It seems like every day a new piece of news comes in as a reminder that the federal aid to the auto industry is more than a lot of people originally realized or imagined. Today brings news that the government has set aside $1.2 billion in stimulus funds for auto-battery manufacturing and $800 million for auto-battery materials, and that the Senate will add $2 billion to the $1 billion already set aside and spent under the "cash for clunkers" subsidy. Reuters reports on $955 million in auto-industry-related asset-backet securities issued this week backed by the government's Term Asset-Backed Securities Loan Facility, or TALF. Then's there's the $5.9 billion loan to Ford from the federal energy department, along with $1.6 billion to Nissan and $465 million to Tesla. So far the total of all these programs is $13.92 billion. On top of that, the Wall Street Journal recently noted, the federal government has spent about $1.5 billion since 2001 researching hydrogen fuel cells for cars. The stimulus bill also provides a federal tax break for any state or local taxes or fees that apply to buying a new vehicle, a break whose cost to the federal budget has been estimated at $1.7 billion.
Meanwhile, the Treasury Department's latest report on the Troubled Asset Relief Program, or TARP, indicates that the Treasury has invested $80 billion in General Motors and Chrysler and their affiliated financing arms, of which it's gotten about $2.1 billion back. Another $3.5 billion has gone to GM and Chrysler parts suppliers. Call all this $81.4 billion.
Add it all together and we're up to $98.5 billion, or about $328 for every American -- more than $1300 from a family of four. Sure, some of this money is loans that the government expects will eventually get paid back, and in some of the amounts, such as the energy department loans or TALF, the federal subsidy can be looked at as the spread between the subsidized interest rate and a free-market interest rate, not the entire amount of the loan. Some of the expenditures may have benefits, such as reductions in greenhouse gases or less dependence on Saudi oil, that go beyond propping up automakers. Still, these calculations omit state and local tax breaks designed to lure auto manufacturing plants, they omit spending on roads, and they omit spending on the federal auto fleet.
The bailouts of bankers have generated most of the populist outrage, but when you think about it, the idea of the government taking $1,300 from every family of four and using it to prop up the automakers -- whether it is the union workers, with their generous health care benefits, or Tesla, whose investors include a lot of well-to-do venture capitalists and some of the country's richest private individuals -- it's outrageous. If the family of four wants to go out and spend money on a new car, that is one thing, a voluntary transaction freely entered into. But having money forcibly taken from you in taxes and transferred to the auto industry when, left to your own devices, you'd rather use the money for something else -- it's maddening. It's what happens in a system where the government, rather than the individual, allocates capital. What that does to our common expectations about the shape of our economy and the role of government may in certain ways be an even greater cost of the auto bailout than $98.5 billion.
