Auto bailouts passed political test, but failed economics test

I expect the Democratic Party to amplify their argument that President Obama’s orchestrated bailout of Chrysler and General Motors was good for the American economy. According to the White House, about 1.25 million jobs were either saved or created as a result of the auto bailouts.

Yes, that’s good news, but was that good for the economy? The economy is about society making choices regarding using available resources to produce optimal output of goods and services. What the bailouts demonstrated was the result you get when government attempts to impose its production preferences on industry. This action is worse than picking and choosing industries to subsidize. It’s overly intrusive.

The appropriate thing for government when it has an excess of ideal labor is to find out from the private sector where they believe the needs for labor are and provide labor with information as to where these opportunities are and how best to prepare for them. If there is market failure, ( a concept I personally no longer subscribe to because markets do not fail), then the only appropriate approach government should take is to fill in the information gaps.

The auto industry bailouts should not be held up as an example of the Administration’s economic prowess.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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One Response to Auto bailouts passed political test, but failed economics test

  1. Ken Ciszewski says:

    “If there is market failure, ( a concept I personally no longer subscribe to because markets do not fail)…”

    I’m curious to know what you thought a “market failure” is (was), since it’s mentioned at the top of all these blogs (“The American Centrist If there is no market failure, there should be no regulation”).

    Does this mean there should never be any kind of regulation?

    “The economy is about society making choices regarding using available resources to produce optimal output of goods and services.” That’s an interesting thought, although I don’t know what “optimal” means. I think that sentence could stand alone as “The economy is about society making choices regarding using available resources to produce output of goods and services.” and be accurate. I don’t see that the choices made, even the “good ones”, are always optimal. Economies are imperfect and messy.

    But if bad choices are made, and the result of those choices is harm to millions of people, should nothing be done? It takes tons of money and many years to create an auto industry, or even just one automobile manufacturer. Once liquidated, recreating such a company is a Herculean task. You admit it was good news the jobs were saved. That probably is good news for the economy as it affects the people of this nation. After all, the decisions made by capitalists are sometimes not in anybody’s interest, even theirs–they sometimes make big mistakes. We should all suffer as a result?

    It used to be said that what’s good for General Motors was good for the USA. That’s overstated, in my opinion, although there is some truth in that, just as there’s some truth in a partial converse statement: letting GM go down the tubes is not good for the USA.

    I’m sure this auto bailout was not something anyone wanted to do. The consequences of not doing it were deemed destructive to the economy, which is why it was done.

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