GM: From the White House to the statehouse

Justin Owen President, The Beacon Center of Tennessee
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General Motors is now notorious for reaching deep into the pockets of taxpayers to bail itself out of a bad situation. In 2008, under the Troubled Asset Relief Program, or TARP, President Bush doled out the first round of what eventually became a $50 billion bailout of the Detroit automaker. With that, the United States government became a majority owner in the company.

This did not sit well with most taxpayers, who cried foul and rightfully so. Soon thereafter, GM became known by the more appropriate moniker of “Government Motors.” Fearing a consumer backlash against it for this historic bailout, GM attempted to distance itself from the Washington scene. But taxpayers weren’t fully off the hook.

Rather than retool its business model to become competitive in the free enterprise system, GM turned to another, smaller government teat. Or several of them, actually. Since its grand TARP bailout, the company has received another $1.7 billion in taxpayer-funded grants and tax abatements, not from the federal government, but from states across the country.

Some might call this a coincidence, but GM freely admits it is an outright strategy. In a recent interview with TennesseeWatchog.org, a project of my organization, a company spokesman stated matter-of-factly, “We are increasing our activity with the states obviously, in the communities in which we operate.”

How right he is. Not long after the TARP bailout, GM began ramping up its lobbying presence in several states. Public filings reveal that since 2008 the company has doubled its lobbying expenditures in Tennessee, increased them by 60 percent in Indiana and increased them by 78 percent in Texas, while also hiring in-state lobbyists in each of the states to give it the proverbial boots on the ground.

The payoff was handsome. State officials in Tennessee just awarded GM more than $1.5 million in grants, part of which went to reopen a plant in Spring Hill, Tennessee. This comes on the heels of a $17 million taxpayer handout in 2009, after which the company immediately packed up and shipped the jobs it had promised Tennesseans back to Michigan.

GM’s increased lobbying efforts also helped the company obtain a $3 million grant through the Maryland Economic Development Assistance Fund and a $1.5 million grant from the Maryland Department of Labor, Licensing and Regulation. In 2009, local Indiana officials announced a $2 million incentive package for the GM assembly plant in Fort Wayne. And in Texas, the company recently applied for refunds on state sales and use tax payments through a state incentive program. For GM, the savings would amount to $3.75 million.

Apparently, turning taxpayers on their heads and shaking every penny from their pockets is a profitable corporate strategy for a quasi-public car company. As of last summer, GM sat on roughly $40 billion in reserves. Yet the ribbon-cutting ceremonies with state officials across the country continue like clockwork, with taxpayers footing a lofty bill.

All the while, GM touts that it has paid back the billions of dollars that taxpayers used to prop it up in 2008. That claim itself is misleading, but even the amount it has returned to the federal government has essentially been funded — in part — by those same taxpayers via state governments. This adds a whole new meaning to the phrase “in one hand and out the other.” One thing is for sure: Four years after TARP, GM has proven that it can still take taxpayers for a ride.

Justin Owen is president & CEO of the Beacon Center of Tennessee, the state’s free market think tank. Visit online at www.beacontn.org