The Treasury Department announced earlier today that it’s ready to sell the 18 percent of General Motors that it still owns, which is going to leave the auto bailout as a large net loser for the government unless shares suddenly skyrocket up to almost $54 a share. By contrast, the bank bailout portion of TARP has turned a profit.
Not that there’s anything wrong with the government taking an accounting loss on a program. To my way of thinking, one of the main lessons of the whole TARP episode is simply how foolish it is to focus on “profits” and “losses” in the investment portfolio of a large currency issuer like the United States. Earning profits on investments would be trivially easy for the U.S. government, were it determined to do so, but it would also be pointless. The point of the GM bailout was to save jobs, and it clearly did that. The policy question is whether the price was way too high for achieving that goal.
It’s fascinating to me that in the 2012 campaign the GM bailout was something Team Obama was eager to campaign on, while the American Recovery and Reinvestment Act was something they tended to run away from. Formally speaking, both were expensive undertakings that saved jobs relative to a plausible counterfactual baseline, but that clearly failed to create an overall robust labor market recovery. But one way or another, the much cruder nature of the GM bailout seems to have worked better as a political talking point. To me, that seems to potentially set a bad precedent. We still haven’t done nearly enough thinking about what happens next time a recession hits in an environment of already low interest rates and we hit the zero bound. The joint political lessons of ARRA and GM seem to be that you want to get a big pool of money and use it to forestall or minimize job losses at big, iconic companies. That produces the kind of concrete, tangible results that people feel good about and candidates are happy to run on.
And yet it doesn’t seem like very good public policy to me. We need a better idea, like legislation directing the Fed to print and distribute helicopter money.