GM Closes American—Not Mexican—Factories After Collecting $11 Billion in Subsidies

GMC

General Motors last week announced it would close five manufacturing plants, four in America and one in Canada. President Trump responded to GM by threatening to cut the automaker’s subsidies unless it protected American jobs:

Trump’s threat triggered the usual bout of shock and horror that we have come to love and expect from America’s “virtuous” conservatives—the sort of people who still prudishly read the Economist or think elitist lapdogs like Ben Shapiro are edgy.

This faux outrage is omnipresent: “How dare the President tell a private company how to manage its affairs. GM should be free to replace as many Americans with foreigners as they like!” This is more-or-less the argument made by Veronique de Rugy in her piece for National Review.

Her argument is flawed—and not only because it ignores the existence of moral and fiduciary obligations beyond the scope of mere profit, but because it is grounded in a number of false assumptions.

American Gangster

De Rugy opens her piece with the standard “virtuous” refrain:

[President Trump] seems to believe that because the government bailed out GM . . . that that company owes the U.S. jobs and factories. It doesn’t.

It does. GM filed for government-assisted Chapter 11 bankruptcy protection on June 1, 2009. American taxpayers subsequently bailed-out GM to the tune of $11.2 billion—and this does not include the plethora of subsidies and kickbacks GM received over the past decade. GM only exists as a going concern because the U.S. government wanted it to exist. This is a cold, hard fact: a fact de Rugy cannot simply ignore because it offends her free-market dogma.

Uncle Sam doesn’t do charity. Uncle Sam is a gangster. If he gives you money you better believe he expects something in return. The moment GM accepted public money is the moment GM ceased to operate as a purely private company. GM owes Uncle Sam. GM owes us. GM cannot accept our money and then close down our factories. The company currently operates five plants in Mexico and four in Canada—those should be first up on the chopping-block. If not, then what do we pay them for?

Let me be clear: I’m not arguing that this is the ideal situation or that the bailout was a good idea. Not by a longshot. I’m merely observing that this is the situation. If Uncle Sam is bankrolling GM, then by God GM better have Uncle Sam’s back. America has a big enough problem with its multinational corporations behaving like Benedict Arnold at every twist and turn: the last thing we need is them backstabbing us with our own tax dollars.

In her article, de Rugy claims she opposes cronyism. And of course, Trump is engaging in cronyism by threatening a poor, helpless “private” corporation like GM. Get a grip. Cronyism is giving GM $11.2 billion with no strings attached. By demanding that GM protect American jobs and maintain our industrial base, our president is making sure we didn’t spend that money in vain. He’s making the best of a bad situation. That’s not cronyism, that’s leadership.

That’s patriotism. That’s America putting America first.

Why economic liberals (suckers) are so keen on getting screwed by big business is beyond me. I suppose that’s why they usually work in academia (like de Rugy) rather than in business (like Trump).

Bootlicking Big Business

In her piece, de Rugy also argues that Trump is partly to blame for the plant closures:

[Trump] is doing his absolute best to make it harder for automakers, domestic and foreign, to produce cars in the U.S. . . . one obstacle is the schedule of metal tariffs—punitive taxes on a major input that unquestionably increases automakers’ costs of production and thereby forcing them to hike their prices.

She argues that Trump’s tariffs hurt GM’s bottom line by increasing their production costs. This made GM less competitive both domestically and internationally, and thus the plant closures were caused by the tariff hikes. But that isn’t what GM said in its announcement last week. The automaker claimed sharply declining U.S. sales of certain car models was driving the decision.

In any case, laying the blame on tariffs is a completely inept understanding of the situation, and yet it’s being pushed by every mainstream conservative news outlet and pundit. Consider this tweet from the economic globalist Ben Shapiro:

According to data from Bloomberg, Trump’s tariffs will cost GM an estimated $493 million in 2018. On this point, de Rugy is correct: tariffs are a tax that increase the cost of doing business. But she neglects to mention that GM saved $339 million in taxes in the first quarter of 2018 alone. Why? President Trump’s tax reforms. This means that the net effect of Trump’s tax restructuring (transitioning from corporate taxes to tariffs) will save GM over $1 billion this year.

How can de Rugy claim that Trump is to blame for GM’s plant closures when he put a net $1 billion in the company’s pockets through tax reform? Clearly GM is closing its plants for other reasons. The “virtuous” conservatives at National Review are simply using the plant closures as a pretext to push their misguided, and frankly anti-American agenda.

About Spencer P Morrison 136 Articles
J.D. B.A. in Ancient & Medieval History. Writer and independent intellectual, with a focus on applied philosophy, empirical history, and practical economics. Author of "Bobbins, Not Gold," Editor-In-Chief of the National Economics Editorial, and contributor to American Greatness. His work has appeared in publications including the Daily Caller, the American Thinker, and the Foundation for Economic Education.