“This is an example of where you get a multiplier effect,” Barack Obama said to the town hall audience. Responding to a question from the audience, he explained how a change in economic policy can produce a larger change in income. Now, a report released about Obama’s Troubled Asset Relief Program provides all of America with a better example of the multiplier effect in action.1
In an independent study requested by the U.S. Congress, TARP’s Special Inspector General stated that the Obama administration rejected restructuring plans submitted by General Motors and Chrysler and instead recommended an accelerated termination of jobs at their automobile dealerships. “Job losses at terminated dealerships were apparently not a substantial factor in the Auto Team’s consideration,” the report said. “At a time when the country was experiencing the worst economic downturn in generations and the government was asking its taxpayers to support a $787 billion stimulus package designed primarily to preserve jobs, Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses and thereby potentially adding tens of thousands of workers to the already lengthy unemployment rolls.” 2
In addition to estimates from the University of Chicago of $3.40 lost for every dollar in Obama’s $787 billion stimulus package, money from vehicle sales lost through jobs Obama terminated was not the only factor contributing to a negative multiplier effect in the current economic crisis. According to the National Automobile Dealers Association, new and used vehicle sales accounted for 85.8% of 2008 sales at automobile dealerships in United States, with sales in parts and service generating $81 billion more in revenue.3
“Although perhaps it is inevitable that public ownership of private companies will have the effect of blurring the Government’s appropriate role,” the TARP report concluded, “the fact that Treasury was acting in part as an investor in GM and Chrysler does not insulate Treasury from its responsibility to the broader economy.” Adding insult to injury was Obama’s choice of a Honda employee to represent the face of American unemployment from the automobile industry for partisan remarks he made last Monday about jobless benefits. Such opportunistic behavior, along with Obama’s history of having a negative multiplier effect with government intervention in the domestic automobile industry, should serve as sufficient warning to lawmakers against the Obama administration’s economic policy to spend taxpayer money for government investment in electric car batteries at the expense of domestic jobs to stimulate a hydrogen economy free from carbon emissions.4
1. Barack Obama, “Remarks by the President at Town Hall – Elkhart, Indiana,” The White House, http://www.whitehouse.gov/the-press-office/remarks-president-town-hall-elkhart-indiana.
2. Neil M. Barofsky, “Factors Affecting the Decisions of General Motors and Chrysler to Reduce their Dealership Networks,” Office of the Special Inspector General for the Troubled Asset Relief Program, http://www.sigtarp.gov/audits.shtml.
3. Michael J. Boskin, “Obama’s Economic Fish Stories,” The Wall Street Journal, July 21, 2010, Opinion. Ward’s Automotive Group, Ward’s Motor Vehicle Facts & Figures, 2009: Documenting the Performance and Impact of the U.S. Auto Industry (Southfield: Ward’s Automotive Group, 2009), 79.
4. Barofsky, “Factors Affecting the Decisions of General Motors and Chrysler to Reduce their Dealership Networks.” Barack Obama, “Remarks by the President in Holland, Michigan on Investing in Clean Energy,” The White House, http://www.whitehouse.gov/the-press-office/remarks-president-holland-michigan-investing-clean-energy. Barack Obama, “Remarks by the President on Unemployment Insurance,” The White House, http://www.whitehouse.gov/the-press-office/remarks-president-unemployment-insurance. Iain Carson and Vijay V. Vaitheeswaran, Zoom: The Global Race to Fuel the Car of the Future (New York: Twelve, 2007), 270-280.