The Auto Bailout was NOT a Success

In the attached article Daniel Ikenson at Cato explains that despite what we heard at the convention this week, the auto bailout was anything but a success. It misallocated massive sums in the economy and likely weakened the industry in the long term. GM and Chrysler should have died, and this would have in fact been healthy for the overall economy. The rotten bits of the companies would have evaporated and the good pieces would have lived on. As I’ve written Cadillac, Corvette, Jeep, and the truck divisions in both companies would likely have lived, and we’d have a better economy for it. Even accounting for the layoffs which would have happened.

(From Cato-at-liberty.org)

The auto industry is plagued with overcapacity, which is a problem that demands a thinning of the herd. GM and Chrysler, through their own relatively poor decisions with respect to labor relations, product offerings, and quality management were failing by the market’s judgment and were the rightful candidates to be thinned. But that process was forestalled. In 2013, auto workers in Alabama, Tennessee, South Carolina, Indiana, and even Michigan and Ohio may lose their jobs because GM and Chrysler workers’ jobs were spared in 2009.

That is only one of the many unseen or under-rug-swept costs of the auto bailouts. The following passage from congressional testimony I gave last year identifies several others:…

Click here for the piece.