Hank  Adler

Last week, the Obama administration announced that they had sold its remaining shares in General Motors at a loss of about $10.5 billion. The bailout of General Motors was a White House operation. The Treasury Department reported that it had recovered $39 billion in stock gains and interest from its $49.5 billion rescue. Transparency not being the Treasury's strongest asset at the moment, this is only a portion of the story.

The easy part of recognizing the real cost of the General Motors transaction is that the Treasury bailed out General Motors with borrowed money. Using an interest rate of 2.5% over four years means the bailout cost the government about $5 billion. That would take the loss to $15.5 billion. The hard part to follow is that the White House awarded General Motors tax benefits contrary to any reasonable reading of the Internal Revenue Code that will convey a subsidy of about $16 to $20 billion to General Motors over the next two decades. (Of interest, any future Secretary of the Treasury can challenge these tax benefits, but no citizen has 'standing' to do so.)

How important are these tax benefits to General Motors? The most recent balance sheet of General Motors has a book value (assets less liabilities) of $37 billion. The book value of the tax benefits on that balance sheet is now $36 billion. General Motors' net worth is effectively equal to its tax benefits, most of which were conveyed to General Motors by the White House.

The list of White House created costs includes many other White House programs such as the vaunted investments in solar energy. The list of other non-Congress approved expenditures is not endless, but very, very long.

What the President cannot seem to understand or accept is that there is nexus with respect to the costs of operating the government that are coming out of the White House and not out of Congress. The White House is expending funds and reducing taxes without Congressional involvement and, in my opinion, without legal authority to do so. Maybe in conjunction with lifting the debt ceiling, the President should be required to find offsetting budgetary cuts equal to his executive orders and other actions increasing the deficit that have occurred without Congressional approval.


Hank Adler

Hank Adler is an Assistant Professor at Chapman University.

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