The dollars are still flowing from the U.S. Treasury to General Motors.
There’s been a lot of talk about GM’s relisting on the stock exchange this week. This is supposed to be evidence that bailout funds are being paid back and GM is on the road to sobriety. But there’s something you probably did not know.
Companies that experience a significant ownership change typically lose access to a tax benefit enabling them to count prior losses and various other expenses—including pensions—against future earnings for tax purposes. In 2009 the federal government quietly decided that companies receiving bailout funds under the TARP program would be exempt from this restriction. This means that GM will be able to count up to $45 billion in pre-bankruptcy losses against future profits for up to 20 years.
When the GM bailout was initiated, I argued that GM WOULD BE PROFITABLE EVENTUALLY because leftists in government would continue to channel taxpayer funds, breaks, and subsidies to keep the company afloat. Whether it’s the original bailout, cash for clunkers, pension “reform” that reduces or eliminates the GM pension burden, “green” subsidies, or tax loopholes, the Obama administration has a vested interest in the company’s survival.
This loophole is further evidence that the GM bailout was simply a bad idea. It’s also a textbook example of why there’s no such thing as fair competition when the government has a horse in the race. Perhaps the new Congress should take action to eliminate the loophole for GM and other bailout companies. I’m getting ready to pass this suggestion along to my new Congressman.
Sure, this will cost us in tax revenue but it will also cost us in innovation. If GM had to survive on its own, then it would have to build better cars or get out of the way of other companies that could. GM should have been forced to sink or swim like everyone else.