Thursday, June 9, 2011

Mourdock on the Failure of the Auto Bailouts

This week is the second anniversary of the Obama bailout of the car companies.

Richard Mourdock's campaign has a new video up detailing his involvement in fighting the bailouts:

In an email, Mourdock adds:

Two years ago today, the American government spent billions in taxpayer dollars to bailout the auto industry. The AP now reports that, "Taxpayers will lose about $14 billion."

Senator Lugar voted with the majority of Democrats in the U.S. Senate to support the auto bailout. Now that we know the bailout has cost taxpayers billions, I have called upon Lugar to explain why he supported it!

The auto bailout was a financial sham. I fought it all the way to the Supreme Court. Meanwhile, Dick Lugar continues to remain silent. He isn't demanding the Obama administration account for the $14 billion losses, and he never spoke out to defend Indiana pensioners who had their retirement fund looted.

Mourdock is not alone in his assessment about the bailouts, either.

It's a view shared by the fact checkers at the Washington Post, of all places, when they looked at the claims Obama made to defend his bailout of the car companies:

With some of the economic indicators looking a bit dicey, President Obama traveled to Ohio last week to tout what the administration considers a good-news story: the rescue of the domestic automobile industry. In fact, he also made it the subject of his weekly radio address.

What we found is one of the most misleading collections of assertions we have seen in a short presidential speech. Virtually every claim by the president regarding the auto industry needs an asterisk, just like the fine print in that too-good-to-be-true car loan.

They go on to dismantle many of the supposed facts and statistics Obama and the bailout supporters cite as proof that the bailouts worked.

They conclude with a damning paragraph:

The president is straining too hard [to defend the bailouts]. If the auto industry bailout is really a success, there should be no need to resort to trumped-up rhetoric and phony accounting to make your case. Let the facts speak for themselves.

The problem, obviously, is that the facts don't speak for themselves. The facts show that the bailouts were a failure.

The Washington Post gave Obama three "Pinocchios" (out of a max of four) for his false claims.

The Washington Examiner gave an even more sharp indictment of the bailouts in a recent editorial:

President Obama and two of his biggest union allies -- the United Auto Workers and the United Steelworkers -- plan to make the automotive bailout "a central issue" in the 2012 election, Politico reports. Republicans should view this as an opportunity. No issue better illustrates the deception, cronyism, disregard for the rule of law, and bad economic decisions of this White House than the auto bailouts.

On Tuesday, Obama announced that Chrysler had paid back all "outstanding loans to the U.S. Treasury and American taxpayers." This is highly misleading. American taxpayers still own a 6.6 percent stake in Chrysler, which cost them nearly $2 billion. Chrysler would have to be worth six times its current value ($5 billion) for the government to break even.

Obama's statement also conveniently forgets the $1.9 billion loan that was erased when Chrysler declared bankruptcy in 2009, and the additional $1.5 billion loaned to Chrysler's suppliers. And don't forget that the only way Chrysler could secure the money to pay off the Treasury loan was by getting Obama Energy Secretary Steven Chu to promise the company an additional $3.5 billion for energy-efficient vehicles. In reality, Chrysler is simply in the process of substituting one government loan for another.

The story is no better at General Motors, which supposedly just posted its biggest profit in a decade this quarter. But GM did not make that money selling cars -- rather, it came from the one-time sale of a subsidiary company. GM had bought Delphi, one of its troubled suppliers, for $2.5 billion in 2009. Then Delphi dumped $6.25 billion worth of its pension obligations onto the federal government's Pension Benefit Guaranty Corp. With those debts gone, GM sold Delphi for $3.8 billion this quarter. Voila -- huge profits for GM, all at the expense of the pensioners who fund and could someday depend on the PBGC (and possibly the taxpayers, too).

Despite these shady deals and accounting shell games, and despite the effective suspension of the rule of law that made the auto bailout possible, the Obama administration still hasn't made this deal worth the investment. According to the Government Accountability Office, U.S. taxpayers have spent $49.5 billion bailing out GM. They will likely never recoup the full $27 billion still tied up in the deal, especially considering that the entire company is only worth $46 billion. And the Chrysler situation is far worse: The government has spent $12.5 billion so far to bail out a $5 billion company. To whatever extent Americans understand the real story behind the auto bailouts, they will be an albatross around the neck of Obama's re-election prospects, not a political asset.

Three Pinocchios doesn't begin to cover it.