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GM-Chrysler bailout is a $14,705 tax on new car purchases

Mark Milke with the Frontier Centre for Public Policy takes on the auto bailouts and the political class.

Mark Milke - June 16, 2009

In the bizarre new world created by Ottawa and Washington D.C., healthy companies - hello Ford, Toyota and other non-troubled automakers and their employees - are punished due to General Motors and Chrysler; the latter gave away the farm on pay, pensions and health benefits and, apparently, have employees and retirees who expect others to pay for such profligacy, as if there exists a right to the paycheques of others.

In the real world, only 38% of Canadians have a company or union pension; many of those, and also the 62% who must provide for their own retirements, will also now pay for GM and Chrysler pensions.

In the upside-down world created by U.S. President Barack Obama's tight links to U. S. labour, those who lent GM and Chrysler money in good faith - not just those in blue suits but the money they manage which belongs to retired teachers and other folks - are told their legal rights should be forgone; they are told their interests must come third(and for pennies on the dollar) after governments that send good public money after bad managers, and after autoworkers' unions who helped sink GM and Chrysler in the first place.

In the economic world created by both Democrats in D. C., and by Conservative MPs from southern Ontario who plumped for "aid" to the auto industry, a federal deficit estimated at "only" $35 billion in late January will now end up at closer to $50 billion.

If, as is now estimated, the total bailout to GM and Chrysler reaches $13 billion from the federal and Ontario governments alone (excluding the Americans), the math becomes simple: most of the additional federal deficit this year is directly attributable to the auto bailout and thus to southern Ontario MPs.

In the consumer world now bent out of all recognition by government fiat, consumers who recently bought a Ford, Honda, Hyundai, Toyota, Volkswagen or some other automobile may have assumed their purchase was their only contribution to an automaker's bottom line.

Not quite. Here's a figure to consider: According to auto industry analyst Dennis DesRosiers, automobile sales in Canada in the first four months this year totalled 428,500. Subtract the vehicles sold by GM and Chrysler, and 294,675 automobiles were sold by other automakers between January and April.

Assume that automobile sales and market share will remain constant for the next eight months. Thus, almost 1.3 million automobiles will be sold in 2009 with just over 884,025 moved off the lot by everyone except Chrysler and GM.

More articles by Mark Milke