A little over a year after filing for bankruptcy, General Motors took the initial steps last week to break free from its majority shareholder—the government. By filing the paperwork for an initial public offering, GM signaled it is ready to shake off its pejorative recent nickname, Government Motors. Experts say the stock sale could come as early as October or November, a potential plus for the Obama administration just ahead of midterm elections. But whether the administration's $50 billion rescue of GM is seen as a policy success will depend on how much the taxpayers get paid back. And both political parties are likely to bring the issue with them on the campaign trail.
The string of bailouts for domestic auto companies and Wall Street banks last year angered some taxpayers, and the 2010 primaries suggested that voters are upset at government spending in general, making this a tricky issue. Leading up to the midterms, Republicans have accused the government of growing too big, spending too much, and intervening too often in the markets with bailouts. Democrats have been defending spending, suggesting the jobs saved will be worth the investment. GM posted high profits in the first two quarters and repaid the Treasury Department $8 billion in loans in April. But the company did not release the price of the public offering or the number of shares being sold, so it is difficult to tell how much the government and taxpayers will be repaid.
But for those who argue the bailout was necessary to prevent a domino effect that might have come with liquidation, the jobs saved by the bailout are worth the investment. "The money that the government gets back is just the icing on the cake," says Ross Eisenbrey, vice president of the liberal Economic Policy Institute. "The bailout was worth doing even if the government were never repaid. Creating jobs in the U.S. economy is not cheap." Eisenbrey estimates that unemployment insurance alone would have cost $16 billion per year.
Democrats are likely to agree and, on the campaign trail, to point to the bailout as a successful policy. "This is another important step in GM's rebound and in the recovery of the domestic auto industry," said Michigan Democratic Sen. Carl Levin, in a statement. "A successful IPO will be even more evidence that the steps the government took in 2008 and 2009 were good for workers, good for Michigan, and good for the nation. I'm optimistic this success story is going to keep getting better."
But with voters still on edge about government spending, some analysts say even wrapping up the issue with the IPO won't help Democrats. "What this actually does is to remind people that the bailout was done, that the bailout is, in a sense, ongoing," says David John, senior policy fellow at the conservative Heritage Foundation, echoing what Republicans are likely to tell voters. "It's doubtful that we are going to see that $50 billion again."
For now, the debate about whether this is a symbol of recovery or a reminder of the bailouts is likely to break on party lines. However, one thing is clear according to Eisenbrey. "This is a symbol of how much better things are than they were two years ago," he says. "But I don't think this by itself signals that the economy is safely on the road to complete recovery."
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