the fiscal brick wall. But that wall won’t feel good, as we can see from the fiscal chaos in Greece and other European welfare states.
But this issue involves more than just inefficient subsidies. I’m also concerned about the corruption that inevitably exists when cronyism replaces capitalism.
It’s quite likely, after all, that GM is spending lots of money on the Chevy Volt because of pressure from Washington rather than demand from consumers. And when you have a car company executive endorsing higher gas taxes, it’s reasonable to think that he’s currying favor with the political masters in DC rather than looking out for the best interests of drivers.
The GM bailout may be a win-win situation for politicians and lobbyists, but it’s a lose-lose proposition for taxpayers and the economy.
P.S. If you want some auto bailout humor, here’s a spoof on the Chevy Volt, an advertisement for the new GM Obummer, a couple of good political cartoons, and a very funny video on the Pelosi GTxi SS/RT.
[…] cronies, campaign contributors, and political supporters (including not just Wall Street, but also auto companies, cities, health insurance companies, imprudent homeowners, Fannie Mae/Freddie Mac, and entire […]
[…] cronies, campaign contributors, and political supporters (including not just Wall Street, but also auto companies, cities, health insurance companies, imprudent homeowners, Fannie Mae/Freddie Mac, and entire […]
[…] was very critical of the General Motors bailout since it largely was designed to give undeserved special benefits to the UAW union. I’m also […]
[…] was very critical of the General Motors bailout since it largely was designed to give undeserved special benefits to the UAW union. I’m also […]
I think a key reason forbes-minded people don’t like the auto bailout is because it supports middle-class union jobs – if GM were allowed to restructure (which no doubt would be the bankruptcy mode of choice), they would be in a great position for some union busting.Additionally if we are to bemoan the Ford ‘disadvantage’ at having its competitor subsidized, why don’t we condemn the Wall street bailout for the same reasons? Any company which betrays and defrauds its shareholders and clients through fraudulent, illegal trading should take the consequences (failure) regardless of its largesse.
[…] A video showing how the auto bailout has been a costly mistake. […]
[…] A video showing how the auto bailout has been a costly mistake. […]
[…] A video showing how the auto bailout has been a costly mistake. […]
Hi James. Please provide details about subsidies to oil and gas companies. Specifics please.
So you’re against all the subsidies to the oil and gas industry that keep gasoline prices artificially low and hamper true competition from alternatives?
You don’t refer to the video anywhere in the post . . .
I clicked all over the picture but couldn’t get it to play. I clicked on Dan Mitchell at the bottom and got a list of everything you’ve ever written. I read the whole damn thing looking for a link to the video. Nada, nada, nada.
You should NOT make it so hard and cause frustration.
Perhaps it might be good to focus on the bad it’s done for Ford. The Ford company would have expanded and employed more people if its bankrupt competition had been allowed to go bankrupt..
[…] Watch, Economy, International, Trade Tweet There are lots of claims that the federal government saved the American auto industry by bailing it out. (Never mind that Ford didn’t get a bailout, and […]
GM loses Market Share every month. The Customer Base is shrinking every month. And every month that goes by takes GM closer to bankruptcy.
Just talked to an auto vendor about the vote-
Good car- but way too expensive
[…] DAN MITCHELL: If the Auto Bailout Was a Success, I’d Hate to See What a Failure Looks Like. […]