Opportunity Costs?

In economics, an opportunity cost is the value of what is foregone in order to pursue a course of action.  Unfortunately, it seems that today's economists, at least those who side with the administration (and, well, Democrats in general), only include the horrific opportunity costs of opting to follow another plan.  There are also, quite logically, brighter scenarios that might well happen, too.

That's how the final result of the auto bailout is now being portrayed.  "The cost to US taxpayers for the auto bailout is only $11 billion."  Yep, "only."  (Should we quibble that it's just the GM bailout that cost $11 billion, that the entire cost is closer to $15 or $16 billion?  Ah, to the gov't, that is just that, quibbling.  I recall a number of school administrators, when approached about how they waste/fritter away money, saying, "Oh, that's just a drop in the bucket."  None of them, none, ever realized how a drop here and a drop there can add up to significant savings.  After all, it wasn't their money they were spending.  I believe it was the late US Senator Everett Dirksen who once said, "A few million here and a few million there and soon you're talking about some real money."  But I won't quibble......)

And the standard line being fed to an eagerly awaiting Lamestream media is about opportunity cost. Think of the terrible things that could have happened had the bailout not occurred!  Yes, millions of jobs lost; billions of dollars of individual savings gone; a significant decrease in production; cats and dogs sleeping together; and worse.

First, nobody knows what would have happened had the US gov't not bailed out GM and Chrysler.  Yep, they might have gone bankrupt (but that certainly doesn't seem to bother many in the federal gov't now about Detroit!).  That terrible scenario might well have happened.  Nobody knows, certainly not the economists, who always hedge their bets with "on the one hand, but on the other...."  (That's why Harry Truman was always looking for "a one-armed economist," not because he was a sadist.)  The auto companies might have come out even better than now, without the billions in costs to the US taxpayers.  That's the other side of opportunity costs--the positive alternative scenario.  All that money might have been spent in better, more productive ways--or not spent at all.  Again, nobody knows for sure, but it's an equally likely scenario.

I'm guessing, too, that the auto companies wouldn't have been allowed to fold--not allowed by private investors.  After all, look at Detroit, a failing place if there is any.  And there's not a lot of reason for optimism.  Yet, there are investors who are spending money on the city.  The Tigers' owner is one.  So is others.  If people are willing to spend money on the bleakness called Detroit--to eventually recuperate their investment-surely there were some who were going to use private funds for the auto companies.  Again, I don't have a crystal ball, but that sure seem likely.

And, why were GM and Chrysler bailed out?  "Too big to fail?"  As I noted above, that doesn't seem to be the case with the city of Detroit, at least not as far as the feds are concerned.  Maybe, just maybe, had they failed, it would have been just desserts.  For decades it was understood in Detroit that the auto makers were producing a pretty lousy product.  They were making poor deals with the unions, while compensating quite well executives who were making the poor deals.  Why should taxpayers pick up the tab for this?

And, who really was bailed out?  Not the bondholders.  Not the suppliers who were owed money.  Not many mid-level managers.  Not retirees with their pensions.  It was the unions and their workers.  Why, then, the bailout?  It was because the federal government decided to pick who wins and who loses.

That's a dangerous proposition, very much so.  So, the feds can determine success and failure, using or not using, other people's money?  That's bad precedent to set, although this wasn't the first time it was done and surely won't be the last.  As long as politics are involved, gov't officials--elected and appointed--won't necessarily do what's right, but what's expedient, what's best for them.

I sure would like a bailout.  But, my problem is I've done nothing wrong.  I've done all the right things. Growing up in the shadows of the Ford Rouge Complex (If the wind blew from the wrong direction, soot pellets could be found on our cars!), I studied hard, found a way to get to an Ivy League college (Amherst), graduate, get a job.  I continued on with my education with three graduate degrees, worked hard, paid my bills.  When the bills began to add up or I sniffed bigger ones on the horizon (such as paying for my son's college education), I went out and got other jobs.  (At one time in the '90s, I was drawing paychecks from five different employers.)  Oh, and of course, we didn't qualify for any federal aid for college, nope--I guess I worked too hard and too much.  I didn't do the stupid stuff GM and Chrysler did, so maybe I'm the stupid one after all--not getting bailed out by the feds.

Grrr....  "Only $11 billion...."