It Didn't Work for Amtrak and It Won't Work for GM, Either

Mon, 01 Jun 2009 16:45:36 +0000 – By Phil KerpenDirector, Americans for Prosperity

I cautiously cheeredthe Obama administration's announcement 60 days ago that GM was on a path to bankruptcy court, because I was hopeful that it would represent an end to political manipulation of the company and a chance to get a clean balance sheet and a new shot as a private company. I couldn't have been more wrong. Instead GM heads to bankruptcy court with a prepackaged deal that almost completely politicizes the company, with the U.S. government the new majority shareholder.

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Taxpayers were already on the hook for $20 billion of bailouts to GM, and today's deal puts us on the hook for another $30 billion. Even worse, that $50 billion could be just the tip of the iceberg, because the government is now committed to owning and operating an automobile company that could run massive losses for years, even decades, to come.

Today's New York Timesquotes an administration official saying: "We don't think that after this next $30 billion, they will need more money, but the fact is there are things you don't know -- like when the car market will come back, and how much Toyota and Honda and Volkswagen will benefit from the chaos." In other words, who knows how much taxpayers will pay. Sky's the limit.

In 1971, Amtrak was created, the Nixon administration said, "It is expected that the corporation would experience financial losses for about three years and then become a self-sustaining enterprise." The Obama administration now claims that GM will be a publicly traded company again in six to 18 months. Expect that, like Amtrak, GM will be government-run and subsidized to the tune of billions of taxpayers dollars for decades to come.

The worst part is that government entities are run according to political, not economic, considerations. Every decision--about dealerships and plant closings, about suppliers, about which vehicles to build--will have to pass the Washington tests of political and environmental correctness.

Saab, Saturn, Hummer, and Pontaic will be shuttered. At least nine plants will close. These changes might make economic sense. But with government calling the shots, we will never be sure why certain plants were closed and others were spared.

The Obama administration's big announcement on fuel-economy standards a couple of weeks ago and the president's endless drumbeat that Detroit needs to make smaller and lighter cars and stop making trucks and SUVs is proof positive of this theory. Trucks have big margins, and could be a path to profitability. GM does need to find a way to make money on smaller cars, too, but does anyone really have confidence that being overseen and run by government bureaucrats will make that more likely to happen? Instead expect some government-by-committee to turn out vehicles with a Yugo-like design that nobody will want to buy and that taxpayers will end up subsidizing heavily.

General Motors was once an icon of American capitalism, but is now an exemplar of outright government control of a major industry, something completely un-American. Someone alert Karl Marx--we have government ownership of the means of production.

The legendary GM President Charles "Engine Charlie" Wilson was famous for sayingin 1953: "For years I thought that what was good for our country was good for General Motors, and vice versa."

Today President Obama echoed those sentiments, ending his speech by saying that he hopes that once again what is good for General Motors will be good for the United States of America. We can only hope that he is wrong! -- that somehow, what's being done to GM will not spread to the rest of our country and its economy. That somehow, we will resist the inexorable pull of endless bailouts and government control if we are to restore the free market system that made our country great.

Mr. Kerpen is director of policy for Americans for Prosperity. He can be contacted through www.philkerpen.com. He records a free daily Podcast and today's is on the subject of the GM. Listen here.