The White House Is Wrong: The Auto Bailout Was a Terrible Idea

This past week White House Press Secretary, Robert Gibbs, suggested that had the government not bailed out two failing auto manufacturers, “that’s a million more people that would have been on unemployment benefits.” As will be explained herein, this claim of the Press Secretary is wrong and misleading.

Mr. Gibbs also suggested that critics of the auto bailout wanted to walk away from a million jobs. Such talk is unfounded political speak. One would have a hard time finding any serious critic who advocated such a thing.

Quoting Mr. Gibbs,

“I’ll let those that sat in the cheap seats a year and a half ago and wanted to walk away from a million, explain to every one of those workers why they made that decision and… whether they thought the decision they made 16 or 18 months ago, different than that of the president of the United States, whether they still stand by it.”

As one who sat in the so-called cheap seats, Mr. Gibbs, I never advocated walking away from a million jobs, but I absolutely do stand by the position that the GM/Chrysler bailout was a terrible thing to do and made no economic sense.

It seems that the President is unable to grasp – or unwilling to accept – some of the most basic economic principles surrounding this issue.

“Supply and demand” is one of the most fundamental economic concepts, and the approximate amount of viable jobs in the auto industry is essentially a result of the demand for the cars being produced. The number of viable jobs is not the result, and cannot be correlated to, the government pumping money into any auto manufacturing company. Of course, non-viable jobs can be artificially supported through bailouts. However, those are not sustainable without a subsequent demand increase, and such a bailout would not and should not have to be tied to saving a particular company.

In a free market economy, it’s nobody’s business to walk away – or to not walk away – from jobs. Indeed, nobody even has such ability. In a free market economy, it is everybody’s business to buy a car when they decide that they need one. This is a called “demand,” Mr. Gibbs. It is demand for cars that will create the jobs to make the cars. If x number of cars are demanded, then x number of cars will be produced and sold, and that is where the jobs come from. The particular company that manufactures the cars is of little relevance to the economy or the number-of-employed.

By saving so many jobs at Company A, President Obama kept roughly as many jobs from Company B. Thus, it can be argued that the President did not save a single job. He only saved a poorly-run company. Is it wise to spend taxpayer money on a poorly-run, inefficient company, rather than to have a well-run, more efficient company expand naturally and bring those jobs unto itself? The simple explanation of that process is that if you do not save Company A, then it goes into bankruptcy, and Company B purchases its factories and equipment. Company B then excitedly hires the already-skilled workers formerly employed by Company A and puts them back to work to meet that “demand,” which we have no control over. Moreover, it is likely that in such a situation, many of the jobs will not even have to be relocated, because the factories are already in place and tooled up. This is nothing more than practical, free-market economics.

Regardless of your crafty words, Mr. Gibbs, the President’s trick has been unveiled. He spent our money to bailout the unions. He kept and continues to keep two poorly-run companies on taxpayer-funded life support, while saving no jobs.