Today’s Wall Street Journal posted an article on the auto bailout and the cost to American taxpayers. The article mentioned the fact that in order to get taxpayers’ money back, shares of General Motors will need to rise to $53 from their current $26 to recoup the Bush-Obama investment. But that’s not the real cost of the bailout.
The article reminds us:
However things shake out, it will be only a fraction of the true costs in precedent and politicized investment. The bailouts signaled that major companies with union labor are too politically big to fail and undermined confidence in the rule of law. More troubling, the conversion of Detroit from an indirect to transparent Washington client continues to distort the auto market.
Last November, Mr. Obama’s enviroteers tightened fuel economy regulations again, jacking them up to 54.5 miles per gallon by 2025—well beyond the standards Congress set in 2007. The auto makers agreed despite their misgivings because as wards of the state they had no political choice. So Chrysler, GM and Ford will still be forced to make cars that dealers struggle to sell profitably, only many more of them.
The rule of law was not followed in the bailouts, and that will create problems for the companies in the future.
The article concludes:
The point is that the auto bailout isn’t an example of enlightened government revitalizing an industry after a market failure. It is a bailout in the wake of failed government policies and bad management that may keep going and going as Washington does whatever it takes to make sure Detroit keeps doing its political bidding.
Government meddling in the private sector is never a good idea.