Is the Bailout of 2009 a Thing of the Past?

Remember the Chrysler and GM bailouts of 2009? They saved these iconic American auto makers from ruin. Some questioned their advisability at the time, but with the now booming auto industry, these early critics are coming to seem more and more misguided. There are numbers to bear this out. The Center for Automotive Research (CAR for short) has recently released a study it conducted on the general economic results of the bailouts. The facts and figures show just how important, and how successful, these bailout actions were in retrospect.

One way to look at the economic effects of the bailout is in terms of the number of jobs it has saved. The CAR study concludes that the bailouts of Chrysler and GM saved 2.631 million jobs in 2009 and 1.519 million jobs in 2010. These are impressive numbers. Lost jobs mean large areas of lost income and a general wave of economic distress can result from massive job loss waves of this nature. Fortunately this was largely prevented by the measured taken by the U.S. government.

Bailout of 2009

Apropos of this, another area that the CAR study addressed was exactly that – the amount of averaged U.S. income saved by the bailouts. Not surprisingly, it turns out that this amount is huge. The saving of Chrysler and GM saved $173.5 billion in 2009 and $110.9 billion in 2010 for a total of $284.4 billion. This is personal income – the paycheck that Americans take home. Fewer jobs mean less money flowing to the American public in general. Those saved jobs allowed hundreds of millions of dollars to continue circulating that would otherwise have dropped out of circulation, making the average American poorer.

If the bailouts had either failed or not been undertaken at all, there would have been an impact on the federal government as well. There would have been a drop in the amount of income taxes the government collected, for instance. The government would also have been hit with lower social security receipts and higher transfer payments. All of this would have been another dimension of the havoc that would have been caused by the failure of the automotive giants.

As our local auto exports at AutoNation Chrysler said, the auto industry has many connections beyond the simple employment of auto employees, designers, and administrative staff at auto factories. There is, for instance, a whole parts supply industry to consider. Many of the parts suppliers that supply parts to General Motors also sell parts to Ford, Chrysler, and Overseas automakers. These suppliers would have been hit almost as hard at the primary manufacturers themselves, and this would have had gigantic repercussions in terms of the global auto industry as a whole.

The study concludes with a statement that, given these statistics, one is inclined to interpret as more than bombastic praise: “CAR is confident that in the years ahead, this peacetime intervention in the private sector by the US government will be seen as one of the most successful in US economic history.”

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