- The Washington Times - Monday, March 30, 2009

The Obama administration will tell us this week, possibly as early as today, how much more taxpayer money will be given to the auto industry. We say “give,” not “loan.” No one who had any thought of getting his money back would loan these companies the dollar amounts being offered, even with the “strings” that will be required.

The bailout money, as any observer can see, is really just another payoff to the unions. GM’s problems could easily be handled by the bankruptcy system. Bankruptcy rarely stops firms from producing products. The bankruptcy system simply protects viable operations long enough to reorganize to make a profit.

Let’s go through a simple example of what is happening. Suppose you were asked to lend $1.66 million on a house that had a market value of $200,000? You can reread those numbers again if you want. Would you take the investment remotely seriously? Bankers would assume that there was a typo in the application and send it back.

To make the example even more ridiculous, suppose that the homeowner who is asking for the loan had a negative income - a negative income of $3.1 million last year, that he is expected to lose a lot more money over the next couple of years and, even if things work perfectly, it’s only a hope that he will stop losing money after 2011.

Even if you had been foolish enough to have already loaned $1.3 million to this homeowner to finance the house before his new $1.66 million request, you would run away from this borrower and simply chalk up the $1.3 million previously given out as some temporary insanity.



Well, assume that there are 10,000 homes like this that are looking for loans, and that will give you the exact loan situation facing GM. GM has a market value of only $2 billion, its income ran in the red $31 billion last year, and it wants a loan of $16.6 billion on top of the $13 billion it already has received. You might also throw in that GM is expecting to report that sales are down 47 percent in March. The billions may seem small compared to the many trillions in obligations that the stimulus and bailout are piling up this year, but until now it has been considered real money worth not squandering.

But shouldn’t one feel sorry about the car companies? No, given their current circumstances, because these government programs generate a false sense of altruism and doing “good.” All the grateful union members get the money, but the money has to come from somewhere, from people who no longer have the money. Unfortunately, the spotlight seems to miss this other darker side of government’s wonderful gifts.

At some point Americans are going to turn en masse against the Obama administration for playing favorites with taxpayer money.

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