It’s only been one day since President Obama signed the stimulus bill into law setting in motion government spending amounting to $787 billion and already there is a line forming at the White House door for more bailout money.

Faltering GM and Chrysler, hit hard by high labor costs and assorted other ills, are still begging for more money from taxpayers despite the fact that they have been on the receiving end of billions of dollars in federal loans already.

In fact, so far the two companies have received a healthy $17.4 billion in loans from taxpayers to finance their continued survival. According to Bloomberg, GM has “asked the U.S. for as much as $16.6 billion in new loans” so that it can survive while it cuts as many as 47,000 jobs worldwide.

Meanwhile, Chrysler, which is planning to cut an additional 3,000 jobs, wants another $5 billion in financing from taxpayers.

And why would this be a good deal for the taxpayers? According to plans submitted to the government by the the two automakers, bankruptcy for the companies could cost the U.S. as much as $110 billion.

In other words, according to the automakers, the $21 billion in new financing they seek is a good deal compared to the alternative.

Is it? There are some factors to consider. First, should American taxpayers be forced to invest in these private companies? Forget about the basic issue of freedom of association for a moment and think about the banks. GM and Chrysler have their hands out for taxpayer money precisely because banks won’t give them any. The automakers are a bad risk and private investors (i.e., the banks in this case) aren’t all that likely, given the beating they themselves have taken in this economy, to throw billions of dollars in the GM/Chrysler black hole with little hope of ever recouping that investment. For the automakers, the government — the taxpayer — is the lender of last resort. But should taxpayers foot the bill for loans that the private sector wisely considers to be far too risky? Of course not.

Then there is that pesky issue of freedom. The Obama administration won’t talk about it (and neither did the Bush administration or any previous administration in recent memory), but nothing can be more statist than to have a government force its citizens to lend money to other private citizens or entities.

This is not a hard concept to grasp. What would happen if a police officer came to your door and told you that under order from the city council, you must give your neighbor a $50,000 loan on favorable terms? Of course, it would seem to be an outrage.

Yet, this is the order of the day in state and federal government. It is, however, particularly onerous at the federal level. If freedom means anything, it means the ability to keep the product of one’s one labor and to spend it or not as one sees fit. That government has already given billions in taxpayer loans and bailouts to federal entities is an outrage — that it is considering doing so once again is mindboggling in the extreme.

These are good reasons already to oppose further taxpayer funding of the automakers (or of any other businesses as well), but there is yet another good reason to oppose the rescue of GM and Chrysler: opportunity cost.

Opportunity cost is something that economists think about, but it is also something that all citizens should consider.

At the Library of Economics and Liberty David R. Henderson, an associate professor of economics at the Naval Postgraduate School in Monterey, California and a former senior economist with President Reagan’s Council of Economic Advisors, explains the meaning and relevance of opportunity cost considerations.

“When economists refer to the ‘opportunity cost’ of a resource, they mean the value of the next-highest-valued alternative use of that resource,” Henderson writes. “If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you cannot spend the money on something else. If your next-best alternative to seeing the movie is reading the book, then the opportunity cost of seeing the movie is the money spent plus the pleasure you forgo by not reading the book.”

What is the opportunity cost in choosing to give federal loans to GM and Chrysler to keep those companies afloat?

It is difficult to say exactly because this is not a clear-cut case. The taxpayer money that has already been given, and the money that may yet be given, could have been utilized by the taxpayers themselves in an almost infinite variety of ways. Because of this, the opportunity cost can not be clearly determined. Despite this, it is clear that the spending that taxpayers could have undertaken is no longer possible once they lose control of their money and so an infinite variety of choices have been foregone. Who knows, then, what sectors of the economy might have benefitted if so much taxpayer money had not been pilfered by the government.

In the end, the government can not indiscriminately take money from taxpayers either through taxes or inflation of the money supply and expect to stimulate the economy. At some point the opportunity cost will be just too great, and the nation will be truly bankrupt.

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Bob Donohoo said:

	Remember the 500... The cure is 500. If each one of us commit to "creating" 500 activists focused on liberty in our Congressional Districts, these kinds of games are all over and we can restore the limited government we have not seen for 100 years. Remember the 500...
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February 18, 2009
Votes: +4

danwhitehead1 said:

	Not at all surprising I wonder why I'm not the least bit surprised? It's getting closer and closer and closer with ever increasing speed.
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February 18, 2009
Votes: +1

MarkGlen said:

	King Obama I don't think Obama can be persuaded by us to change what he intends to do. He is determined to merge the U.S. into a one world government.
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February 18, 2009 | url
Votes: +1

Cadence said:

One World Government I think you are right Mark Glen. There is no difference between Democrats and Republicans. Like I said before,they both answer to a higher authority, and it isn't God. They are merely puppets to the rich elite and international bankers who planned this and all previous recessions beginning with the Great Depression, and are planning the world wide economic collapse, with the sole purpose of destroying our free market system and communizing the world. Question: What is the biggest single threat to the security and economic well being of the United States? Answer: The United States Congress God help us.

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February 19, 2009
Votes: +1

Peter Steele said:

	RE: My Chevrolet Cobalt LT and I love it My 2007 Chevrolet Cobalt LT sedan is a car I love as it is the right size, looks very well, has just the right power as the car is perfect for me. But what I suggest for GM executives is to call for legislators to repeal NAFTA and go through controlled bankruptcy as GM is my favorite car company. BGen Peter F. Steele, USMC [Ret]
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February 21, 2009
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Vermonter said:

... I am 100% against any government bailouts, but if all those autoworkers and associated industries lost their jobs, wouldn't we all be bailing them out in unemployment compensation? I'm no economist by a long shot, but my gut tells me that if the government simply let this economy go to heck, in the end we would have a system of much greater equality rising out of the ashes. Prices would come down to realistic levels, and those with hundred-thousand dollar only-on-paper investments would come down to the level of those of us who get by on the money in our checking accounts. We could have a fresh start on a much more realistic foundation. This is only my gut, so tell me if I'm off here. But I'm sure THEY don't want that to happen because it is in their interest to maintain a permanent state of poverty and inequality. Can anyone follow up on this thought, because it's really only half-baked in my feeble mind.

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February 22, 2009
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