After selling 200 million shares of GM stock in December, the U.S. government owns only 19% in the carmaker and plans to sell the remaining 300 million shares by early 2014.
This shouldn’t come as a surprise to those who’ve followed the GM saga. The December sale cemented a loss to taxpayers of around $12-13 billion, but it was certain to happen after the election. The story isn’t receiving a lot press, however, and the exit will no doubt be hailed as a triumph of government intervention when all is said and done. The remaining sale will quietly cost us another ~$15-20 billion–depending on the stock price–and will be completed well before the midterms. While I strongly favor the government’s liquidation of GM shares, anyone who thinks the process was coincidentally nestled between the 2012 and 2014 election cycles fails to understand the political nature of the bailout.
The sale of GM shares will mark the end of a costly and unnecessary infusion of politics in the private sector. Supporters will argue that millions of jobs were saved, but this analysis remains both convenient and illogical. They will never provide a convincing calculation for the number of “saved jobs.” They will continue to incorrectly assume that GM would have dissolved without a government bailout. They will fail to recognize the costs associated with the bailout and the ongoing support for the carmaker, including such measures as the $7500 subsidy for purchases of the Chevy Volt. And they will never see the jobs that might have replaced those at GM and the products those workers might have produced if GM had downsized through a normal bankruptcy.
Unfortunately, the real costs extend far beyond the GM bailout. Rather than focus on satisfying customers in a highly competitive marketplace, executives have learned that political partnerships can have a lot more to do with long term survival if you’re too big too fail. And while we’ve been told that bailouts won’t happen again, they can and will whenever the political winds blow in the right direction.
The irony here is that free enterprise always takes a hit when Washington takes sides in the private sector. We are told that capitalist greed and mismanagement wreak havoc on the middle class, and government must step in to save the day. Yet, many overlook the political corruption and regulations that dictate business activity in the first place. Whether its auto production or the banking sector, firms are not entirely free to make their own hiring and production decisions anyway. In other words, Washington often intervenes to solve the very problems it creates, at a net cost to taxpayers. This is a more difficult case to make than the emotion-laden “save American jobs” pitch, but it is the one that must be made going forward if we are to produce the kind of productivity and growth needed to save our economy over the long term.