Good news: Auto bailout no longer costing taxpayers $14.3 billion
posted at 12:10 pm on November 17, 2011 by Ed Morrissey
Remember how the Obama administration bragged about saving the American auto industry with the $85 billion bailout for GM and Chrysler? They’ve claimed that the bailout will only — only — cost taxpayers $14.3 billion in the end. However, like so many of the White House’s economic claims, further revisions bring bad news (via The New Editor):
The Treasury Department dramatically boosted its estimate of losses from its $85 billion auto industry bailout by more than $9 billion in the face of General Motors Co.’s steep stock decline.
In its monthly report to Congress, the Treasury Department now says it expects to lose $23.6 billion, up from its previous estimate of $14.33 billion.
The Treasury now pegs the cost of the bailout of GM, Chrysler Group LLC and the auto finance companies at $79.6 billion. It no longer includes $5 billion it set aside to guarantee payments to auto suppliers in 2009.
The big increase is a reflection of the sharp decline in the value of GM’s share price.
The Detroit News actually reported this on Monday, and the estimate from the Treasury is based on the GM stock price as of September 30th of $20.18. It’s since rebounded a bit to $22.47 at around 11 am ET today. That’s still a rather steep decline from its January high of $39.48 a share, but it’s a little better than the $19.48 low GM hit last month. The next estimate for the bailout cost will come on December 30th.
Tom Elia notes that the losses shown by Treasury don’t include a special arrangement for GM:
It is important to note that these figures do not include the apparently unprecedented tax treatment GM is receiving from the IRS with regard to its ‘tax-loss carry forwards,’ something restructured companies never get to take advantage of.
Including those figures in calculations totaling the entire cost of the auto bailout for the federal government raises the loss on the bailout by about $15-$20 billion, or to around $35-$40 billion.
The Detroit News also reports that this will inflate the cost of the overall bailout, too:
The new estimate also hikes the overall cost of the $700 billion Troubled Asset Relief Program costs to taxpayers. TARP is the emergency program approved by Congress in late 2008 at the height of the financial crisis.
In total, the government used $425 billion to bailout banks, insurance companies and automakers, and provided $45 billion in housing program assistance.
The government now expects to lose $57.33 billion, including the full cost of the housing program, up from $36.7 billion. The new estimate means the government doesn’t believe it will make an overall profit on its bailouts.
Well, only the government ever really expected to make a profit on TARP anyway, so that’s nothing more than a cold dose of reality. But it’s good to keep these figures in mind as the Obama 2012 campaign tries to defend the auto bailouts and downplay the cost to taxpayers over the next year or so.