American taxpayers paid $12,200 for every General Motors Corp. vehicle sold through the beginning of 2011, and $7,600 for every Chrysler Group LLC vehicle sold, a report by an economics professor at Rochester Institute of Technology found.
The Auto Bailout—A Taxpayer Quagmire, written by Thomas Hopkins, professor of economics at Rochester Institute of Technology, analyzes what the taxpayer cost of the government bailout of the auto industry. This includes how much each taxpayer has contributed to the auto industry since December 2008 and how much each vehicle is costing the public.
“The bailout has created moral hazard problems, inadvertently handicapping the progress of stronger, non-subsidized producers,” Hopkins said. “The problems extend beyond just the auto industry, as favored status for one financial company and its bank necessarily complicates prospects for non-subsidized rivals. The time has come to stop such bailouts and, in an orderly way, to seek at least some recovery for taxpayers.”
The study found the average American taxpaying family has invested roughly $800 in the auto bailouts so far. Government support for General Motors, Chrysler and GMAC—the financing subsidiary that supports sales at both—now stands at a $78.9 billion with no clear plan for how the American public will be reimbursed, the research found.
“If Americans are to believe public officials’ claims that the government will eventually re-privatize the auto industry and recoup some of these funds, the necessity of a thoughtful exit plan is essential,” Hopkins said. “However, at this time no such plan exists, making it unlikely that the Department of the Treasury or the public will ever recover its investment.”
The report is based on a November study released by the Government Accountability Office as well as statements and reports released from the U.S. Treasury.
(c) 2009 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail service@rbj.net.
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