Yesterday there was an interesting coda to the campaign arguments over the auto bailouts. The economics blogger Adam Ozimek made a nice catch: in a survey of economists, former Obama economic adviser and current Chicago business school professor Austan Goolsbee indicated that the benefits of bailing out Chrysler and GM will not exceed the costs. Ozimek notes that Goolsbee defended the auto rescue as a member of Obama’s economic team, and wonders how he could do so if he thinks it wasn’t a worthwhile endeavor.
Goolsbee resolved the apparent contradiction in an email to Quartz’s Tim Fernholz, who asked if the benefits of the auto bailouts exceeded the costs:
Obama’s part of the bailout likely did (we’re still not fully out of the positions) but there were appx $18 billion given by the Bush administration which largely just kept them alive until Obama took office and if you add that $18b I believe the total is somewhat underwater, as a factual matter. Nothing new here.
Goolsbee’s saying that the actual Obama “bailouts,” which were in fact managed bankruptcies, were cost-effective. The problem was that a large amount of money was already out the door before Obama’s policies could be enacted, thanks to the Bush administration, and the net result is that the bailouts lost money.
Goolsbee’s comments fit into an argument I made in October about the role of the Bush administration in the auto bailouts. Bush’s loans to the auto industry, made before Obama’s inauguration, took the best policy option off of the table, namely putting GM and Chrysler through a structured bankruptcy without extending them bailouts first.
One note that is now only relevant for its historical value is that that was the course of action Mitt Romney favored in late 2007, whereas Obama at the time preferred an administrative restructuring of the two companies. Of course, the Obama White House eventually took part of Romney’s advice and put the companies through bankruptcy, but by that point the automakers had already received billions in loans from the government.