Barack Obama has turned up the heat on Mitt Romney recently on the auto bailout. According to the strategy Obama rolled out last week, Democrats plan to highlight Romney’s opposition to the bailout and the politically-engineered bankruptcies that supposedly saved GM and Chrysler, along with all of the jobs at both automakers (unless you count the tens of thousands of jobs lost at the dealerships shuttered in the bailout). The criticism of Romney and the claims of credit for success will crescendo into the Democratic convention in the first week of September, trumping Romney’s advantage on economics.
However, reality threw a wrench into the works yesterday, as Treasury reported that the losses on the bailout for taxpayers have grown an additional $3 billion:
The Treasury Department says in a new report the government expects to lose more than $25 billion on the $85 billion auto bailout. That’s 15 percent higher than its previous forecast.
In a monthly report sent to Congress on Friday, the Obama administration boosted its forecast of expected losses by more than $3.3 billion to almost $25.1 billion, up from $21.7 billion in the last quarterly update.
The report may still underestimate the losses. The report covers predicted losses through May 31, when GM’s stock price was $22.20 a share.
On Monday, GM stock fell $0.07, or 0.3 percent, to $20.47. At that price, the government would lose another $850 million on its GM bailout.
The government still holds 500 million shares of GM stock and needs to sell them for about $53 each to recover its entire $49.5 billion bailout. At the current price, the Treasury would lose more than $16 billion on its GM bailout.
Jim Geraghty says that victory laps over the continued existence of GM and Chrysler are a little ridiculous:
[T]he President speaks as if the (somewhat) improved financial health of GM* is some sort of public policy miracle.
Is there any way you could provide $85 billion to an industry and it wouldn’t be in better financial shape?
* Other than the management shake-up.
There are a couple of problems with taking high-fives at this point, not the least of which is the massive loss taxpayers will take when the government finally unloads the stock. Obama says that both companies would have gone under without the bailout (started by George W. Bush, with the arm-twisting bankruptcy run by the Obama administration), but a greatly-reduced Chrysler ended up being sold off to Fiat anyway. Ford, meanwhile, didn’t take the bailout — and managed to do just fine. The only thing accomplished by the Obama administration was the protection of UAW contracts and the shift of liabilities tied to pensions and benefits from GM to taxpayers. Those kinds of liabilities could have been addressed in a normal bankruptcy without government intervention — but it would have turned out much worse for Obama’s allies in Big Labor.
If Obama wants to run for a second term on the basis of doing this for other industries, I can’t think of a better argument to vote against him.