In a bit of a flashback, the government bailed out GM to the tune of about $20 billion dollars. Despite shoveling this much cash into the dying company, it still died. Or rather died a financial death on the form of bankruptcy. Now the state owes 60% of GM, a company that has a rather impressive negative net worth. Or unworth, to borrow a bit from the notion of the undead. Of course, that is something of an apt term-just as the undead are formerly living beings that continue to move around after death, GM is a formerly profitable company that continues to move around after its financial death.
While people are calling GM “Government Motors” and getting fired up with rhetoric about socialism, I am going to bypass all that for now. Instead, I’ll do a bit of math.
The logic behind dumping about $20 billion into GM was that it would help save jobs and save the economy. Now, if we just took $20 billion and hired people at $40,000 a year, we could hire 500,000 people for one year. Or hire 50,000 for ten years. Or, …well, you can do the math. Alternatively, we could have put that money into starting up new businesses and, in all probability, created many viable new companies that would hire people.
While I do believe that the state has an obligation to protect the citizens, this should be done in an effective manner. That is, the action taken should get the most for our tax dollars. This has clearly not been the case with the Bush and Obama administrations’ handling of the crisis.
But the money wasn’t spent that way. Rather it was spent to try to save GM, which failed anyway. Of course, the folks in the government are trying to put a positive spin on it: GM will shed its bad components and re-emerge as a leaner and profitable company. However, this is something of a serious gamble. GM’s track record has been one of more or less unrelenting failure and bad decisions for years. Pouring money into a company with that sort of track record seems to be a rather bad risk. If GM fails to arise like a phoenix from its ashes, then we (the taxpayers) will be, to use the technical term, screwed once again.
But, suppose that GM does rise out of the ashes like a mighty fire bird? What will that do for the taxpayers? Will we get a slice of the profits? Will we each get a new car? Will we sell off GM for a small percentage of its worth to some friend of who ever happens to be in office when that happens? Whatever might be said now, we have to wonder what we will get out of this. The more cynical might say “screwed again.” Perhaps.