An alternative to popular faith
The latest headlines trumpeted, “GM repays loans of $8.1 billion, and it happened ahead of schedule.” Innocent taxpayers cheered this wonderful news. Earlier headlines told how GM went bankrupt, thereby cheating creditors out of more than $20 billion, and then too, innocent taxpayers cheered. Finally, the U.S. government paid $50 billion for 60% of GM, which the government hopes to sell at a profit, and when it does, innocent taxpayers will cheer once again.
So everything is wonderful, right? Actually, those three pieces of news were terrible for America, and thus, terrible for taxpayers.
When GM went bankrupt, and creditors lost more than $20 billion, this represented more than $20 billion that disappeared from the economy. If putting money into the economy is a stimulus, this was an anti-stimulus. Those creditors were real people and real companies. Millions of people were affected.
I myself owned a few of those GM bonds that lost about 70% of their value. That’s money my fellow creditors and I won’t be able to spend on goods and services, nor will we invest that money in economic growth. It’s gone. Disappeared. Poof!
No need to get into the question of why the government chose to lend GM money rather than to make good on GM’s obligations to real people and real companies. It’s probably a combination of politics and economic ignorance.
Then, when GM repaid the government, another $8.1 billion disappeared from the economy – another anti-stimulus. That’s $8.1 billion that GM will not use for employee salaries or for the purchase of goods and services from its thousands of suppliers. That money, too, is gone. Disappeared. Poof!
And lest you believe it went to taxpayers, it did no such thing. It will not put one cent into any taxpayer’s pocket, nor will it reduce federal taxes by even one cent. It simply has disappeared as a credit on a federal balance sheet, never to be seen, again.
Finally, when the government sells its GM stock, all the money it receives will disappear into that same balance sheet. No taxpayer will receive any, and no federal taxes will be reduced. The money simply will be gone. Another anti-stimulus. And if GM makes a profit on its sale of stock, the anti-stimulus will be even greater. Poof!
And the taxpayers will cheer.
I wonder, when you hear the cattle “moo,” while waiting in line to be cut into steaks, is that mooing the way innocent cattle cheer?
Rodger Malcolm Mitchell