Obama Rails Against Bailouts in Speech Defending Auto Bailout
In last night's State of the Union address, President Obama declared that the United States "we will not go back to an economy weakened by outsourcing, bad debt, and phony financial profits." He railed against a system that isn't fair to the "millions of Americans who work hard and play by the rules every day," positioning himself against special treatment for a favored few: "No bailouts, no handouts, and no copouts," he said. The address, he explained, was intended to move past all that, and "lay out a blueprint" for America's economy—a blueprint that "begins with American manufacturing."
What might this blueprint hold for all of us? If Obama's top example of successful policy is any example, more bailouts, more handouts, more special treatment for favored companies and industries, and more phony profits. We're not going back to an economy weakened by all these things; we're just going to keep the one we have. Here's how Obama touted the first item on his economic brag sheet last night:
On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen. In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences. We got the industry to retool and restructure. Today, General Motors is back on top as the world's number-one automaker. (Applause.) Chrysler has grown faster in the U.S. than any major car company. Ford is investing billions in U.S. plants and factories. And together, the entire industry added nearly 160,000 jobs. We bet on American workers. We bet on American ingenuity. And tonight, the American auto industry is back.
Sure, it's back in the sense that General Motors is finally beating Toyota, a Japanese car maker that just saw its supply chain decimated by a Tsunami and a nuclear disaster. And you know what? In a boxing match pitting a lower ranked fighter who's been given brass knuckles by the ref against a higher-ranked fighter who just broke his ankle, I'll probably bet on the one with the brass knuckles. But it's not much of a victory.
And sure, it's back in the sense that GM is no longer on the precipice of complete fiscal meltdown; all it took was a $50 billion handout bailout copout gift from taxpayers, and a $20 billion tax break. Also: continued public losses as the company under performs. When GM went public, taxpayers bought up a 61 percent stake in its operations at about $33 a share. So I suppose Obama was right about one thing: The auto bailout was a bet of sorts; in order for the public to simply break even, GM's share prices would have to rise to roughly $51. As of yesterday evening, shares are trading at $24.75. The company's investors—that would be everyone who pays taxes—are losing money on this deal. This is straightforward industry favoritism, and it's not particularly fair to the millions of American workers and taxpayers who play by the rules, but weren't bailed out, and are now having to foot a giant-sized bill for a company that was.
Yet this is apparently the kind of success that Obama would like to see replicated across the country. "What's happening in Detroit can happen in other industries," he said. So taxpayers can take tens of billions in avoidable losses in order to bail out other failing industries too? Not exactly a blueprint for success, but it certainly tells you where the Obama administration would like to take the country.