Government Involvement is Bad for Business

I said, I believe in American workers, I believe in this American industry, and now the American auto industry has come roaring back.  Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.

Barack Obama

Obama said this with the belief that he saved the auto industry.  But at what cost?  The federal government wrote a check for just shy of $80 billion.  Of that, only $35 billion has been repaid and $7 billion was written off as a loss.  GM stock has lost a third of its value since the special bankruptcy, putting it at just over $20 a share.  For taxpayers to breakeven, that needs to reach $51 a share.  The Volt, Obama's car of the future, has a sales record like the Edsel despite a $7,500 government subsidy for those who buy it.  Though GM posted a profit last year, it paid negative taxes thanks to a special tax break, courtesy of the US government.  The 'success' of the US auto industry is being financed by the taxpayer, not the car buyer.  However, since the bottom has not yet fallen out, it is being proclaimed as a success but the market knows better (i.e. the stock price is falling).  By comparison, Ford (which didn't get a bailout) had $8.8 billion in profits in 2011.

Rather than seek to aid private companies with federal bailouts at taxpayer expense, maybe the President could work on the US Postal Service which has so far lost $11.6 billion this year.  Or maybe he could look into Amtrak food service which is somehow losing $80 million a year despite selling soda for $2 and hamburgers for $9.50.  Or perhaps he could look at that trillion dollar a year deficit.  All of these are legitimately within his purview.

Government is ill-suited to running a business because it has no interest in the bottom line.  Everywhere that government has sought to run business, shortages are common, poor quality is typical, and taxpayer bailouts inevitable.  Without profit motive, cost containment goes out the window.  Without competition, quality falls.  If government was capable of running an efficient business, Europe would not be in such financial trouble, the Soviet Union would still be a going concern, and Cuba would be overrun with immigrants seeking the good life.