A new study concludes … surprise! … that the automotive bailout was mainly a bailout of … well, you know:
President Obama touts the bailout of General Motors and Chrysler as one of the signature successes of his administration. He argues that the estimated $23 billion the taxpayers lost was worth paying to avoid massive job losses. However, our research finds that the president could have both kept the auto makers running and avoided losing money.
The preferential treatment given to the United Auto Workers accounts for the American taxpayers’ entire losses from the bailout. Had the UAW received normal treatment in standard bankruptcy proceedings, the Treasury would have recouped its entire investment. Three irregularities in the bankruptcy case resulted in a windfall to the UAW.
We’ve talked about this in general terms, but they break it down into specifics. Basically, pools of creditors that were supposed to be treated equally were split into two pools — the unions and everyone else. The unions got far more than the “everyone else”. They also avoided pay cuts and benefits cuts, which might have happened in a normal bankruptcy, as we’ve seen with the airlines. The net result is that our $26 billion loss is about what the UAW got out of this.
(I can’t find the reference, but I believe the pension funds would have gotten federal money anyway had they collapsed. But that’s only a portion of the payout to UAW. And at least that would have been honest.)
People see this as an anti-labor thing, but it really isn’t. I’m not fond of unions but I support the rights of private sector unions to exist, to negotiate, to strike, to organize and to get their contracts honored (public sector unions are a different matter). I think the union focus is drawing people away from the salient point: President Obama gave $26 billion to his political allies. That’s bigger than everything paid to, say, Halliburton. But because it’s Big Labor, no one seems to have noticed.